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pushed up as result of tenant demand and repositioning of older, outdated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)
3 | METRO BOSTON INDUSTRIAL | Q4 2019
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
$/SF
(NN
N)
2015 2016 2017 2018 2019
-1,000
-500
0
500
1,000
1,500
2,000
SQU
AR
E FE
ET(t
hous
and
s)
2013 2014 2015 2016 2017 2018 2019
NET ABSORPTION NEW SUPPLY
0%
2%
4%
6%
8%
10%
12%
14%
2014 2015 2016 2017 2018 20192013
5-YEAR HISTORICAL AVERAGE VACANCY RATES
4 | METRO BOSTON INDUSTRIAL | Q4 2019
INDUSTRIAL FLEX/R&D
TOTAL INVENTORY(SF)
TOTAL VACANT(SF)
TOTAL VACANCY RATE
Q4 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
ASKING RENT($/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)
$/S
F(N
NN
)
0%
4%
8%
12%
16%
20%
2013 2014 2015 2016 2017 2018 2019
ROUTE 495/METROWEST ROUTE 128 URBAN CORE
5 | METRO BOSTON INDUSTRIAL | Q4 2019
INDUSTRIAL MANUFACTURING
TOTAL INVENTORY(SF)
TOTAL VACANT(SF)
TOTAL VACANCY RATE
Q4 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
ASKING RENT($/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%
6 | METRO BOSTON INDUSTRIAL | Q4 2019
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
Size 81,800 SF Size 81,776 SF Size 76,054 SF Size 54,000 SF
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
Size 32,500 SF Size 27,098 SF Size 21,772 SF Size 20,374 SF
Submarket Route 495 North Submarket Route 128 NorthWest Submarket Route 128 NorthWest Submarket Route 495 West
7 | METRO BOSTON INDUSTRIAL | Q4 2019
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
$(m
illio
ns)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
8 | METRO BOSTON INDUSTRIAL | Q4 2019
TOTAL INVENTORY
(SF)
UNDER CONSTRUCTION
(SF)
DIRECT VACANT
(SF)
SUBLEASE VACANT
(SF)
TOTAL VACANCY
RATE
Q4 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
ASKING RENT NNN
($/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