metro boston market report… · q3 17 market report metro boston. 2 committed to boston, connected...

303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 1

INSIDE STATISTICS...

OPTIMISM GROWS IN BOSTON CRE MARKETS

303 Congress Street | Boston, MA 02210 | 617.457.3400

www.NAIHunneman.com

OFFICE (DOWNTOWN, CAMBRIDGE, SUBURBAN)

INDUSTRIAL (WAREHOUSE, FLEX/R&D, MANUFACTURING)

CAPITAL MARKETS

Q3 2017

MARKET REPORTM E T R O B O S T O N

http://www.naihunneman.com/

Committed to Boston, Connected to the World.2

OFFICE STATISTICS OVERVIEW

TOTAL VACANCY RATE

DIRECT VACANCYQ3 NET

ABSORPTION (SF)ASKING RENT

($/SF)UNDER

CONSTRUCTION (SF)

11.6% 10.6% 255,470 $34.04 3,867,977

ASKING RENT

LEASING ACTIVITY

12-MONTH ABSORPTION

SUBLEASE VACANCY

DIRECT VACANCY

MA Business Confidence Index:

61.2 OUT OF 100 (Aug 2017)

Boston Unemployment Rate:

3.5% (Aug 2017)

Boston Office-using Employment:

17,400 Jobs added 2.3% Growth year-over-year

State Tech & Science Index:

NO. 1 by Milken Institute

MA Economy Ranked:

NO. 5 by USNews

Third Quarter Ends with Mixed ResultsDespite a somewhat pedestrian third quarter, optimism continues to grow in the Boston market. Absorption was positive this quarter, with the Route 128 Belt driving much of the activity, but total office vacancies inched up to 11.6% due to speculative construction in Waltham and Newton. The general trend of urban migration among office tenants continues, with PTC and Alexion joining the growing list of companies moving downtown. Facebook and WeWork have also committed to increasing their footprint in the city. While tenants are expanding in the suburbs, those currently out with requirements are likely considering a downtown relocation as well. Moreover, several large blocks of space coming back to the suburban market remain a risk to the near-term outlook. While overall absorption may increase in the coming quarters, demand growth will likely fail to reach levels Greater Boston has seen in recent years (barring Boston being selected for Amazon’s HQ2).

With the groundbreaking of a handful of projects, office construction ticked up to almost 3.9 million SF in the third quarter. athenahealth recently broke ground on a 350,000-square-foot expansion at Arsenal Yards in Watertown and DivcoWest is moving forward with the first 450,000-square-foot office building at its NorthPoint development in Cambridge. The Abbey Group also recently filed plans for its redevelopment of the Flower Exchange site in the South End. The project will include more than 600,000 square feet of office space.

An eight-million-square-foot elephant entered the office market this quarter, and its potential impact on the Greater Boston market has been discussed,

dissected and pondered in detail by nearly every commercial real estate professional in the state. Since Amazon announced plans to establish a second headquarters in the U.S., the industry has been upended by rampant speculation as to who will be able to woo the e-commerce giant. All told Amazon’s HQ2 will bring 50,000 jobs to the winning metro area and require upwards of 8-10 million square feet of office space; mirroring their existing headquarters in Seattle. While Amazon has yet to identify any frontrunners, consensus puts Greater Boston on a short-list of viable contenders. Other metro areas being tossed around with Boston include Austin, Denver, Atlanta, Chicago and Washington D.C. However, with more than 100 cities interested in bidding for HQ2, the competition will be stiff.

Looking locally, finding sites that could actually accommodate a campus of this size as well as meet the firm’s requirements/preferences is a little trickier. With that said, several sites throughout the metro have been touted as options for Amazon’s HQ2. HYM’s Suffolk Downs in Revere has emerged as a leader, as the redevelopment site boasts 161 acres of land, proximity to Logan Airport and superior MBTA access via the Blue Line. Other redevelopment sites in Boston, like the Flower Exchange and the Post Office’s sorting facility near South Station, have also come up in discussions. Outside of Boston, Cambridge’s Volpe Center redevelopment and the NorthPoint site as well as Weymouth’s Union Point are also potential contenders. Amazon is expected to make a final decision regarding HQ2 sometime next year and while the outcome is unclear, Boston is well-positioned to land this white whale.

