Boston Area Industrial Market Report for Q4 2022
Boston’s industrial market is clamoring for more supply. Absorption is well above 2019–20 levels — demand is at a multi-year high — and vacancies continually challenge all-time lows. Developers are responding with construction activity not seen in 20 years, with square footage in process growing 50% year over year as 2022 began. Until the supply-demand balance shifts, tenants find themselves with little in the way of negotiating leverage: At 6.6%, the amount of space available across the metro area has never been lower.
A fairly concentrated demand pool, particularly ecommerce and life sciences sector firms, is driving leasing activity space. Consumer spending shifted to online shopping, spurring an increased need for distribution and warehouse space. In 2020, Amazon leased nearly 600,000 SF in the Boston metro and close to 2 million SF in the commonwealth. In 2021, this growth has continued as Amazon committed to an additional 160,000 SF of space in Littleton.
High-tech companies are also driving demand, from Commonwealth Fusion Systems, a spin-off from MIT’s Plasma Science and Fusion Center, to iRobot, which was founded by members of MIT’s Artificial Intelligence Lab.
Investor interest is at a fever pitch, and given recent rent growth (annualized gains touched 10.2%), the spending spree isn’t over. Sales volume is headed for a second straight record year and increased for the fifth consecutive time.