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303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM
METRO BOSTON INDUSTRIAL MARKET REPORT
FIRST QUARTER | 2019
2 | METRO BOSTON INDUSTRIAL | Q1 2019
BOSTON MARKET INDUSTRIAL OVERVIEW
Greater Boston industrial vacancies ended the first quarter slightly higher as
speculative construction weighed on fundamentals. Vacancies, at 8.8%, are
still in line with their 20-year lows though. Insulet, Dealer Tire, Estes and Spire
Printing all took occupancy of large blocks of space during the quarter —
helping to keep net absorption in the black. The warehouse market continues
to dominate, boasting the lowest vacancy rate and accounting for more
than 200,000 square feet of positive absorption during the first quarter. New
construction continues to drive frothy rent gains throughout the metro area.
Having expanded by 40-50% over the last 10 years, asking rents are sitting at
all-time highs. Above-average growth has been centered inside of Route 128,
but with limited availabilities in these areas, landlords along Route 495 are
gaining traction.
Boston’s industrial pipeline remains steady as developers continue to bring
new product on line. Speculative development is dominating activity, with
only 26% of the nearly two million square feet currently underway pre-
leased. The 300,000-square-foot 100 Financial Park in Franklin, Condyne’s
513,000-square-foot expansion at the Bluestar Business Park in Norton and
DeBartolo Development’s 350,000-square-foot 725 Elm Street in Bridgewater
are expected to deliver in 2019 with large availabilities. A handful of other major
developments are expected to break ground soon as well. While vacancies will
likely face some more upward pressure as a result, especially in the warehouse
market, overall market conditions remain well balanced.
While new construction is putting upward pressure on vacancies, recent
speculative development is also driving strong rent gains throughout the
industrial market. Average asking rents across the Greater Boston metro
are nearing $10/SF NNN, with infill locations and submarkets with high
concentrations of Flex/R&D space garnering much higher lease rates. This
represents a cyclical high for the market. Moreover, year-over-year rent growth
is actually accelerating. Annual rent growth over the last two quarters has been
close to 10%, which is well above recent historical trends. Expect solid gains in
the near term outlook, especially if the construction pipeline remains robust
and vacancies continue to hover near historically low levels.
Consensus among most economists is that 2019 will remain a year of growth.
However, uncertainty is weighing on sentiment. A yield-curve inversion (the
10-year versus the 3-month Treasuries), trade conflicts and global economic
instability have emerged as potential economic risks. Many are looking to 2020
as a potential inflection point in what will likely be the longest U.S. economic
expansion in history.
8.8%
TOTAL VACANCY RATE
182,313Q1 NET ABSORPTION
(SF)
$9.86ASKING RENT
($/SF)
1,983,938UNDER CONSTRUCTION
(SF)
3 | METRO BOSTON INDUSTRIAL | Q1 2019
INDUSTRIAL WAREHOUSE
TOTAL INVENTORY(SF)
TOTAL VACANT(SF)
TOTAL VACANCY RATE
Q1 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
ASKING RENT($/SF)
Total 95,885,446 6,147,767 6.4% 272,240 272,240 $7.75
• First-quarter net absorption totaled roughly 272,000 square feet in
the Greater Boston warehouse market, which represents the eighth-
consecutive quarter of positive absorption. New construction kept
vacancies flat, at 6.4%, over the quarter. Developers are ramping up
construction in order to meet the growing need for modern, high-quality,
“smart” distribution space, with total square feet under construction
nearing 1.6 million. Near-term fundamentals in the local warehouse
market are expected to continue to benefit from solid leasing and demand
from new and growing warehouse/distribution tenants needing to meet
the growing consumer demand.
• 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 300,000 square feet or more
of warehouse space have only a handful of choices in the metro area.
That said, new construction will help relieve some of this pressure on
fundamentals.
• Much of Greater Boston’s current development is focused on warehouse/
distribution product, with close to 1.6 million square feet underway as of
the first quarter of 2019. Developers remain focused on the metro’s key
distribution hubs in the south. The Route 128 and 495 South submarkets
account for 83% of all warehouse development. Work continues on
Condyne’s 513,000-square-foot Bluestar Business Park in Norton and on
the 300,000-square-foot 100 Financial Park in Franklin. Another 350,000
square feet of space is slated to come on line by the end of 2019 at 725 Elm
Street in Bridgewater as well.
• Medline Industries and MSHQ executed major warehouse leases during
the first quarter; taking down several hundred thousand square feet of
space in Taunton and Westborough, respectively.