2017Q3


TOTAL INVENTORY

(SF)

TOTAL VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT ($/SF)

Class A 48,754,813 3,970,641 8.1% (14,784) (80,392) $62.09

Class B 20,818,966 1,879,733 9.0% 26,248 (131,056) $48.28

CLASS A & B TOTAL 69,573,779 5,850,374 8.4% 11,464 (211,448) $57.61

Recent Construction

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Leased Available

Vacancy and Net Absorption

Class A & B Rents

0%

2%

4%

6%

8%

10%

12%

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Net Absorption Vacancy

$0

$10

$20

$30

$40

$50

$60

$70

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Class B Class A


Class A & B Rents

0%

2%

4%

6%

8%

10%

12%

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$0

$10

$20

$30

$40

$50

$60

$70

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Class B Class A

VACANCY AND NET ABSORPTION

TENANT ADDRESS SIZE SUBMARKET TYPE

PTC 121 Seaport Blvd 221,531 SeaportRelocation/Expansion

Alexion 121 Seaport Blvd 178,787 SeaportRelocation/Expansion

CloudHealth Technologies

100 Summer Street

80,000Financial District

Relocation/Expansion

Hinckley Allen 28 State Street 52,000Financial District

Renewal

WeWork200 Portland Street

39,790 North Station Expansion

NOTABLE TRANSACTIONS

DOWN

TOWN

CLASS A & B RENTS

RECENT CONSTRUCTION

OFFICE STATISTICS DOWNTOWN

TRENDS• Negligible net absorption and the newly-renovated 66 Long Wharf coming on line

pushed vacancies up 10 basis points in the third quarter.

• The latest wave of suburban-to-urban migration has hit the Seaport. PTC signed a lease for roughly half of 121 Seaport and plans to relocate its headquarters from Needham in 2019. Alexion, which is consolidating operations from several locations including Lexington, is slated to occupy the remainder of the building and bring it to full occupancy.

• In September, Reebok began shifting its workforce from Canton to its new headquarters at the Innovation & Design Center in the Seaport.

• WeWork continues to grow its footprint both locally and nationally. The coworking giant’s 39,790-square-foot lease at 200 Portland Street will be its fifth Boston-area location. Reportedly, the firm is also looking for additional locations throughout the Downtown markets.

• Natixis recently moved into its new space at 888 Boylston Street, vacating several floors at nearby 399 Boylston Street.

• Thomson Reuters is subleasing more than 70,000 square feet of space across several buildings on Thomson Place in the Seaport. CloudHealth Technologies is also subleasing roughly 30,000 square feet at 280 Summer Street in anticipation of its relocation to the Financial District.



OFFICE STATISTICS CAMBRIDGE

TRENDS

• Net absorption in Cambridge’s office market was slightly negative in the third quarter, pushing vacancies up 20 basis points over the quarter.

• Sublease space accounts for half of Cambridge’s total vacancies with the former Biogen space at 105 Broadway making up the lion’s share.

• Harvard University’s IT division leased the entirety of Infinity Pharmaceuticals’ former office space at 784 Memorial Drive.

• Facebook inked a deal for 132,636 square feet at 100 Binney Street, which is predominantly a lab building currently under construction in Kendall Square. The social media giant will relocate from 1 Broadway and plans to house 650 employees in the expanded space.

• Dirt is moving in Cambridge. MIT is underway on 314 Main Street, which will include 345,000 square feet of office space. DivcoWest is also constructing a 430,000-square-foot office-lab building as part of the first phase of the long-awaited NorthPoint development. Finally, work has begun on the “Akamile” — Akamai Technologies’ new 486,000-square-foot headquarters.

• Last quarter, Cambridge Systematics vacated 29,513 square feet at 100 Cambridgepark Drive; relocating to Medford.

• The American Red Cross has listed its 37,000-square-foot office at 139 Main Street for lease and Twitter is subleasing 15,877 square feet at 141 Portland Street.

• The Davis Companies paid $44.5MM or $323/SF for 625 Mount Auburn Street at a 5.8% cap rate. This represents a 50% increase from the asset’s previous sale price in 2007.

TOTAL INVENTORY

(SF)

TOTAL VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT ($/SF)

Class A 7,036,443 414,380 5.9% (25,243) (179,949) $65.58

Class B 3,318,193 36,848 1.1% 10,052 5,286 $64.43

CLASS A & B TOTAL 10,354,636 451,228 4.4% (15,191) (174,663) $65.49


Intersystems 1 Memorial Drive 238,000 East CambridgeRenewal/Expansion

Facebook 100 Binney Street 132,636 East CambridgeRelocation/Expansion

Google 4 Cambridge Center 70,820 East Cambridge Renewal

Harvard University 784 Memorial Drive 63,175 Mid Cambridge Relocation

Construction

0

100,000

200,000

300,000

400,000

500,000

600,000

Q12015

Q32015

Q12016

Q32016

Q12017

Q32017

Q12018

Q32018

Q12019

Q32019

Leased Available


Class A & B Rents

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

(300,000)

(200,000)

(100,000)

0

100,000

200,000

300,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$0

$10

$20

$30

$40

$50

$60

$70

$80

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Class B Class A


Class A & B Rents

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

(300,000)

