With nearly two million square feet of industrial property lying vacant and a 14-15% vacancy rate for Boston’s Industrial Property the gloom and sweat running from property owner’s brows appears almost visible. And yet, 40% of these same property owners are grinning from ear to ear. Their properties are leased and even if per chance their tenant vacates, the likelihood of being released in short order is high. The rents aren’t being slashed. Tenant Improvements aren’t being offered. If anything: The rents will be rising! The vacancy rates for their properties are between 1 and 2%.
A small percentage you may imagine. And you’d be wrong. These properties comprise nearly 40% of all the industrial spaces in Boston and over 5,500,000 sq ft of space. These are the industrial properties offering 10,000 sq ft or less. The vast majority of these properties are occupied by small, Independent businesses. With increasing regularity, large commercial properties owners with properties offering spaces of 50,000 sq ft or more are studying the options to lease out smaller portions of the property to small businesses requiring 10,000 sq ft or less.
From a macro view, the industrial market looks soft, if not depressing. But a micro view reveals the anomaly. With roughly fourteen million sq ft of industrial space in Boston Proper, nearly two million lay vacant. But, nearly one million of the two million vacant spaces are over 75,000 sq ft and consist of almost half the industrial vacancies. For spaces of 10,000 sq ft or less, there is scarcely 100,000 sq ft available in the entirety of Boston; an astonishingly low vacancy rate of 1.8%.
Nearby communities such as Cambridge & Somerville have benefited by proximity and have experienced substantially similar low vacancy rates for smaller properties. Rents for properties of 5,000 sq ft and below are typically running $10-$14/sq ft NNN and from 5,000-10,000 sq ft are ranging from $8-$12/sq ft NNN.
With the uncanny ability to adapt in the midst of what may have seemed a bleak perspective, Boston’s small business owners and entrepreneurs have repositioning themselves in the new marketplace. Boston’s small businesses have breathed life into a seemingly morbid economy and have been the stabilizing force behind Boston’s commercial real estate market. Savvy commercial property owners are looking at ways to capitalize on this anomaly. Call this Boston’s own version of The Industrial Revolution.