market report…303 congress street | boston, ma 02210 | 617.457.3400 | hunnemanre.com metro boston...

303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM

METRO BOSTON INDUSTRIAL MARKET REPORT

FOURTH QUARTER | 2019

2 | METRO BOSTON INDUSTRIAL | Q4 2019

BOSTON MARKET INDUSTRIAL OVERVIEW

During the fourth quarter of 2019, greater Boston’s industrial market continued

its stellar performance. Overall, the market posted over 2,000,000 square feet of

positive net absorption. Vacancies continued to drop and are currently sitting

at 7.7%, down 82 basis points from a year ago. Asking rents continue to be

pushed up as result of tenant demand and repositioning of older, outdated

assets. Across the metro, rents are sitting at $10.13/SF NNN, up $.64 from the

fourth quarter of 2018. Having increased by 40-50% over the last 10 years,

current asking rents are the highest they’ve ever been. Above-average gains

have been centered inside of Route 128, but with limited availabilities in these

areas, landlords are gaining traction along route 495.

Boston’s industrial pipeline continues to grow as developers look for innovative

ways to add inventory to the market. Speculative development is dominating

activity, with only 47% of the nearly 3 million square feet currently underway

pre-leased. Landlords will continue to look for creative ways to provide both

last-mile distribution centers for large retail tenants as well as high end Flex/

R&D space as a release valve for biotech companies looking to scale their

operations.

Amazon dominated headlines this quarter as they signed leases totaling over

1.6 million square feet. They added a last-mile distribution center just north

of Boston along with another that’s closer in proximity to Providence. The

company also expanded their robotics operation in Westborough. Looking

ahead, it’s expected that they’re still in the market for over 1 million square feet

of last-mile space. With few options, they will likely turn to one of the built-on-

spec projects if they want to expand in metro Boston.

Over the past year, biotech jobs have grown at the fastest pace in a decade.

There were 4,300 added over the past year, a 6.4% jump from fourth quarter of

2017. While growth could level off as VC investing has been down on the year,

developers looking to add luxury housing and lab space are hard pressed to

meet the demands of the workforce. While the suburbs haven’t seen the same

boom in housing construction, they have heavily benefited from the lack of

availability of flex and lab space in urban Boston.

Looking ahead, the trade war continues to be most important storyline to

follow in regard to the industrial sector. It’s expected that a settlement will pass

in 2020, however, it will be difficult to determine which industries will benefit

until the deal is done. While other parts of the country had been bracing for

a slowdown in the manufacturing industries, Greater Boston’s market hasn’t

shown any signs of slowing down. Bolstered by the continuation of record

levels of capital market activities and a strong quarter of leasing, expectations

going into the new year remain positive.

7.7%

TOTAL VACANCY RATE

437,032Q4 NET ABSORPTION

(SF)

$10.13ASKING RENT

($/SF)

3,036,489UNDER CONSTRUCTION

(SF)


INDUSTRIAL WAREHOUSE

TOTAL INVENTORY(SF)

TOTAL VACANT(SF)

TOTAL VACANCY RATE

Q4 NET ABSORPTION

(SF)

YTD NET ABSORPTION

(SF)

ASKING RENT($/SF)

Total 95,624,289 5,655,644 5.9% 122, 208 700,302 $8.74

• After a down third quarter, Greater Boston’s warehouse market got back

on track heading into 2020. Asking rents were up almost $.40 cents from

the previous quarter and just over 14% from the previous year. The asset

class saw 700,000 square feet of positive net absorption during the year,

a trend that is likely to continue into the near year following several

blockbuster leases being signed. While vacancies are well below the

6-Year historical average, consolidations across the industry have offset

the leasing activity. For three consecutive quarters, no new supply has

been added to the warehouse market. This is likely to change as vacancy

rates have continued to drop and developers could turn to built-on-spec

projects rather than waiting for built-to suit.

• Demand for urban warehouse space could change moving forward, the

lack of available space should push rents upwards and landlords will be

tasked with adding more inventory. Developers have very few options

and will have to get creative; multi-story warehouses and high-tech

storage space are some ways landlords are addressing the problem in

other regions of the country.