(200,000)

(100,000)

0

100,000

200,000

300,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$0

$10

$20

$30

$40

$50

$60

$70

$80

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Class B Class A



CLASS A & B RENTS

CONTIGUOUS BLOCKS

CAMBRIDGE

2017Q3


TOTAL INVENTORY

(SF)

TOTAL VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT ($/SF)

Class A 58,353,243 7,370,023 12.6% 76,842 116,987 $29.20

Class B 53,240,896 8,475,891 15.9% 182,355 564,776 $21.81

CLASS A & B TOTAL 111,594,139 15,845,914 14.2% 259,197 681,763 $25.16


Smith & Nephew150 Minuteman Road, Andover

112,148Route 495 Northeast

Renewal

National Grid404 Wyman Street, Waltham

68,145Route 128 West

Sublease

Steward Health Care

89 A Street, Needham


Expansion

Corbus Pharmaceuticals

500 River Ridge Drive, Norwood

32,733Route 128 South

Relocation/Expansion

Optos500 Nickerson Road, Marlborough


Relocation

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Leased Available

Class A & B Rents

Construction

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

(800,000)

(600,000)

(400,000)

(200,000)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$0

$5

$10

$15

$20

$25

$30

$35

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Class B Class A

Class A & B Rents

Construction

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

(800,000)

(600,000)

(400,000)

(200,000)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$0

$5

$10

$15

$20

$25

$30

$35

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Class B Class A



CLASS A & B RENTS

RECENT CONSTRUCTION

OFFICE STATISTICS SUBURBAN

TRENDS

• Despite posting positive absorption in the third quarter, delivery of vacant Two Wells Avenue in Newton and 200 Smith Street (Post) in Waltham pushed Suburban office vacancies up by 20 basis points compared to last quarter.

• Computershare (250 Royall Street, Canton), Aspect Software (300 Apollo Drive, Chelmsford) and Covidien (9-11 Hampshire Street, Mansfield) vacated space this quarter.

• Several other large blocks of space are coming back to the market over the next 12-18 months. SunLife is leasing 124,000 square feet in Wellesley, Alexion will be closing its facility at 33 Hayden Avenue in Lexington in favor of the Seaport, Shire is subleasing 104,000 square feet at 235 Wyman Street, and Simplivity is vacating space on Technology Drive in Westborough. Progress Software and Constant Contact are close to inking deals to relocate within the suburbs.

• Steward Health Care will join SharkNinja at the newly-constructed 89 A Street in Needham, leasing 52,000 square feet in the third quarter.

• In August, NBCUniversal finalized it’s purchase of the 165,000-square-foot 189 B Street in Needham for its regional headquarters; paying $41.7MM or $124/SF. The building is slated to deliver in early 2019.

• Digital Federal Credit Union is expanding its footprint and has acquired the former Kronos headquarters at 297 Billerica Road in Chelmsford.

SUBURBAN



INDUSTRIAL STATISTICS OVERVIEW

ASKING RENT

LEASING ACTIVITY

12-MONTH ABSORPTION

SUBLEASE VACANCY

DIRECT VACANCY

TOTAL VACANCY RATE

DIRECT VACANCYQ3 NET

ABSORPTION (SF)ASKING RENT

($/SF)UNDER

CONSTRUCTION (SF)

7.4% 7.2% 257,661 $8.61 1,748,500

Industrial Market Growth ContinuesThe Greater Boston industrial market absorbed roughly 260,000 square feet of space in the third quarter of 2017 and vacancy remains near record lows, with single-digit numbers in all but one submarket. While leasing activity has waned, demand drivers remain vast and varied. Growing interest from new entrants to the market is a positive sign as well; pointing to Greater Boston’s increasing visibility and greater national appeal. Such solid fundamentals and a dearth of quality product have led to continued rent growth, even among lower-quality assets, reaching 9.3% in the past 12 months.

A handful of local users have begun major expansion projects recently. Insulet kicked off its new 300,000-350,000-square-foot manufacturing facility at 100 Nagog Park in Acton during the third quarter and Siemens is underway on a 300,000-square-foot expansion at its campus in Walpole. Maxon Precision Motors is also constructing a 59,000-square-foot manufacturing facility in Taunton. While projects continue to move through the planning pipeline, new construction has struggled to keep pace with the industrial market’s outsized demand this cycle. The market should be able to absorb any new product coming on line in the near future.

