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Boston Area Retail Market Report for Q3 2021

Overview

Despite lingering struggles with rent weakness, the Boston retail landscape appears to have bottomed out. Giving a nod to the seemingly everpresent caveat of ongoing virus variant disruption, observers still see signs of recovery via increased lease signings and positive net absorption. A thin slate of new projects has kept overall vacancy tight, although shopping corridors mighty and minuscule remain gutted at a local level. For instance, vacancy was close to 10% in the Financial District at the start of the third quarter, and it was among roughly 50% of Boston submarkets still showing net negative absorption year-over-year.

Supply-side struggles may not be a concern, but the seemingly metro-wide inability to drive rents is a red flag. There is improvement in every subtype, particularly in mall rents, but they remain behind pre-pandemic levels. This progression, fueled by pent-up shopping demand and a return to more office settings, will likely be painfully slow for the broader market.

This inability to locate a key piece of the net operating income puzzle has kept this a tenant's market, but it has not weighed down on investment. Liquidity returned at the end of 2020 and has been free-flowing throughout 2021. Both cap rates and market pricing continue along a flat trend line, and CoStar's Base Case forecast shows only moderate increases over the next couple of years.

 

 

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Information provided by CoStar.com

 

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