Boston Area Industrial Market Report for Q1 2025

Overview

The Boston industrial market has seen a slowdown following a significant wave of new construction, marking the largest influx of industrial space in 25 years. As a result, the vacancy rate has increased by 200 basis points over the past four quarters, reaching 7.6%, the highest level since 2014. This increase is part of a broader national trend, where a slowdown in the housing market has reduced demand for warehouse-intensive items like building materials and furniture. Additionally, imports and inventories are returning to normal after pandemic disruptions, but the uncertainty surrounding potential new tariffs has further dampened industrial demand.

Boston has not been immune to these national trends, particularly in the logistics and flex space sectors. Demand for logistics space has slowed, and the demand for flex space, which is crucial for Boston’s biotech research and manufacturing sectors, has also softened. Over the past 12 months, the market has seen a negative absorption of 650,000 square feet. A large portion of new space absorption has been driven by Amazon, which occupied a new 3.8 million square foot facility in North Andover in the second quarter of 2024. With more large projects expected to be completed by the end of the year, the vacancy rate is expected to rise towards 8.0% by mid-2025, the highest level since 2014.

This rising vacancy rate has also had an impact on rent growth, which has slowed considerably. After reaching a peak of 9.4% in mid-2022, Boston’s industrial rent growth has dropped to 6.2% on a trailing 12-month basis as of the first quarter of 2025. This trend mirrors national market conditions, though Boston’s larger share of flex space may keep rent growth from decelerating as rapidly. Despite the slowdown, rent growth is expected to remain above 5% through 2025, as the absorption of new supply gradually balances out.

Looking ahead, Boston’s industrial market is expected to follow national trends, with the vacancy rate forecast to peak by the end of 2025. At approximately 8.0%, the market will be experiencing a higher vacancy rate than during the tightening of the 2010s, but it will remain well below the double-digit levels seen during and after the Great Recession. Although short-term market conditions are challenging, the longer-term outlook suggests that the market will stabilize as the excess supply is absorbed.

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

Compare