• Asking rents continue to set records, supported by current market
conditions and speculative construction. Ending the first quarter at $7.75/
SF, lease rates are sitting 7.6% over year-ago levels and 28% above rates
seen at the end of 2014. Lease rates in the Route 495 North and South
submarkets have seen significant amount of growth over the last five
years; expanding by 40%-50% during this period.
TOTAL VACANCY
NET ABSORPTION & SUPPLY
ASKING RENT
0%
2%
4%
6%
8%
10%
12%
14%
2014 2015 2016 2017 2018 20192013
5-YEAR HISTORICAL AVERAGE VACANCY RATES
-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
$1
$2
$3
$4
$5
$6
$7
$9
$8
$/SF
(NN
N)
2015 2016 2017 2018 2019
4 | METRO BOSTON INDUSTRIAL | Q1 2019
INDUSTRIAL FLEX/R&D
TOTAL INVENTORY(SF)
TOTAL VACANT(SF)
TOTAL VACANCY RATE
Q1 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
ASKING RENT($/SF)
Total 52,230,658 6,658,475 12.7% (604,937) (604,937) $11.92
• While Greater Boston’s Flex/R&D market continues to benefit from the
growing tech, biotech, and light manufacturing industries, several recent
move-outs resulted in roughly 600,000 square feet of negative absorption
in the first quarter. As a result, Flex/R&D vacancies increased to 12.7% over
the quarter. That said, the market continues to see persistent demand
from technology-related companies, which is expected to drive growth in
the local Flex/R&D market in the coming quarters.
• The Route 128 South submarket accounted for the lion’s share of negative
absorption during the quarter. Universal Wilde vacated 200,000 square feet
at 26 Dartmouth Street in Westwood and the Mass Lottery relocated from
60 Columbian Street in Braintree to its new headquarters in Dorchester.
• Rents continue to climb steadily in the Flex/R&D market despite rising
vacancy rates. Metrowide rents ended the first quarter just shy of $12/
SF NNN. Lease rates are up 6.0% year-over-year and 1.7% over the
quarter. 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 will impact the availability of infill industrial sites;
keeping rents on their upward trajectory.
• Several Flex/R&D assets changed hands during the first quarter. In one
of the largest transactions of the quarter, Oakdell, LLC acquired the
115,650-square-foot 28 Damrell Street in South Boston for $33.5 million
or $299/SF. This sale points to the meteoric rise in demand for urban, infill
industrial assets. Trillium Brewing also purchased a Flex/R&D building on
the former Reebok campus in Canton from Spear Street Capital for $13
million. The brewing company plans to convert the property into a large
brewery and taproom. AMERCO Real Estate Company purchased two
assets, including a Flex/R&D building at 145 Milk Street, in Methuen for $12
million. The firm is planning to convert the properties into a self-storage
facility.
• Volatility in the stock market led high-tech indices to decline significantly
at the end of 2018. Pricing rebounded nicely in early 2019, which bodes
well for the Greater Boston Flex/R&D markets. However, further strain in
the markets would ultimately result in demand-side risks.
VACANCY BY SUBMARKET
NET ABSORPTION & ASKING RENT
BLOOMBERG MASSACHUSETTS HIGH TECH INDEX
0%
4%
8%
12%
16%
20%
2013 2014 2015 2016 2017 2018 2019
ROUTE 495/METROWEST ROUTE 128 URBAN CORE
-600
-400
-800
-200
0
200
400
600
800
SQU
AR
E FE
ET(t
hous
and
s)
2015 2016 2017 2018 2019
ASKING RENT NET ABSORPTION
$/SF(N
NN
)
$4
$6
$8
$7
$5
$10
$9
$11
$13
$12
0
10
20
30
40
50
60
70
80
90
100
2014 2015 2016 2017 2018
5 | METRO BOSTON INDUSTRIAL | Q1 2019
INDUSTRIAL MANUFACTURING
TOTAL INVENTORY(SF)
TOTAL VACANT(SF)
TOTAL VACANCY RATE
Q1 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
ASKING RENT($/SF)
Total 35,005,249 3,368,620 9.6% 515,010 515,010 $9.61
• After facing some headwinds last year, Greater Boston’s manufacturing
market rebounded during the first quarter. With more than 500,000 square
feet of positive absorption, vacancies declined by 50 basis points to end
the quarter at 9.6%. The opening of Insulet’s new facility at Nagog Park in
Acton and Maxon Motor’s new manufacturing site in Taunton drove much
of this activity. Manufacturing fundamentals remain dynamic and demand
drivers continue to shift to marijuana cultivation, drug production, food
production and high-tech manufacturing.