To accommodate larger ships in a post-Panama Canal expansion world, ports throughout the country have been eyeing dredging projects. The deepening of Boston’s Conley Terminal has been on our radar for a few years and the project is finally making some headway. Local officials and the US Army Corps of Engineers kicked off the planned infrastructure improvements in September, which will take 3.5 years and two phases to complete. The first phase will establish an area where the sediment being

dredged can be moved to. The second phase will involve the deepening of three shipping channels. The Outer Channel will go from 40 to 51 feet in depth, the Main Shipping Channel will go from 40 to 47 feet in depth and the Reserve Channel will also go from 40 to 47 feet in depth. These improvements will allow more cargo traffic to flow through the Port of Boston, boding well for the local industrial market and economic growth.

Last-mile distribution has become the darling of the industrial market. The advent of 1-hour delivery and consumers’ need for convenience are driving demand for older, industrial product in infill locations throughout Boston. Moreover, industry experts suspect Amazon’s acquisition of Whole Foods is a logistics play, giving the e-commerce giant direct access to some of the nation’s wealthiest and densest zip codes. Look for more growth in Boston’s urban industrial markets from Amazon and its competitors as consumer spending patterns continue to evolve.

Conversely, infill locations are in high demand from investors and developers alike. Large-scale redevelopment projects are on tap for the Flower Exchange site and Widdett Circle (both in Boston) while plans for sites in Needham and Newton continue to move forward. The Boston Flower Exchange has already made the move to Chelsea and the Abbey Group is planning to create a tech and life science hub on their former site in the South End. Food wholesalers clustered in Widdett Circle announced plans to sell their current property and relocate to a new facility at the Raymond L. Flynn Marine Park in the Seaport. This trend will likely continue as demand for other commercial and residential uses drive the redevelopment of more urban infill locations.

Containerized Cargo:

151,560 TEUS (YTD Aug 2017) 9.7% Growth year-over-year

Manufacturing Output:

10.10% of GSP (2015)

Housing Permits:

9,421 (YTD Aug 2017) 24% Increase year-over-year

Industrial Employment:

822,900 MA Jobs (Aug 2017) 0.0% Growth year-over-year

Biopharma MFG Employment:

10,616 MA Jobs (Dec 2015) 6.3% Growth year-over-year

2017Q3


Recent Construction

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Leased Available


Warehouse Rents

0%

2%

4%

6%

8%

10%

12%

(400,000)

(200,000)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$5.00

$5.25

$5.50

$5.75

$6.00

$6.25

$6.50

$6.75

$7.00

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


Warehouse Rents

0%

2%

4%

6%

8%

10%

12%

(400,000)

(200,000)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$5.00

$5.25

$5.50

$5.75

$6.00

$6.25

$6.50

$6.75

$7.00

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


WAREHOUSE RENTS

RECENT CONSTRUCTION

INDUSTRIAL STATISTICS WAREHOUSE

TOTAL INVENTORY

(SF)

TOTAL VACANT

(SF)

TOTAL VACANCY

RATE

Q3NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT ($/SF)

TOTAL 90,882,417 5,947,318 6.5% 408,298 209,451 $6.88


Draka Cableteq656 Joseph Warner Bouelvard, Taunton


Owner-User Sale

Barletta Engineering

980 Turnpike Street, Canton


Owner-User Sale

National Development

130 Eastern Avenue, Chelsea

37,460 Urban Core Sale

AC Adventures LLC

191 Mechanic Street, Bellingham


Lease

Cambridge Sound Management

3 Normac Road, Woburn

16,500Route 128 North

Lease


TRENDS• Greater Boston’s warehouse market posted 408,298 square feet of positive absorption

in the third quarter, pushing vacancies down by 40 basis points compared to last quarter.

• Move-ins from Mancon at 200 Shuman Avenue in Stoughton and Lifoam at 351 Holt Road in Andover drove absorption this quarter.

• Landlords continue to push lease rates in the local warehouse market as fundamentals remain positive. Year-over-year, asking rents have increased by more than 9% to $6.88 per square foot this quarter.

• Owner-user sales continue to drive activity. Two of the largest transactions were Draka Cableteq’s purchase of the 242,640-square-foot 656 Joseph Warner Boulevard in Taunton and Barletta Engineering’s acquisition of the 60,000-square-foot 980 Turnpike Street in Canton.

• Reportedly, the sale of M.S. Walker’s former warehouse at 750 Everett Street in Norwood is nearly complete. The 162,695-square-foot building is currently vacant.

• Speedline Technologies vacated 120,000 square feet at 16 Forge Park in Franklin and relocated to 35 Parkwood Drive in Hopkinton. Brede/Allied Convention Services vacated the 190,033-square-foot 100 Industrial Park Road in Hingham as well this quarter.

• Williams-Sonoma is giving back more than 100,000 square feet of space at 176 Grove Street in Franklin.

