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Boston Area Industrial Market Report for Q4 2017

The Boston Industrial market ended the fourth quarter 2017 with a vacancy rate of 5.0%. The vacancy rate was unchanged over the previous quarter, with net absorption totaling positive 1,453,086 square feet in the fourth quarter. Vacant sublease space increased in the quarter, ending the quarter at 1,467,049 square feet. Rental rates ended the fourth quarter at $7.36, an increase over the previous quarter. A total of 21 buildings delivered to the market in the quarter totaling 1,406,511 square feet, with 3,583,653 square feet still under construction at the end of the quarter.

Absorption

Net absorption for the overall Boston Industrial market was positive 1,453,086 square feet in the fourth quarter 2017. That compares to positive 1,198,684 square feet in the third quarter 2017, positive 799,261 square feet in the second quarter 2017, and positive 2,394,025 square feet in the first quarter 2017. The Flex building market recorded net absorption of positive 138,187 square feet in the fourth quarter 2017, compared to negative (208,997) square feet in the third quarter 2017, positive 342,194 in the second quarter 2017, and positive 857,351 in the first quarter 2017. The Warehouse building market recorded net absorption of positive 1,314,899 square feet in the fourth quarter 2017 compared to positive 1,407,681 square feet in the third quarter 2017, positive 457,067 in the second quarter 2017, and positive 1,536,674 in the first quarter 2017.

Vacancy

The Industrial vacancy rate in the Boston market area remained at 5.0% at the end of the fourth quarter 2017. The vacancy rate was 5.0% at the end of the third quarter 2017, 5.2% at the end of the second quarter 2017, and 5.3% at the end of the first quarter 2017. Flex projects reported a vacancy rate of 6.6% at the end of the fourth quarter 2017, 6.6% at the end of the third quarter 2017, 6.4% at the end of the second quarter 2017, and 6.7% at the end of the first quarter 2017. Warehouse projects reported a vacancy rate of 4.5% at the end of the fourth quarter 2017, 4.5% at the end of third quarter 2017, 4.8% at the end of the second quarter 2017, and 4.9% at the end of the first quarter 2017.

Rental Rates

The average quoted asking rental rate for available Industrial space was $7.36 per square foot per year at the end of the fourth quarter 2017 in the Boston market area. This represented a 4.7% increase in quoted rental rates from the end of the third quarter 2017, when rents were reported at $7.03 per square foot. The average quoted rate within the Flex sector was $10.62 per square foot at the end of the fourth quarter 2017, while Warehouse rates stood at $6.47. At the end of the third quarter 2017, Flex rates were $10.45 per square foot, and Warehouse rates were $6.17

Deliveries and Construction


During the fourth quarter 2017, 21 buildings totaling 1,406,511 square feet were completed in the Boston market area. This compares to seven buildings totaling 361,099 square feet that were completed in the third quarter 2017, 14 buildings totaling 267,151 square feet completed in the second quarter 2017, and 500,690 square feet in eight buildings completed in the first quarter 2017. There were 3,583,653 square feet of Industrial space under construction at the end of the fourth quarter 2017. 

Sales Activity

Tallying industrial building sales of 15,000 square feet or larger, Boston industrial sales figures fell during the third quarter 2017 in terms of dollar volume compared to the second quarter of 2017. In the third quarter, 49 industrial transactions closed with a total volume of $268,917,231. The 49 buildings totaled 3,741,246 square feet and the average price per square foot equated to $71.88 per square foot. That compares to 57 transactions totaling $326,549,774 in the second quarter. The total square footage was 5,831,054 for an average price per square foot of $56.00. Total year-to-date industrial building sales activity in 2017 is down compared to the previous year. In the first nine months of 2017, the market saw 161 industrial sales transactions with a total volume of $899,117,657. The price per square foot has averaged $65.81 this year. In the first nine months of 2016, the market posted 185 transactions with a total volume of $950,499,832. The price per square foot averaged $56.55. Cap rates have been lower in 2017, averaging 7.68%, compared to the first nine months of last year when they averaged 7.73%. One of the largest transactions that has occurred within the last four quarters in the Boston market is the sale of 27 Drydock Ave in Boston. This 280,562-square-foot industrial building sold for $146,500,000, or $522.17 per square foot. The property sold on 12/16/2016, at a 3.75% cap rate.

Information provided by CoStar.com

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