• Amazon made headlines during quarter four as they signed the largest

lease of year and one of the largest in the last decade; they expanded

their footprint in the urban market by taking 829,000 square feet at 135

American Legion Hwy in Revere. The former Necco warehouse will serve

as a last mile distribution center for deliveries in urban Boston. The tech

giant also signed a 300,000 square-foot lease at 351 Maple St in Bellingham

and expanded their footprint 480 Sprague St in Dedham.

• With such robust demand, particularly from the growing importance of

e-commerce and last-mile delivery, large warehouse/distribution users

are facing fewer options. Tenants in need of 200,000 square feet or more

of warehouse space have only a handful of choices in metro Boston.

New construction should help alleviate some of this pressure on market

fundamentals, but conditions will likely continue to favor landlords in the

next few quarters.

TOTAL VACANCY

NET ABSORPTION & SUPPLY

ASKING RENT

$0

$1

$2

$3

$4

$5

$6

$7

$10

$9

$8

$/SF

(NN

N)

2015 2016 2017 2018 2019

-1,000

-500

0

500

1,000

1,500

2,000

SQU

AR

E FE

ET(t

hous

and

s)

2013 2014 2015 2016 2017 2018 2019

NET ABSORPTION NEW SUPPLY

0%

2%

4%

6%

8%

10%

12%

14%

2014 2015 2016 2017 2018 20192013

5-YEAR HISTORICAL AVERAGE VACANCY RATES


INDUSTRIAL FLEX/R&D

TOTAL INVENTORY(SF)

TOTAL VACANT(SF)

TOTAL VACANCY RATE

Q4 NET ABSORPTION

(SF)

YTD NET ABSORPTION

(SF)

ASKING RENT($/SF)

Total 51,902,301 5,771,189 11.6% (755) (111,231) $12.40

• Greater Bostons Flex/R&D market had a stagnant quarter to end the

year. After posting 204,000 of positive net absorption in the last quarter,

it posted a lackluster 750 square feet of negative net absorption. Asking

rents remain on an upward trajectory and currently stand at $11.69/

NNN. The regions strong life science and technology industries have put

pressure on both developers and landlords to provide premium flex space

as an alternative to the Cambridge market.

• The outlook is positive heading into the new year as life science and

robotics companies continue to be pushed out of urban locations when

looking to expand their lab space. Flex/R&D users looking for space inside

of Route 128 will pay a premium, with asking rents surpassing $20/SF NNN

in some markets. Continued pressure from residential, life science and

other mixed-use redevelopments could impact market fundamentals and

keep rents on their upward trajectory Asking rents in pockets of the Route

128 West and Northwest belts have grown exponentially over the last few

years, surpassing $22/SF NNN.

• With just 6 available spaces for tenants looking for more than 200,000

SF of space, the options are limited for any larger companies seeking

relocation. While leasing has been down over the year, There are multiple

landlords that are looking to reposition underperforming manufacturing

and warehouse buildings into Flex/R&D capable facilities.

• Cambridge-Based Moderna Therapeutics announced that it will be

moving 250 jobs to Norwood after it leased the entire 228,000 square-

foot building at 1 Upland Rd earlier in the year. The space was formerly

occupied by UTI and will serve as the biotech’s headquarters. Earlier in

the year, Vecna Robotics made a similar move out of Cambridge when

they relocated to 425 Waverly Oaks Rd in Waltham, signing a 77,000

square foot lease as they look to double in size.

• The stock market was less volatile in 2019 as the high-tech index continued

to reach record levels. Questions around the presidential election and

policy involving “big-tech” could have some Flex/R&D users taking a “wait

and see” approach in the new year.

VACANCY BY SUBMARKET

NET ABSORPTION & ASKING RENT

BLOOMBERG MASSACHUSETTS HIGH TECH INDEX

0

10

20

30

40

50

60

70

80

90

100

2014 2015 2016 2017 2018

$4

$5

$6

$7

$8

$9

$10

$11

$12

$13

-800

-600

-400

-200

0

200

400

600

800

2015 2016 2017 2018 2019

ASKING RENT NET ABSORPTION

SQ

UA

RE

FE

ET

(th

ou

san

ds)

$/S

F(N

NN

)

0%

4%

8%

12%

16%

20%

2013 2014 2015 2016 2017 2018 2019

ROUTE 495/METROWEST ROUTE 128 URBAN CORE


INDUSTRIAL MANUFACTURING

TOTAL INVENTORY(SF)