WAREHOUSE



INDUSTRIAL STATISTICS FLEX / R&D

TOTAL INVENTORY

(SF)

TOTAL VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT NNN

($/SF)

TOTAL 50,379,098 5,281,779 10.5% (56,947) 337,651 $10.88

Recent Construction

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Leased Available


Flex / R&D Rents

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

(100,000)

(50,000)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$11.00

$12.00

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


Flex / R&D Rents

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

(100,000)

(50,000)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$11.00

$12.00

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


FLEX / R&D RENTS

RECENT CONSTRUCTION

TENANT / BUYER ADDRESS SIZE SUBMARKET TYPE

iRobot Corp.The XChange, Bedford

208,686 Route 128 Northwest

Renewal/Expansion

Anika Therapeutics

32 Wiggins Avenue, Bedford

134,000 Route 128 Northwest

Renewal

Watson-Marlow Bredel Inc.

37 Upton Drive, Wilmington

50,000 Route 128 North

Renewal/Expansion

Clear Motion400 Research Drive, Wilmington

28,473 Route 128 North

Relocation

AmericanBio20 Dan Road, Canton

23,406 Route 128 South

Relocation


TRENDS

• In one of the largest lease transactions of the year, iRobot renewed its office and flex space at The XChange in Bedford and expanded by roughly 5,000 square feet.

• Cisco Systems put 1414 Massachusetts Avenue in Boxborough on the market for $6.25MM and vacated the building, accounting for the majority of negative absorption in Flex/R&D market this quarter.

• Biofuel company, Joule Unlimited, is winding down operations amid layoffs and vacating 50,000 square feet at 18 Crosby Drive in Bedford.

• Construction concluded on HighRes Biosolution’s 80,000-square-foot building at 102 Cherry Hill Drive in Beverly. The firm relocated their operations from 299 Washington Street in Woburn.

• Siemens broke ground on a 300,000-square-foot expansion at its campus in Walpole this summer. The development, which will take four years to complete, will include manufacturing, warehouse, lab and office space.

• In July, R.J. Kelly purchased a 521,000-square-foot, 7-property Flex/R&D portfolio at the Cherry Hill Commerce Center in Danvers for $52.8MM or $101/SF. The portfolio was 85% occupied at the time of sale.

FLEX / R&D

2017Q3


INDUSTRIAL STATISTICS MANUFACTURING

TOTAL

INVENTORY (SF)

TOTAL VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT NNN

($/SF)

TOTAL 33,653,700 1,760,431 5.2% (93,690) 322,998 $7.78

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Leased Available

Manufacturing Rents

Recent Construction

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

(800,000)

(600,000)

(400,000)

(200,000)

0

200,000

400,000

600,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

$7.50

$8.00

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Manufacturing Rents

Recent Construction

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

(800,000)

(600,000)

(400,000)

(200,000)

0

200,000

400,000

600,000

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

$7.50

$8.00

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017


MANUFACTURING RENTS

RECENT CONSTRUCTION

MAN

UFACTURING

TENANT / BUYER ADDRESS SIZE SUBMARKET TYPE

Port Development LLC

2 Opportunity Way, Newburyport

86,308 Route 495 Northeast

Sale

National Development

960 Massachusetts Avenue, Roxbury

79,000 Urban Core Sale

Automation Solutions

11 Cabot Boulevard, Mansfield

66,968 Route 495 South

Lease

1st Light Energy19 Bonazolli Avenue, Hudson

6,500 Route 495 West

Lease


TRENDS• A handful of move-outs pushed net absorption in Greater Boston’s manufacturing

market into the red during the third quarter; pushing vacancies up by 20 basis points. Average asking rents are still growing and are nearing $8 per square foot.

• Whitsons Culinary Group is subleasing the entirety of 40 Newmarket Square, located in an area known for food production and distribution, vacating 27,314 square feet of food processing space.

• After selling its warehouse and production facility to Atlantic Management last quarter, Necco has begun to consolidate it’s space at 135 American Legion Highway in Revere; vacating 147,405 square feet in the third quarter.

• Alnylam Pharmaceuticals’ drug manufacturing facility is slated to deliver by the end of the year, bringing 200,000 square feet of space on the market.

• After purchasing the vacant 100 Nagog Park in Acton earlier this year, Insulet Corporation has broken ground on a new manufacturing facility on the site. Zoning changes will allow the new owner to expand the property by 300,000-350,000 square feet, which is expected to be up and running in 2019. Given that the site will also house office space, Insulet could move their headquarters operations (currently in Billerica) there as well.

• National Development acquired a 2.77-acre industrial property in Roxbury; totaling 81,424 square feet across two buildings. The new owner may redevelop the site, which is zoned for a multitude of uses, as it boasts the development potential of 240,000 square feet of commercial space.



