Q1-2018-IndustrialReport

INDUSTRIAL STATISTICS FLEX / R&D

FLEX / R&D

TOTAL INVENTORY (SF)

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q1 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

TOTAL

52,248,295

5,072,998

9.7%

276,091

276,091

Vacancy by Submarket

19%

17%

Vacancy by Submarket VACANCY BY SUBMARKET 14%

TRENDS • Greater Boston’s Flex/R&D market continues to benefit from the growing tech, biotech, and light manufacturing industries. Vacancies ended the first quarter at 9.8% as the market absorbed more than 200,000 square feet. CustomSpace took occupancy of close to 75,000 square feet at 1515 Washington in Braintree and Urban Air Adventure Park moved into 40,000 square feet at the newly constructed 189 Mechanic Street in Bellingham. AmericanBio and Monogram Foods also took down roughly 23,000 square feet each in Canton and Wilmington, respectively. Persistent demand from technology-related companies is expected to drive growth in the local Flex/R&D market in the coming quarters. • The Route 128 Loop boasts some of the strongest Flex/R&D fundamentals in the region. Vacancies ended the first quarter of 2018 at just 6%, which are less than half of those in the Route 495 Loop and well below the Urban Core. Asking rents are well above the metrowide average, at $14.17/SF. However, space in close proximity to Boston maintains a $9-10/SF premium over space located in Route 128 South and Route 128 North. Users like Mighty Squirrel (23,000 SF), Medrobotics (20,000 SF), and VEO Robotics (12,000 SF) are the types of firms taking down space in the Route 128 markets. • Massachusetts maintains one of the nation’s top robotics clusters, and continued growth in this industry has bolstered demand for local Flex/R&D space. In the third quarter of last year, NextShift Robotics inked a deal for 22,450 square feet at 1001 Pawtucket Boulevard in Lowell — recently taking occupancy of the space. Medrobotics signed a lease for 20,000 square feet at 220 Paramount Drive in Raynham. Moreover, Amazon Robotics is in the market for 300,000 square feet of space as well. As technologies continue to advance for medical users, consumer goods, and e-commerce, look for continued growth in the robotics industry. • There were only a handful of major move outs in the first quarter. Beaver Visitec International vacated more than 83,000 square feet of flex space at 425 Waverley Oaks Road in Waltham and Barnette Inc. vacated 20,000 square feet at 378 Commercial Street in Malden. SCP Pool Corporation is also planning to move out of 39,979 square feet at 12 Parkwood Drive in Hopkinton in early 2019. • With vacancies declining by 650 basis points over the last 5 years, it’s not surprising Flex/R&D lease rates are surging in Greater Boston. Space runs from $8-$10/SF in the Route 495 Loop to the high-teens to low-twenties in the Route 128West/Northwest and Urban Core submarkets. Overall asking rents surpassed $11/SF in the first quarter; increasing by 6.8% over the last 12 months. Infill locations, close to population centers, have seen the steepest inclines in recent years. From 2014-18, Flex/R&D asking rents expanded by 70% in the Urban Core, 41% in Route 128 Northwest, and 30% in Route 128West.As fundamentals remain strong, look for more rent gains in the near future.

12%

19%

10%

17%

7%

14%

12%

5%

10%

2%

0%

7%

2013

2014

2015

2016

2017

2018

5%

Route 495/Metrowest

Route 128

Urban Core

2%

0%

2013

2014

2015

2016

2017

2018

Route 495/Metrowest

Route 128

Urban Core

NET ABSORPTION AND ASKING RENT Net Absorption and Asking Rent

700

$12

600

Net Absorption and Asking Rent

500

$10

700

$12

400

600

300

$8

500 SF (000s) 200

$10

400

100

$6

300

$8

0

200 SF (000s)

-100

$4

2014

2015

2016

2017

100

$6

Net Absorption

Asking Rent

0

NOTABLE TRANSACTIONS

-100

$4

2014

2015

2016

2017

Net Absorption

Asking Rent

Route 495 West Route 128 South Route 128 West Route 495 South

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