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Boston Area Retail Market Report for Q1 2017

The Boston retail market did not experience much change in market conditions in the first quarter 2017. The vacancy rate went from 3.1% in the previous quarter to 3.1% in the current quarter. Net absorption was positive 294,408 square feet, and vacant sublease space decreased by (109,265) square feet. Quoted rental rates increased from fourth quarter 2016 levels, ending at $17.61 per square foot per year. A total of 19 retail buildings with 140,512 square feet of retail space were delivered to the market in the quarter, with 2,700,592 square feet still under construction at the end of the quarter

Absorption

Retail net absorption was slightly positive in Boston first quarter 2017, with positive 294,408 square feet absorbed in the quarter. In fourth quarter 2016, net absorption was positive 410,891 square feet, while in third quarter 2016, absorption came in at positive 852,417 square feet. In second quarter 2016, positive 1,555,753 square feet was absorbed in the market.

Vacancy

Boston’s retail vacancy rate changed in the first quarter 2017, ending the quarter at 3.1%. Over the past four quarters, the market has seen an overall decrease in the vacancy rate, with the rate going from 3.4% in the second quarter 2016, to 3.2% at the end of the third quarter 2016, 3.1% at the end of the fourth quarter 2016, to 3.1% 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 second quarter 2016, there were 773,013 square feet of vacant sublease space. Currently, there are 385,855 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 down from their levels four quarters ago. Quoted rents ended the first quarter 2017 at $17.61 per square foot per year. That compares to $17.57 per square foot in the fourth quarter 2016, and $18.40 per square foot at the end of the second quarter 2016. This represents a 0.2% increase in rental rates in the current quarter, and a 4.49% decrease from four quarters ago

Deliveries and Construction

During the first quarter 2017, 19 buildings totaling 140,512 square feet were completed in the Boston retail market. Over the past four quarters, a total of 1,429,014 square feet of retail space has been built in Boston. In addition to the current quarter, 26 buildings with 306,464 square feet were completed in fourth quarter 2016, 25 buildings totaling 226,222 square feet completed in third quarter 2016, and 755,816 square feet in 24 buildings completed in second quarter 2016.

There were 2,700,592 square feet of retail space under construction at the end of the first quarter 2017. Some of the notable 2017 deliveries include: 585 State Rd, a 27,156-square-foot facility that delivered in first quarter 2017 and is now 100% occupied, and 1313 Main Street – Tractor Supply, a 20,000-square-foot building that delivered in first quarter 2017 and is now 100% occupied. Total retail inventory in the Boston market area amounted to 338,212,902 square feet in 27,838 buildings and 1939 centers as of the end of the first quarter 2017

Sales Activity

Tallying retail building sales of 15,000 square feet or larger, Boston retail sales figures fell during the fourth quarter 2016 in terms of dollar volume compared to the third quarter of 2016. In the fourth quarter, 30 retail transactions closed with a total volume of $231,714,000. The 30 buildings totaled 2,637,317 square feet and the average price per square foot equated to $87.86 per square foot. That compares to 31 transactions totaling $434,411,627 in the third quarter 2016. The total square footage in the third quarter was 2,184,423 square feet for an average price per square foot of $198.87.

Total retail center sales activity in 2016 was down compared to 2015. In the twelve months of 2016, the market saw 101 retail sales transactions with a total volume of $1,005,571,514. The price per square foot averaged $148.22. In the same twelve months of 2015, the market posted 128 transactions with a total volume of $1,029,125,517. The price per square foot averaged $190.75.

Cap rates have been higher in 2016, averaging 7.41% compared to the same period in 2015 when they averaged 7.20%.

One of the largest transactions that has occurred within the last four quarters in the Boston market is the sale of 145- 149 Great Road – Brookshire Shops. This 75,781 square foot retail center sold for $33,500,000, or $442.06 per square foot. The property sold on 12/30/2016.

Information provided by CoStar.com

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