The Boston industrial market is adjusting after the largest influx of new construction in 25 years. Vacancy has climbed 200 basis points over the last four quarters to reach 8.0%, the highest since 2014. This reflects a cooling trend as supply outpaces demand in the near term.

Nationally, higher interest rates have slowed housing activity, cutting demand for warehouse-heavy goods such as building materials and furniture. Imports and inventories are settling back to long-term patterns, but tariff uncertainty continues to add pressure. Despite resilient job growth and consumer spending, these headwinds have weighed on industrial demand.

Locally, Boston is seeing slower absorption in both logistics and flex space, the latter of which plays a key role for the region’s biotech sector. Net demand formation totaled -2.6 million SF over the past year, with Amazon’s 3.8 million SF North Andover facility accounting for a significant share of new occupancy in Q2 2024.

Looking ahead, supply remains the dominant force shaping market conditions. Amazon’s project is the largest new delivery since 2001, and additional developments are set to hit the market by year’s end. With vacancies elevated, rent growth has compressed to 3.4% on a trailing 12-month basis, down from a cycle peak of 9.2% in mid-2022. That said, rents are projected to maintain growth above 5% through 2025 as new supply is gradually absorbed.

The long-term forecast calls for vacancy to peak around 8.0% by late 2025 before moderating. While above the historically tight conditions of the 2010s, this remains well below the double-digit levels seen after the Great Recession. For investors, tenants, and landlords, now is the time to plan strategically for shifting opportunities in Boston’s industrial market. Contact our team today to discuss how these trends could impact your portfolio or space needs.