CAPITAL MARKETS OVERVIEW

INDUSTRIAL SALES VOLUME ($)

RETAIL SALES VOLUME ($)

MULTIFAMILY SALES VOLUME ($)

OFFICE SALES VOLUME ($)

TOP Q3 / INVESTMENT SALES

South End Portfolio1000 Washington St/321 Harrison Ave

Boston

BuyerNordblom Company/CIM Group LP

Price $114,200,000

Total SF 314,410

Price/SF $363

Cap Rate -

Olmsted Place161 S Huntington Avenue

Jamaica Plain

Buyer Bell Partners, Inc.

Price $103,250,000

Units 191

Price/ Unit $524,111

Cap Rate 4.25%

Powder Mill Plaza100 Powdermill Road

Acton

Buyer Medipower

Price $16,300,000

Total SF 75,000

Price/SF $217

Cap Rate -

Rivertech 129 Concord Road

BillericaBuyer

Boston Andes Capital LLC/Jumbo Capital Management

Price $45,000,000

Total SF 285,952

Price/SF $157

Cap Rate -

OFFICE MULTIFAMILY RETAIL INDUSTRIAL

Transaction Volume Continues to SlideAt a macro level, transaction volume continues to slide from its 2015 peak — declining by 28% year-over-year as of July. While falling deal volume may seem concerning, pricing remains stable. Real Capital Analytics’ CPPI expanded by 1.1% from July to August, while CoStar Group’s CCRSI increased by 1.2% in the month of July. The growing bid-ask spread, modest economic growth and interest rate stability are key components driving these trends. Despite the recent slowdown, investment sales in US commercial real estate should remain positive with buyers focusing more on the multifamily and industrial asset classes.

Greater Boston outperformed during the first half of 2017, as the market posted strong pricing gains and increasing sales volume. Activity waned in the third quarter, with the office and retail markets seeing the sharpest declines. Some of this deceleration is likely seasonal, as activity tends to slow in the summer months, but metro-level trends are mirroring those at the national level. Though we may see capital shift from primary to secondary markets in the near future, US commercial real estate remains attractive to foreign investors and Boston remains a key destination for overseas buyers.

Both locally and nationally, multifamily assets are becoming a favorite among investors. Year-to-date, $2.5 billion in assets changed hands in Greater Boston, with nearly 60% of the volume trading during the third quarter. Some of the largest apartment transactions during the third quarter include John Hancock

Real Estate’s purchase of the Harborview at the Navy Yard in Charlestown for $149 MM, Equity Residential’s acquisition of the Girard in the South End for $116 MM and the Carlyle Group’s sale of Olmstead Place in Jamaica Plain for $103 MM.

Moreover, interest in industrial assets is on the rise due in part to growing e-commerce activity. Jumbo Capital and Boston Andes Capital recently acquired the two-building Rivertech portfolio in Billerica for $45MM or $157/SF, Calare Properties sold a flex building on Seyon Street in Watertown for $15MM or $159/SF and in one of the biggest deals of the year, R.J. Kelly bought the 7-building Cherry Hill Corporate Center in Danvers for $52.8MM or $101/SF.

A handful of assets and redevelopment sites in “fringe” urban locations have changed hands recently. Nordblom Company and Rubenstein Partners acquired an office building and parking garage at 1000 Washington Street in the South End for $75MM. Nordblom also recently snapped up the Boston Globe’s former headquarters in Dorchester, with plans to redevelop the site. Finally, National Development and Charles River Realty Investors purchased 960 Massachusetts Avenue and 100 Newmarket Street in Boston for $11.7MM. While it’s unclear if the new owners are planning to develop the site, it is zoned for multiple uses with the potential for 240,000 SF of commercial space.

2017Q3


OFFICE SALES

RETAIL SALES

MULTIFAMILY SALES

INDUSTRIAL SALES

CAPITAL MARKETS STATISTICS

Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL

SALES VOLUME ($) $1,449,433,520 $2,291,555,352 $2,846,769,858 $514,786,751 $7,102,545,481

# OF TRANSACTIONS 103 79 92 51 325

TOTAL SF 4,685,421 6,020,434 7,584,382 2,032,274 20,322,511

MEDIAN $/SF $183 $139 $178 $153 $163

Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL

SALES VOLUME ($) $570,941,032 $376,606,283 $285,126,128 $213,154,478 $1,445,827,921

# OF TRANSACTIONS 147 113 136 72 468

TOTAL SF 2,995,240 1,516,673 2,063,810 854,599 7,430,322

MEDIAN $/SF $200 $200 $250 $253 $216

Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL

SALES VOLUME ($) $1,087,102,971 $292,564,788 $770,304,889 $1,472,169,684 $3,622,142,332


TOTAL UNITS 4,195 918 2,906 3,332 11,351

MEDIAN $/UNIT $166,667 $241,667 $200,000 $214,062 $200,000

Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL

SALES VOLUME ($) $688,364,820 $452,274,723 $386,332,081 $302,111,353 $1,829,082,977


TOTAL SF 6,101,446 4,729,518 6,420,637 3,248,230 20,499,831

MEDIAN $/SF $79 $86 $90 $97 $87



M E T R O B O S T O N

OFFICE STATISTICS

MARKET RECAP20

17Q3

TOTAL INVENTORY

(SF)