• Trillium Brewing announced plans to open a production brewery on the
former Reebok site in Canton. The popular brewer recently purchased a
19-acre site with a 140,000-square-foot building at the Royall Street facility
with plans to relocate operations over the next few years. With this move,
Trillium will consolidate leased spaces in Canton and warehouses in Avon
and Taunton.
• Massachusetts’ marijuana industry continues to bolster manufacturing
activity. At the end of 2018, AmeriCann began construction on its
Massachusetts Medical Cannabis Center in Freetown. The 30,000-square-
foot first phase is slated to come on line in 2019. Plans are already in the
works for the campus’ 345,000-square-foot second phase as well. All told,
AmeriCann plans to develop nearly one million square feet of cultivation
and processing space.
• Build-to-suit projects dominate current construction activity in Greater
Boston’s manufacturing market. Pilot Development recently broke ground
on a 50,000-square-foot processing facility for Boston Sword and Tuna on
Parcel 6 at the Massport Marine Terminal. The seafood processing company
will expand operations from 8 Seafood Way once construction is complete.
Senior Metal Bellows is expanding its manufacturing facility in Sharon by
47,000 square feet as well.
• 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 and electric products and chemical manufacturing are among
Massachusetts’ top contributors to GDP.
VACANCY & NET ABSORPTION
ASKING RENT
MASSACHUSETTS MANUFACTURING REAL GDP
-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%
$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
6 | METRO BOSTON INDUSTRIAL | Q1 2019
NOTABLE TRANSACTIONS
800 JOHN QUINCY ADAMS ROADTAUNTON
112 BARNUM ROADDEVENS
301 BARTLETT STREETNORTHBOROUGH
425 WAVERLEY OAKS ROADWALTHAM
Company Medline Industries Company Nypro Company MSHQ Company Vecna Technologies
Size 350,326 SF Size 247,060 SF Size 100,000 SF Size 77,709 SF
Submarket Route 495 South Submarket Route 495 North Submarket Route 495 West Submarket Route 128 West
1 FIRST AVENUEPEABODY
2-8 CRAIG ROADACTON
333 BOSTON PROVIDENCE TURNPIKENORWOOD
525 BODWELL STREETAVON
Company Spire Printing Company Avnet, Inc. Company Organogenesis Company Aqua Leisure
Size 63,142 SF Size 45,000 SF Size 43,850 SF Size 40,000 SF
Submarket Route 128 North Submarket Route 495 North Submarket Route 128 South Submarket Route 128 South
165 GROVE STREETFRANKLIN
675 CANTON STREETNORWOOD
200 RESEARCH DRIVEANDOVER
101 BISHOP STREETFRAMINGHAM
Company NRX Logistics Company Caesarstone Company Physical Sciences Company ABC Supply
Size 34,606 SF Size 32,000 SF Size 30,010 SF Size 30,000 SF
Submarket Route 495 South Submarket Route 128 South Submarket Route 495 Northeast Submarket Framingham-Natick
7 | METRO BOSTON INDUSTRIAL | Q1 2019
RESEARCH SPOTLIGHT
TOP 5 MASSACHUSETTS MANUFACTURING INDUSTRIES
MANUFACTURING AS A % OF TOTAL EMPLOYMENT
50
52
54
58
56
62
60
64
68
66
70
0
40
20
60
100
80
120
AV
ERA
GE
EMPL
OY
MEN
T/ES
TAB
LISH
MEN
T
AV
ERA
GE
WA
GE
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
6%
8%
7%
9%
11%
10%
13%
12%
14%
US MASSACHUSETTS
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
WAGE GROWTH-MASSACHUSETTS AND THE U.S.
160
150
140
130
120
110
100
170
180
190
200
1998 2000 20011999 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
U.S. TOTAL U.S. MANUFACTURING
MASSACHUSETTS TOTAL MASSACHUSETTS MANUFACTURING
GDP(MILLIONS)
1. Computer and Electric Product Manufacturing $15,924.10
2. Chemical Manufacturing $9,461.70
3. Fabricated Metal Product Manufacturing $5,037.20
4. Miscellaneous Manufacturing $4,747.20
5. Food and Beverage and Tobacco Products $2,879.60
MASSACHUSETTS HIGH TECH MANUFACTURING
8 | METRO BOSTON INDUSTRIAL | Q1 2019
CAPITAL MARKETS
• Momentum in Boston’s industrial market continued into the New Year.
