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Boston Area Retail Market Report for Q4 2017

The Boston retail market did not experience much change in market conditions in the fourth quarter 2017. The vacancy rate went from 2.9% in the previous quarter to 2.8% in the current quarter. Net absorption was positive 658,913 square feet, and vacant sublease space decreased by (205,525) square feet. Quoted rental rates increased from third quarter 2017 levels, ending at $18.69 per square foot per year. A total of 17 retail buildings with 405,320 square feet of retail space were delivered to the market in the quarter, with 2,162,215 square feet still under construction at the end of the quarter.

Absorption

Retail net absorption was moderate in Boston fourth quarter 2017, with positive 658,913 square feet absorbed in the quarter. In third quarter 2017, net absorption was positive 511,736 square feet, while in second quarter 2017, absorption came in at positive 920,959 square feet. In first quarter 2017, positive 354,553 square feet was absorbed in the market.

Vacancy

Boston’s retail vacancy rate decreased in the fourth quarter 2017, ending the quarter at 2.8%. Over the past four quarters, the market has seen an overall decrease in the vacancy rate, with the rate going from 3.0% in the first quarter 2017, to 2.9% at the end of the second and third quarters 2017, to 2.8% in the current quarter. The amount of vacant sublease space in the Boston market has trended down over the past four quarters. At the end of the first quarter 2017, there were 385,855 square feet of vacant sublease space. Currently, there are 120,947 square feet vacant in the market.

Rental rates

Average quoted asking rental rates in the Boston retail market are up over previous quarter levels, and up from their levels four quarters ago. Quoted rents ended the fourth quarter 2017 at $18.69 per square foot per year. That compares to $18.15 per square foot in the third quarter 2017, and $16.96 per square foot at the end of the first quarter 2017. This represents a 3.0% increase in rental rates in the current quarter, and a 9.26% increase from four quarters ago.

Deliveries and Construction

During the fourth quarter 2017, 17 buildings totaling 405,320 square feet were completed in the Boston retail market. Over the past four quarters, a total of 1,896,264 square feet of retail space has been built in Boston. In addition to the current quarter, 13 buildings with 502,832 square feet were completed in third quarter 2017, 18 buildings totaling 830,876 square feet completed in second quarter 2017, and 157,236 square feet in 21 buildings completed in first quarter 2017. There were 2,162,215 square feet of retail space under construction at the end of the fourth quarter 2017. Some of the notable 2017 deliveries include: 193 Boston Tpke, a 375,000-square-foot facility that delivered in second quarter 2017 and is now 100% occupied, and 129 Parker St, a 250,000-square-foot building that delivered in third quarter 2017 and is now 70% occupied. Total retail inventory in the Boston market area amounted to 342,445,987 square feet in 28,252 buildings and 1941 centers as of the end of the fourth quarter 2017.

Sales Activity

Tallying retail building sales of 15,000 square feet or larger, Boston retail sales figures fell during the third quarter 2017 in terms of dollar volume compared to the second quarter of 2017. In the third quarter, 18 retail transactions closed with a total volume of $145,956,000. The 18 buildings totaled 1,028,544 square feet and the average price per square foot equated to $141.91 per square foot. That compares to 28 transactions totaling $224,308,400 in the second quarter 2017. The total square footage in the second quarter was 1,323,881 square feet for an average price per square foot of $169.43.

Total retail center sales activity in 2017 was down compared to 2016. In the first nine months of 2017, the market saw 79 retail sales transactions with a total volume of $607,025,841. The price per square foot averaged $154.93. In the same first nine months of 2016, the market posted 71 transactions with a total volume of $773,857,514. The price per square foot averaged $186.97. Cap rates have been higher in 2017, averaging 7.36% compared to the same period in 2016 when they averaged 7.34%.


Information provided by CoStar.com

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