TOTAL VACANT(SF)

TOTAL VACANCY RATE

Q4 NET ABSORPTION

(SF)

YTD NET ABSORPTION

(SF)

ASKING RENT($/SF)

Total 34,901,011 2,641,490 7.4% 104,814 1,348,140 $11.26

• Any fears of a recession in the manufacturing sector haven’t affected the

local market. The 1,348,000 square feet of positive net absorption witnessed

during 2019 was a major turn-around from the 7 consecutive quarters

of negative absorption from 2017-2018. The flurry of leasing activity has

pushed rents above $11/NNN for the first time, and are up $1.94 over the

past 12 months. Vacancies have been pushed down by 2.6% in 2019 and

currently sits at 7.4%, the lowest since the third quarter of 2017.

• Amazon had been exploring options to build a state-of-the-art robotics

facility in proximity to it’s existing location in North Reading. They ultimately

signed a 477,00 square-foot lease at 50 Otis St in Westborough. The move

reaffirms the companies plans to expand their manufacturing capabilities

within the region and is expected to create as many as 200 manufacturing

jobs.

• The construction pipeline for manufacturing product should continue to

grow as logistics companies continue to look for newer, high-tech space.

The expansion of Massachusetts’ marijuana industry will also be a key driver

for the asset type as the need for cultivation and storage space has become

a top priority for companies looking to increase their footprint in the region.

• Work has continued on Condyne’s Blue Star Business Park in Norton. The

built-on-spec project could add up to 600,000 square feet of warehouse/

manufacturing product to the 128 South Corridor. In Bellingham, Barings

has broken ground on Lincoln Logistics 36, a 345,000 SF distribution

building located at 160 Mechanic St. It’s also being built on spec and slated

to deliver in December 2020.

• While manufacturing as a whole accounts for only 7% of total employment in

Massachusetts, the Bay State remains a pioneer in advanced manufacturing.

High labor and business costs tend to drive large manufacturers to lower

cost locations outside of New England. However, hi-tech industries like

computer, electric products and chemical manufacturing are among

Massachusetts’ top contributors to GDP.

VACANCY & NET ABSORPTION

ASKING RENT

MASSACHUSETTS MANUFACTURING REAL GDP

$0

$2

$4

$6

$8

$12

$10

$/SF

(NN

N)

2015 2016 2017 2018 2019

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

MIL

LIO

NS

2005 2007 2009 2011 2013 2015 2017

-800

-600

-400

-200

0

200

400

600

SQU

AR

E FE

ET(t

hous

and

s)

2013 2014 2015 2016 2017 2018 2019

NET ABSORPTION VACANCY RATES

11%

7%

9%

5%

3%

1%

-1%


NOTABLE TRANSACTIONS

135 AMERICAN LEGION HWYREVERE

50 OTIS STWESTBOROUGH

100 FINANCIAL PARKFRANKLIN

351 MAPLE STBELLINGHAM

Company Amazon Company Amazon Company Imperial Bag and Paper

Company Amazon

Size 829,000 SF Size 477,000 SF Size 300,000 SF Size 300,000 SF

Submarket Central Industrial Submarket Route 495 West Submarket Route 495 South Submarket Route 495 South

15 CAMPANELLI DRPEABODY

10 TURNPIKE STWEST BRIDGEWATER

17 COMMONWEALTH AVEWOBURN

15-21 UNIVERSITY RDCANTON

Company Restoration Hardware

Company Harvey Building Products

Company Harvery Building Products

Company Prodrive Technologies


Submarket Route 128 South Submarket Route 128 South Submarket Route 128 North Submarket Route 128 South

10 ELIZABETH DRIVECHELMSFORD

63 SECOND AVEBURLINGTON

128 SPRING STLEXINGTON

45 BARTLETT STMARLBOROUGH

Company Datacon Company LeMaitre Vascular Company Curis, Inc. Company Global Printing and Packaging


Submarket Route 495 North Submarket Route 128 NorthWest Submarket Route 128 NorthWest Submarket Route 495 West


CAPITAL MARKETS• Greater Boston’s industrial capital markets posted a banner year in 2019.

