Boston Area Industrial Market Report for Q3 2024

Overview

Boston’s industrial market is experiencing continued softening through mid-2024 as a significant amount of new supply enters the market. The vacancy rate has increased to 7.0%, a rise of over 200 basis points since early 2022. The past few quarters have seen negative net absorption, driven by the heaviest delivery of industrial space in 25 years. Nationwide trends, including a housing market slowdown, reduced demand for warehouse-heavy goods, and inventory adjustments following the pandemic, have impacted industrial demand despite a resilient job market and steady consumer spending.

Locally, Boston is feeling the effects of slowing demand for logistics and flex space, which is critical for the region’s biotech research and manufacturing industries. The market has seen -1.4 million SF in absorption over the past year, largely offset by Amazon’s occupancy of a 3.8 million SF facility in North Andover that delivered in Q2 2024. Despite Amazon’s expansion, overall demand for industrial space is expected to remain subdued in the near term, with the vacancy rate projected to climb above 6.5% by the end of 2024, marking its highest point since 2015.

Supply growth continues to outpace demand, contributing to rising vacancy rates and a slowdown in rent growth. Rent growth, which peaked at 9.8% in mid-2022, has slowed to 5.9% as of Q4 2024. This mirrors national trends, though Boston’s significant share of slower-moving flex space is expected to cushion rent deceleration. Rent growth is projected to remain above 5% by the end of the year, with some stabilization anticipated by mid-2025 as new supply is absorbed.

Looking ahead, the long-term outlook for Boston’s industrial market aligns with national trends. Vacancy rates are forecasted to stabilize around 7% by the end of 2025. While this is higher than the tightened market of the 2010s, it remains well below the double-digit vacancy rates experienced during the periods surrounding the Great Recession.

Ready to stay ahead in Boston’s shifting industrial landscape? Let ABG Commercial Realty guide you through market changes and help you capitalize on new opportunities. Reach out today to start strategizing your next move.

Information provided by CoStar.com

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