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Boston Area Industrial Market Report for Q4 2017

The Boston Industrial market ended the first quarter 2018 with a vacancy rate of 5.3%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (746,153) square feet in the first quarter. Vacant sublease space decreased in the quarter, ending the quarter at 1,250,159 square feet. Rental rates ended the first quarter at $7.54, an increase over the previous quarter. A total of 12 buildings delivered to the market in the quarter totaling 1,045,604 square feet, with 3,119,391 square feet still under construction at the end of the quarter.

Absorption

Net absorption for the overall Boston Industrial market was negative (746,153) square feet in the first quarter 2018. That compares to positive 1,401,233 square feet in the fourth quarter 2017, positive 1,214,209 square feet in the third quarter 2017, and positive 822,478 square feet in the second quarter 2017. The Flex building market recorded net absorption of negative (523,043) square feet in the first quarter 2018, compared to positive 119,970 square feet in the fourth quarter 2017, negative (244,888) in the third quarter 2017, and positive 342,118 in the second quarter 2017. The Warehouse building market recorded net absorption of negative (223,110) square feet in the first quarter 2018 compared to positive 1,281,263 square feet in the fourth quarter 2017, positive 1,459,097 in the third quarter 2017, and positive 480,360 in the second quarter 2017.

Vacancy

Rental Rates

The average quoted asking rental rate for available Industrial space was $7.54 per square foot per year at the end of the first quarter 2018 in the Boston market area. This represented a 2.2% increase in quoted rental rates from the end of the fourth quarter 2017, when rents were reported at $7.38 per square foot. The average quoted rate within the Flex sector was $10.63 per square foot at the end of the first quarter 2018, while Warehouse rates stood at $6.70. At the end of the fourth quarter 2017, Flex rates were $10.54 per square foot, and Warehouse rates were $6.48.

Deliveries and Construction

 


During the first quarter 2018, 12 buildings totaling 1,045,604 square feet were completed in the Boston market area. This compares to 22 buildings totaling 1,438,796 square feet that were completed in the fourth quarter 2017, seven buildings totaling 361,099 square feet completed in the third quarter 2017, and 267,151 square feet in 14 buildings completed in the second quarter 2017. There were 3,119,391 square feet of Industrial space under construction at the end of the first quarter 2018. Some of the notable 2018 deliveries include: 10 Webb Drive, a 785,000-square-foot facility that delivered in first quarter 2018 and is now 100% occupied, and 12 Innovation Way, a 40,506-square-foot building that delivered in first quarter 2018 and is now 100% occupied. The largest projects underway at the end of first quarter 2018 were 238 Main St, a 600,000-square-foot building with 49% of its space pre-leased, and 333 Coney St, the Siemens Expansion, a 300,000-square-foot facility that is 100% preleased.

Sales Activity

Tallying industrial building sales of 15,000 square feet or larger, Boston industrial sales figures rose during the fourth quarter 2017 in terms of dollar volume compared to the third quarter of 2017. In the fourth quarter, 63 industrial transactions closed with a total volume of $479,752,500. The 63 buildings totaled 6,799,697 square feet and the average price per square foot equated to $70.55 per square foot. That compares to 48 transactions totaling $252,422,231 in the third quarter. The total square footage was 3,674,907 for an average price per square foot of $68.69. Total year-to-date industrial building sales activity in 2017 is down compared to the previous year. In the twelve months of 2017, the market saw 224 industrial sales transactions with a total volume of $1,363,375,157. The price per square foot has averaged $65.63 this year. In the twelve months of 2016, the market posted 251 transactions with a total volume of $1,508,773,723. The price per square foot averaged $65.25. Cap rates have been slightly lower in 2017, averaging 7.72%, compared to the twelve months of last year when they averaged 7.73%. One of the largest transactions that has occurred within the last four quarters in the Boston market is the sale of 135 William T Morrissey Blvd - Boston Globe in Dorchester. This 703,000-square-foot industrial building sold for $81,000,000, or $115.22 per square foot. The property sold on 12/21/2017.

Information provided by CoStar.com

The Industrial vacancy rate in the Boston market area increased to 5.3% at the end of the first quarter 2018. The vacancy rate was 5.0% at the end of the fourth quarter 2017, 5.0% at the end of the third quarter 2017, and 5.2% at the end of the second quarter 2017. Flex projects reported a vacancy rate of 7.2% at the end of the first quarter 2018, 6.7% at the end of the fourth quarter 2017, 6.7% at the end of the third quarter 2017, and 6.5% at the end of the second quarter 2017. Warehouse projects reported a vacancy rate of 4.7% at the end of the first quarter 2018, 4.5% at the end of fourth quarter 2017, 4.5% at the end of the third quarter 2017, and 4.8% at the end of the second quarter 2017.

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