UNDER CONSTRUCTION

(SF)

DIRECT VACANT

(SF)

SUBLEASE VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT ($/SF)

Back Bay 13,836,220 - 1,347,235 240,775 11.5% 31,673 3,126 $64.18

Charlestown 2,490,975 - 136,554 - 5.5% (51,570) (53,701) $41.20

Fenway/Kenmore 1,697,521 - 42,397 - 2.5% 371 13,422 $44.56

Financial District 35,583,994 381,283 2,765,687 236,472 8.4% 65,669 (30,675) $57.18

Midtown 2,076,364 - 69,725 - 3.4% (12,937) 8,059 $45.43

North Station 2,669,250 179,984 114,184 8,808 4.6% 5,146 (16,295) $44.34

Seaport 10,044,887 1,297,341 789,763 70,269 8.6% (15,995) (116,570) $54.77

South Station 1,174,568 - 28,505 - 2.4% (10,893) (18,814) $47.44

BOSTON TOTAL 69,573,779 1,858,608 5,294,050 556,324 8.4% 11,464 (211,448) $57.61

East Cambridge 5,636,548 879,598 68,960 180,246 4.4% (39,931) (149,847) $79.47

Mid Cambridge 2,667,518 - 81,310 23,144 3.9% 13,690 (12,014) $69.72

West Cambridge 2,050,570 - 73,827 23,741 4.8% 11,050 (12,802) $47.79

CAMBRIDGE TOTAL 10,354,636 879,598 224,097 227,131 4.4% (15,191) (174,663) $65.49

Framingham-Natick 4,607,042 - 685,628 61,678 16.2% 145 22,393 $24.60

Inner Suburbs 6,409,455 53,271 500,755 22,353 8.2% 21,227 26,517 $32.98

Route 128 North 14,248,204 145,000 1,334,914 80,832 9.9% 7,213 (38,835) $22.14

Route 128 Northwest 13,574,687 280,000 1,733,254 200,690 14.2% 47,767 (29,423) $30.98

Route 128 South 14,333,096 65,400 1,571,666 185,003 12.3% 12,187 (81,069) $23.09

Route 128 West 23,447,964 541,100 2,548,175 279,622 12.1% 283,291 448,104 $38.42

ROUTE 128 TOTAL 65,603,951 1,031,500 7,188,009 746,147 12.1% 350,458 298,777 $30.25

Route 495 North 13,208,246 - 2,759,695 111,451 21.7% (61,205) (31,418) $18.89

Route 495 Northeast 7,453,186 - 1,495,408 12,331 20.2% (11,145) 75,948 $18.52

Route 495 South 3,334,696 - 527,577 7,935 16.1% (131,165) (82,673) $20.05

Route 495 West 10,977,563 45,000 1,687,279 39,668 15.7% 90,882 372,219 $19.08

ROUTE 495 TOTAL 34,973,691 45,000 6,469,959 171,385 19.0% (112,633) 334,076 $18.95

SUBURBAN TOTAL 111,594,139 1,129,771 14,844,351 1,001,563 14.2% 259,197 681,763 $25.16

MARKET TOTAL 191,522,554 3,867,977 20,362,498 1,785,018 11.6% 255,470 295,652 $34.04


M E T R O B O S T O N M E T R O B O S T O N

INDUSTRIAL STATISTICS

MARKET RECAPBOSTON

10TH LARGESTMETROPOLITAN AREA IN THE US

UNEMPLOYMENT RATE US AVERAGE: 4.4%

2,748,756 LABOR FORCE

3.5%

$2.7 BILLION VC Funding (2016) 9

Accelerators

Tech Startups (Compass)4,000

537 Big Data Companies in MA INNOVATIVE

CITY(Innovation Cities)

SMARTEST

CITY(Forbes)

16LIFE SCIENCE INCUBATORS

TOTAL INVENTORY

(SF)

UNDER CONSTRUCTION

(SF)

DIRECT VACANT

(SF)

SUBLEASE VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET

ABSORPTION (SF)

YTD NET

ABSORPTION (SF)

ASKING RENT NNN

($/SF)

