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Boston Area Industrial Market Report for Q3 2021

Overview

Boston's industrial market is clamoring for more supply. Absorption is well above 2019-20 levels — the market hasn't registered such high absorption since 2015 — and vacancies are at all-time lows. Developers are responding with a supply pipeline that is booming at levels not seen in two decades. Even at this pace, though, tenants find themselves with little in the way of negotiating leverage.

Leasing velocity, which slightly declined in 2020, has regained recent form as several industrial users, particularly e-commerce and life sciences sector firms, have continued to take space. Amazon continues to lease at a historic pace here in Boston and across the country. Consumer spending shifted to online shopping, spurring 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.

Even as the pandemic has cooled the office market, biotech companies like Arranta Bio and Thermo Fisher Scientific continue to lease space. 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. Boston has notably diminished its industrial inventory over the past decade as many buildings have either been demolished or converted for multifamily use. However, in 2021, industrial construction levels are the highest they've been in 20 years

Healthy fundamentals have paved the way for increased investor interest in recent years. Sales volume for the first half of 2021 outperformed the 2018–20 average for the first half. Thus far, over $1.8 billion of transactions recorded in 2021.

 

 

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Information provided by CoStar.com

 

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