Boston’s industrial market has shown signs of softening by mid-2024, influenced by a significant influx of new supply. The vacancy rate has risen to 6.6%, a 200 basis point increase since early 2022. This rise in vacancy rates coincides with negative net absorption in recent quarters, reflecting the heaviest delivery schedule in 25 years.

National trends have also impacted Boston’s industrial demand. A slowdown in the housing market has reduced the need for warehouse-intensive items like building materials and furniture. Despite strong job markets and resilient consumer spending, imports and inventories are returning to pre-pandemic levels, further slowing industrial demand.

Locally, Boston has seen slower absorption of logistics space and a decline in demand for flex space, essential for biotech research and manufacturing. The market has added 170,000 square feet of space in the past year, mainly due to Amazon’s new 3.8 million square foot facility in North Andover.

Looking ahead, demand in Boston’s industrial market will likely remain subdued. The vacancy rate is expected to exceed 6.5% by the end of the year, with several large projects set to deliver new space. This increased vacancy has also compressed rent growth, which has slowed from a peak of 9.9% in mid-2022 to 7.0% as of Q3 2024.

In the long term, Boston’s industrial market is projected to stabilize, with the vacancy rate settling around 7% by the end of 2025. This rate is higher than in the tightening 2010s but remains well below the levels seen during and after the Great Recession.