Urban Core 17,429,405 70,000 907,012 32,214 5.4% (261,732) (82,522) $10.37

Framingham-Natick 3,163,774 - 129,016 10,000 4.4% 106,421 168,927 $8.60

Route 128 North 28,364,865 145,000 1,138,366 123,173 4.4% 56,452 242,233 $9.84

Route 128 Northwest 3,881,764 - 193,202 92,500 7.4% (60,177) (4,063) $19.38

Route 128 South 39,059,962 400,000 3,070,924 5,100 7.9% 164,125 98,675 $7.24

Route 128 West 4,319,350 - 195,414 30,975 5.2% 1,983 (577) $18.58

ROUTE 128 TOTAL 75,625,941 545,000 4,597,906 251,748 6.4% 162,383 336,268 $8.87

Route 495 North 20,546,056 383,000 2,533,080 13,605 12.4% (265,721) (245,298) $10.17

Route 495 Northeast 11,905,357 175,000 1,036,588 57,600 9.2% 402,479 435,929 $8.17

Route 495 South 31,060,160 575,500 2,697,490 - 8.7% 39,284 122,993 $6.04

Route 495 West 15,184,522 - 723,269 - 4.8% 74,547 133,803 $9.49

ROUTE 495 TOTAL 78,696,095 1,133,500 6,990,427 71,205 9.0% 250,589 447,427 $8.21

MARKET TOTAL 174,915,215 1,748,500 12,624,361 365,167 7.4% 257,661 870,100 $8.61



M E T R O B O S T O N

2017Q3 CONTACTS

PETER W. EVANS

617.457.3402

[email protected]

JASON ROTH

617.457.3405

[email protected]

COLIN GORDON

617.457.3265

[email protected]

MAX PAWK

617.457.3345

[email protected]

MATTHEW DAVIS

617.457.3305

[email protected]

TREY AGNEW

Executive Vice President

617.457.3363

[email protected]

CATHY MINNERLY


617.457.3334

[email protected]

JAMES BOUDROT, CCIM, SIOR


617.457.3328

[email protected]

DAVID GILKIE, CCIM, SIOR

Senior Vice President

617.457.3202

[email protected]

F. MICHAEL DIGIANO


617.457.3410

[email protected]

NED HALLORAN


617.457.3372

[email protected]

STEVE JAMES


617.457.3263

[email protected]

LEEANNE RIZZO


617.457.3371

[email protected]

OVAR OSVOLD

Vice President

617.457.3222

[email protected]

CORMAC SULLIVAN

Associate

617.457.3319

[email protected]

MICHAEL ALLEN

Assistant Vice President

617.457.3276

[email protected]

SEAN HANNIGAN

Associate

617.457.3252

[email protected]

PATRICK GRADY

Associate

617.457.3278

[email protected]

DAVID N. ROSS


617.457.3392

[email protected]

ANDREW KAEYER


617.457.3207

[email protected]

ELLIOTT WHITE


617.457.3355

[email protected]

CARL CHRISTIE


617.457.3394

[email protected]

DAN MCGEE


617.457.3266

[email protected]

IAN S. MCKINLEY

Senior Associate

617.457.3404

[email protected]

ROBERT TITO


617.457.3231

[email protected]

GINA BARROSO


617.457.3261

[email protected]

MARK HALL


617.457.3412

[email protected]

HENRY LIEBER


617.457.3383

[email protected]

STUART PRATT, SIOR, CCIM

Chairman

617.457.3333

[email protected]

DAVID E. FINNEGAN

Vice President, Marketing Services

617.457.3238

[email protected]

STEPHEN M. PROZINSKI

COO & Co-Managing Principal

617.457.3370

[email protected]

LIZ BERTHELETTE

Director of Research

617.457.3306

[email protected]

PETER W. EVANS

Executive Vice President &

617.457.3402

[email protected]

Corporate

Urban Advisory

Group

Suburban Leasing &

Sales

Capital Markets

Co-Managing Principal

mailto:[email protected]


































SUBMARKET MAPM E T R O B O S T O N M E T R O B O S T O N

BOSTON

CAMBRIDGE

INNER SUBURBS

128 NORTH

128 NORTHWEST

128 WEST

FRAMINGHAM-NATICK

128 SOUTH

495 NORTHEAST

495 NORTH

495 WEST

495 SOUTH


303 Congress Street | Boston, MA 02210 | 617.457.3400

www.NAIHunneman.com

MARKET REPORTM E T R O B O S T O N

Q3 2017

OFFICE (DOWNTOWN, CAMBRIDGE, SUBURBAN)

INDUSTRIAL (WAREHOUSE, FLEX/R&D, MANUFACTURING)

CAPITAL MARKETS

METHODOLOGY

SOURCE: Co-Star, NAI Hunneman Commercial Company. PREPARED: September 2017. 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.


metro boston market report… · q3 17 market report metro boston. 2 committed to boston, connected...

Documents