Sales volume across the metro surpassed $2 billion for the first time over a

calender year. As asking rents have ballooned and vacancies continue on

their downwards trajectories, both local and foreign capital flowed into

the region. Tight market fundamentals have led to consistent investor

interest, which has been driving up pricing. Developers looking to meet

the city’s ever-growing need for housing and other commercial uses are

keeping prices elevated as well. The median price per square foot was

down during the final quarter; leveling off at $117 per square foot.

• Marcus Partners purchased a 4-building warehouse portfolio from Novaya

Real Estate Ventures for $80 million, amounting to $95/SF. The buildings

were 96% leased at the time of the sale that carried a 5.7% cap rate. Each

of the assets are last-mile distribution centers and are located across

three separate submarkets.

• In South Boston, the Related Companies purchased a 60,000 square-foot

light manufacturing building at 57 Elkins St for $29 million. The buyer

has yet to disclose their future plans for the building as it’s fully leased to

Integra LifeSciences.

MEDIAN PRICE/SF

TOP Q4 / INVESTMENT SALES

10-20 DAN RDCANTON

57 LITTLEFIELD STAVON

160 DASCOMB RDANDOVER

326 BALLARDVALE STWILMINGTON

Buyer The Seyon Group Buyer Marcus Parnters Buyer Northbridge Partners Buyer Marcus Parnters

Price $34,000,000 Price $30,000,000 Price $26,250,000 Price $22,400,000

Total SF 214,000 Total SF 407,466 Total SF 125,609 Total SF 187,589

Price/SF $158 Price/SF $73.63 Price/SF $209 Price/SF $119

Cap Rate - Cap Rate - Cap Rate - Cap Rate -

SALES VOLUME($)

NUMBER OF TRANSACTIONS

TOTAL SF

MEDIAN($/SF)

MEDIAN CAP RATE

$568M 81 4.7 M $114 7.5%

SALES VOLUME

$140

$120

$100

$80

$60

$40

$20

$0

2008 201420132012201120102009 2015 2016 2017 2018 2019

$800

$600

$700

$500

$400

$300

$200

$100

$0

$(m

illio

ns)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


TOTAL INVENTORY

(SF)

UNDER CONSTRUCTION

(SF)

DIRECT VACANT

(SF)

SUBLEASE VACANT

(SF)

TOTAL VACANCY

RATE

Q4 NET ABSORPTION

(SF)

YTD NET ABSORPTION

(SF)

ASKING RENT NNN

($/SF)

Urban Core 18,790,278 70,000 1,882,292 30,176 10.2% (20) 161,866 $16.56

Framingham-Natick 3,182,438 - 85,826 - 2.7% 1,072 23,210 $9.06

Route 128 North 28,742,480 - 1,293,134 39,199 4.6% (9,929) 427,745 $12.05

Route 128 Northwest 3,785,373 - 91,732 207,000 7.9% 1,877 (115,163) $17.35

Route 128 South 39,294,951 391, 801 2,982,553 - 7.4% 137,885 (207,318) $8.36

Route 128 West 4,426,603 - 464,873 - 10.5% 8,860 (126,574) $19.22

Route 128 Total 79,431,845 391,801 4,855,278 246,199 6.4% 139,775 (25,260) $10.46

Route 495 North 22,493,395 - 2,576,143 12,000 11.1% 183,184 535,079 $9.93

Route 495 Northeast 12,727,617 - 1,034,303 - 8.1% 19,175 311,407 $8.30

Route 495 South 33,218,080 1,807,250 2,315,869 4,941 7.1% (31,792) 1,012,808 $7.29

Route 495 West 15,933,386 767,438 1,703,230 12,643 7% 89,550 174,911 $9.69

Route 495 Total 84,372,478 2,574,688 7,683,937 29,584 8.3% 246,517 2,020,605 $8.77

Market Total 182,594,601 3,036,489 14,380,747 305,959 7.7% 427,032 2,197,971 $10.13

INDUSTRIAL RECAP

METHODOLOGY

Source: Co-Star, Hunneman. Prepared: December 2019.

Disclaimer: The above data is from sources deemed to be generally reliable, but no warranty is made as to the accuracy of the data nor its usefulness for any particular purpose.

Average Rental Rates are asking rents on direct space. Vacant space includes both direct and sublease space.

303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM

JAMES FIFTALSenior Research Analyst

[email protected]

market report…303 congress street | boston, ma 02210 | 617.457.3400 | hunnemanre.com metro boston...

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