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Boston Area Retail Market Report for Q1 2018

The Boston retail market did not experience much change in market conditions in the first quarter 2018. The vacancy rate went from 2.9% in the previous quarter to 3.0% in the current quarter. Net absorption was negative (297,204) square feet, and vacant sublease space increased by 16,780 square feet. Quoted rental rates increased from fourth quarter 2017 levels, ending at $19.17 per square foot per year. A total of 20 retail buildings with 174,463 square feet of retail space were delivered to the market in the quarter, with 2,106,197 square feet still under construction at the end of the quarter.

Absorption

Retail net absorption was moderate in Boston fourth quarter 2017, with positive 658,913 square feet absorbed in the quarter. In third quarter 2017, net absorption was positive 511,736 square feet, while in second quarter 2017, absorption came in at positive 920,959 square feet. In first quarter 2017, positive 354,553 square feet was absorbed in the market.

Vacancy

Boston’s retail vacancy rate increased in the first quarter 2018, ending the quarter at 3.0%. Over the past four quarters, the market has seen a slight overall increase in the vacancy rate, with the rate going from 2.9% in the second, third, and fourth quarters 2017, to 3.0% in the current quarter. The amount of vacant sublease space in the Boston market has trended down over the past four quarters. At the end of the second quarter 2017, there were 357,024 square feet of vacant sublease space. Currently, there are 139,872 square feet vacant in the market.

Rental rates

Average quoted asking rental rates in the Boston retail market are up over previous quarter levels, and up from their levels four quarters ago. Quoted rents ended the first quarter 2018 at $19.17 per square foot per year. That compares to $18.67 per square foot in the fourth quarter 2017, and $17.36 per square foot at the end of the second quarter 2017. This represents a 2.7% increase in rental rates in the current quarter, and a 9.44% increase from four quarters ago.

Inventory and Construction

During the first quarter 2018, 20 buildings totaling 174,463 square feet were completed in the Boston retail market. Over the past four quarters, a total of 1,982,101 square feet of retail space has been built in Boston. In addition to the current quarter, 22 buildings with 467,244 square feet were completed in fourth quarter 2017, 14 buildings totaling 506,518 square feet completed in third quarter 2017, and 833,876 square feet in 17 buildings completed in second quarter 2017. There were 2,106,197 square feet of retail space under construction at the end of the first quarter 2018. Some of the notable 2018 deliveries include: 300 Keller St, a 36,600-square-foot facility that delivered in first quarter 2018 and is now 100% occupied, and 9 Plympton Rd, a 17,731- square-foot building that delivered in first quarter 2018 and is now 90% occupied. Total retail inventory in the Boston market area amounted to 344,121,543 square feet in 28,532 buildings and 1939 centers as of the end of the first quarter 2018.

Sales Activity

Tallying retail building sales of 15,000 square feet or larger, Boston retail sales figures rose during the fourth quarter 2017 in terms of dollar volume compared to the third quarter of 2017. In the fourth quarter, 27 retail transactions closed with a total volume of $233,580,353. The 27 buildings totaled 1,146,047 square feet and the average price per square foot equated to $203.81 per square foot. That compares to 18 transactions totaling $148,886,000 in the third quarter 2017. The total square footage in the third quarter was 1,021,572 square feet for an average price per square foot of $145.74. Total retail center sales activity in 2017 was down compared to 2016. In the twelve months of 2017, the market saw 107 retail sales transactions with a total volume of $848,336,194. The price per square foot averaged $167.17. In the same twelve months of 2016, the market posted 101 transactions with a total volume of $1,015,844,514. The price per square foot averaged $157.50. Cap rates have been lower in 2017, averaging 7.26% compared to the same period in 2016 when they averaged 7.41%. One of the largest transactions that has occurred within the last four quarters in the Boston market is the sale of 201 Newbury St in Boston. This 24,712 square foot retail center sold for $75,000,000, or $3,034.96 per square foot. The property sold on 4/20/2017.


Information provided by CoStar.com

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