More than $530 million in industrial and Flex/R&D assets changed hands
during the first three months of 2019, with urban sales boosting volume
and pricing. Developers looking to meet the city’s ever-growing need for
housing and other commercial uses are acquiring older, industrial assets
for redevelopment and are keeping prices elevated. At close to $90/SF,
the median price per square foot in the Boston industrial market is 17%
above 2008 levels.
• Two of the seven transactions over $20 million were located in Boston.
The Verndale Corporation sold the 115,650-square-foot 28 Damrell Street
to Oakdell, LLC for $33.5 million or $290/SF and Centerbridge Partners
acquired the 88,256-square-foot 420 E Street from GFI Partners for $32.5
million or $368/SF. Look for capital to continue flowing to aging industrial
corridors in neighborhoods like the South End and South Boston.
• Other major trades include Sun Life Institutional Investments’ acquisition
of two properties for $76.7 million and Charles River Realty Group’s
purchase of 1 Technology Way in Norwood for $28 million.
MEDIAN PRICE/SF
TOP Q1 / INVESTMENT SALES
INDUSTRIAL PORTFOLIOBELLINGHAM/LITTLETON
28 DAMRELL STREETBOSTON
420 E STREETBOSTON
1 TECHNOLOGY WAYNORWOOD
Buyer Sun Life Institutional Investments Buyer Oakdell, LLC Buyer Centerbridge Partners Buyer Charles River Realty
Group
Price $76,650,000 Price $33,500,000 Price $32,500,000 Price $28,000,000
Total SF 688,370 Total SF 115,650 Total SF 88,256 Total SF 130,000
Price/SF $111 Price/SF $290 Price/SF $368 Price/SF $215
Cap Rate - Cap Rate - Cap Rate - Cap Rate -
SALES VOLUME($)
NUMBER OF TRANSACTIONS
TOTAL SF
MEDIAN($/SF)
MEDIAN CAP RATE
$533 M 97 5.1 M $86 6.1%
SALES VOLUME
$800
$600
$700
$500
$400
$300
$200
$100
$0
$(m
illio
ns)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$120
$100
$80
$60
$40
$20
$02008 201420132012201120102009 2015 2016 2017 2018 2019
9 | METRO BOSTON INDUSTRIAL | Q1 2019
TOTAL INVENTORY
(SF)
UNDER CONSTRUCTION
(SF)
DIRECT VACANT
(SF)
SUBLEASE VACANT
(SF)
TOTAL VACANCY
RATE
Q1 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
ASKING RENT NNN
($/SF)
Urban Core 18,732,486 150,000 2,041,919 34,176 11.1% (101,761) (101,761) $16.12
Framingham-Natick 3,213,188 - 121,121 - 3.8% (12,085) (12,085) $9.14
Route 128 North 28,807,333 - 1,686,792 125,850 6.3% (52,339) (52,339) $9.89
Route 128 Northwest 3,812,608 - 157,314 29,776 4.9% (3,521) (3,521) $18.41
Route 128 South 39,841,784 397,500 3,048,864 19,440 7.7% (189,636) (189,636) $7.72
Route 128 West 4,459,603 - 410,182 - 9.2% (67,358) (67,358) $20.47
Route 128 Total 76,921,328 397,500 5,303,152 175,066 7.1% (312,854) (312,854) $9.71
Route 495 North 22,138,555 - 2,692,728 8,049 12.2% 198,426 198,426 $9.91
Route 495 Northeast 12,814,136 - 1,106,012 85,414 9.3% 154,284 154,284 $7.92
Route 495 South 33,153,274 1,211,000 3,125,241 46,359 9.6% 176,144 176,144 $6.60
Route 495 West 16,148,386 225,4383 1,415,282 10,343 8.8% 80,159 80,159 $10.04
Route 495 Total 84,254,351 1,436,438 8,349,263 150,165 10.1% 609,013 609,013 $8.42
Market Total 183,121,353 1,983,938 15,815,455 359,407 8.8% 182,313 182,313 $9.86
INDUSTRIAL RECAP
METHODOLOGY
Source: Co-Star, Hunneman. Prepared: March 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.
LIZ BERTHELETTEDirector of Research
JOEY BIASIResearch Analyst
303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM