Q2 2012 Boston, Massachusetts Industrial Submarket Trends

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Q2 2012 Boston, Massachusetts Industrial Submarket Trends

The Central Boston submarket, which includes both that city and Cambridge, contains a concentration of high-value Flex/R&D space near the area’s many prestigious research universities, particularly in the bio-tech category. Some older industrial uses tied to the airport and seaport, and extensive adaptive reuse and redevelopment, are found there and in the adjacent Northern Suburbs submarket. Route 128 runs around the central area in a semi-circle, and is famous as the home of business parks with information technology companies, particularly north and west of the center. With the center congested, much of the warehouse/distribution activity has shifted to the I-495 beltway even further out, particularly in southern submarkets.

Central Boston/Northern Suburbs

  • For 10.8 million square feet of Flex/R&D space in Central Boston, the most among nine submarkets, Reis reports a vacancy rate of 12.5% and an asking rent of $18.93 psf, the highest.
  • The vacancy rate fell 20 basis points during the quarter on 11,000 square feet of positive net absorption, and is down 100 basis points from a year earlier. The average asking rent increased 0.2% during the quarter and the average effective rent rose 0.4% to $15.93 psf. Year-over-year gains are large at 6.4% and 6.5%, respectively.
  • Reis predicts 1.5 million square feet of Flex/R&D space will complete in this submarket from 2012 to 2016, dwarfing the amount of space of any kind expected to deliver in any other submarket. The 120,000- square-foot 150 Second Street in Cambridge will be the first to complete, with an expected completion date of December 2012.
  • For 9.7 million square feet of warehouse/distribution space in the Central Boston submarket, the vacancy rate is 10.3%, second lowest among the submarkets, and the average asking rent is $8.23 psf, the second highest according to Reis.
  • The vacancy rate slipped 10 basis points from the prior quarter, and is down 30 basis points from a year earlier. The average asking rent rose 1.0%, with the average effective rent up 1.5% to $6.97 psf during the second quarter. The year-over-year changes are large at 6.9% asking and plus 9.8% effective.
  • In the close-in Northern Suburbs submarket, Reis reports 6.5 million square feet of warehouse/distribution space with a vacancy rate of 10.4% and an average asking rent of $8.76 psf, the highest among the submarkets.
  • The vacancy rate has been flat for the past four quarters. In the second quarter the asking average increased 0.3% and the effective average rose 0.4% to $7.30 psf. Rents are up 2.6% and 1.5%, respectively, from a year earlier.
  • The 107,000-square-foot Building A of Rivergreen Business Park, identified as a manufacturing building, is under construction in Everett.
  • Cushman & Wakefield reports an overall vacancy rate of 16.3%, and a directed weighted average net rental rate of $10.09 psf for warehouse/distribution and $13.33 psf for high-tech, for 4.5 million square feet in the City of Boston. For 25 million square feet in the inner suburbs, this source reports a vacancy rate of 16.7%, $8.16 psf for warehouse/distribution space, and $11.31 psf for high-tech.
  • “Specialty foods distributor Baldor Foods will be the recipient of a new refrigerated warehouse space at 215 Williams Street in Chelsea,” according to Jones Lang LaSalle. “The new space is 26,000 square feet and represents a near doubling of their footprint.”

North: Route 128 Northeast Corridor/Chelmsford/Lowell

  • The Route 128 Northeast Corridor has 9.9 million square feet of Flex/R&D space according to Reis, second most among the submarkets. The vacancy rate for this space is 9.1%, down 10 basis points from a quarter earlier and 40 from a year earlier.
  • The average asking rent of $14.24 psf is the second highest among the submarkets. It was down 0.3% during the quarter, and is up 3.7% from a year earlier. The average effective rent is up 0.9% for the quarter and 2.4% year-over-year at $12.24 psf.
  • For 13.1 million square feet of warehouse/distribution space, this submarket has a vacancy rate of 13.7%, and an average asking rent of $6.80 psf.
  • The vacancy rate edged up 10 basis points during the second quarter, the average asking rent was unchanged, and the average effective rent increased 0.9% to $5.80 psf. The vacancy rate is unchanged from a year earlier, with the asking and effective averages are up 1.5% and 7.2%.
  • A 90,000-square-foot manufacturing building for the U.S. Biological Corporation completed construction in July 2012 in Salem. A 104,000-square-foot expansion of the Cubist Pharmaceuticals facility in Lexington completed construction in June.
  • For 16.7 million square feet in its 128 North submarket, Cushman & Wakefield reports a vacancy rate of 15.0% and a direct rental rate of $6.60 psf for warehouse/distribution space and $10.38 psf for high- tech.
  • GSI Group renewed for 147,000 square feet of Flex space at 125 Middlesex Turnpike, Bedford according to this source. DHL leased 118,000 square feet of warehouse/distribution space at 13 Centennial Drive, Peabody.
  • “Shoebuy.com signed a lease for 74,258 square feet at 36 Cabot Street in Woburn,” according to Jones Lang LaSalle. “The e-commerce firm chose this space to expand its order processing and fulfillment operations. They are relocating from 31 Draper Street, also in Woburn.”
  • Farther out, the Chelmsford/Lowell submarket has 19.7 million square feet of warehouse/distribution space, most among the submarkets according to Reis, with a vacancy rate of 10.7% and an average asking rent of $5.32 psf.
  • The vacancy rate was down 10 basis points during the quarter as the average asking rent rose 0.2% and the average effective rent increased 0.4% to $4.58 psf. The vacancy rate is down 60 basis points from a year earlier, with the asking and effective averages up 1.9% and 4.6%, respectively.
  • For 8.1 million square feet of Flex/R&D space in the Chelmsford/Lowell submarket, Reis reports a vacancy rate of 28.1%, second highest among the submarkets, and an asking rent of $8.91 psf.
  • The vacancy rate decreased 80 basis points during second quarter, but is down just 20 from a year earlier. The asking average increased 0.3% during the quarter as the average effective rent rose 1.1% to $7.46 psf. The asking average is down 1.7% from a year earlier, but the effective average is up 2.6%.
  • Cushman & Wakefield reports a vacancy rate of 19.7% and a direct rent of $5.88 psf for warehouse/distribution and $7.70 psf for high- tech, for 33.5 million square feet in its I-495 submarket.
  • “The 495 North market experienced the most positive market fundamentals during the quarter with 75,000 square feet year-to-date of space absorbed overall,” according to this source. “The average size transaction in this market was just over 17,000 with notable deals signed by Symbotic at Wilmington Technology Park for 65,500 square feet of flex space and Northstar Industries signing for 58,000 square feet of manufacturing space at 126 Merrimack Street in Methuen.”

South/South Norfolk County/Bristol County

  • The South Norfolk County submarket, despite including a small piece of the Route 128 corridor, is more of a warehouse/distribution market than a Flex/R&D market, although there has been some interest by tech firms in moving there. For 17.5 million square feet of warehouse/distribution space, second most among the submarkets, Reis reports a vacancy rate of 11.8% and an average asking rent of $5.87 psf.
  • The vacancy rate was up 30 basis points during the second quarter to the same level as a year earlier. The average asking rent decreased 0.2% during the quarter, with the average effective rent down 0.5% to $4.99 psf. The year-over-year changes are down 0.5% asking and up 1.8% effective.
  • Cushman & Wakefield reports a vacancy rate of 17.3%, and a direct rental rate of $5.82 psf for warehouse/distribution space and $8.45 psf for high-tech, for 22.4 million square feet in its 128 South submarket.
  • Equipment leased 100,800 square feet at Canton Commerce Center in Canton, according to this source. Jones Lang LaSalle refers to the lease as a relocation.
  • “GRM Information Management Services first leased, then purchased outright the former Franklin Sports warehouse in Stoughton,” according to Jones Lang LaSalle. “They will initially occupy 160,000 square feet of the building and plan to convert part of it to a data center.”
  • For 1.8 million square feet of Flex/R&D space in the South Norfolk submarket, Reis reports a vacancy rate of 30.9%, down 10 basis points for the quarter and an average asking rent of $7.76 psf.
  • In farther out Bristol County, as reported by Reis, the 14.6 million square feet of warehouse/distribution space has a vacancy rate of 17.4%, highest among the submarkets, and an average asking rent of $4.89 psf, the second lowest.
  • The vacancy rate fell 70 basis points in the second quarter on 107,000 square feet of net absorption, bringing the year-to-date total to plus 264,000 square feet. The average asking rent rose 1.0% during the quarter, with the average effective rent down 2.0% to $4.08 psf. The asking average is unchanged from a year earlier, but the effective average is up 3.6%.
  • The 160,000-square-foot Horizon Beverage Company facility remains under construction in Norton, and is expected to complete construction in September. Reis predicts a total of 715,000 square feet of industrial space will be added here from 2012 to 2016.
  • For 9.8 million square feet of Flex/R&D space, Bristol County has a vacancy rate of 8.8%, second lowest among the submarkets, and an average asking rent of $10.46 psf.
  • This segment had an 80 basis point vacancy rate decrease during the second quarter, as the average asking rent rose 0.6% and the average effective rent increased 1.3% to $9.04 psf. The asking average is down 1.4% year-over-year, but the effective average is up 3.6%.
  • Reis predicts 631,000 square feet of Flex/R&D space will be added in the Bristol County submarket during the 2012 to 2016 period, though none is currently under construction.
  • Cushman & Wakefield reports a vacancy rate of 18.3%, and a direct rental rate of $4.77 psf for warehouse/distribution space and $6.73 psf for high-tech, for 34.1 million square feet in its I-495 South submarket.
  • “The traditional Greater Boston warehouse market, located in the South, saw significant occupancy losses during the quarter despite healthy leasing activity of nearly 900,000 square feet,” according to this source. Vacancy rose due to “several large spaces being placed on the market during the quarter including over 300,000 square feet at 300 Constitution Drive and 124,000 square feet at 645 Myles Standish Boulevard, both in Taunton.”
  • On the other hand, Cushman & Wakefield reports the lease of 378,000 square feet by Plantation Products at 35 United Drive in West Bridgewater and Bodek & Rhodes leased 210,000 square feet in Norton, both in the warehouse/distribution category. Petco leased 92,000 square feet in Taunton.

West: Route 20 West/I-90 South/I-495

  • In the West, Reis divides submarkets based on the main east-west routes rather than into closer-in and further-out submarkets.
  • The Route 20 West submarket, which includes prestigious Waltham on Route 128, has 8.35 million square feet of Flex/R&D space with a vacancy rate of 14.9% and an asking rent of $11.10 psf.
  • The vacancy rate increased 10 basis points during the quarter and is up 70 from a year earlier. The average asking rent and average effective rents were unchanged during the quarter, with the average effective rent at $9.22 psf.
  • For 10.8 million square feet of warehouse/distribution space in the Route 20 West submarket, Reis reports a vacancy rate of 8.3%, lowest among the submarkets, and an average asking rent of $7.23 psf.
  • The vacancy rate is down 10 basis points from a quarter earlier and a year earlier. The average asking rent rose 0.3% and the average effective rent increased 0.8% to $6.39 psf. Rents are down from a year earlier, however, by 1.6% asking and 2.4% effective.
  • Reis predicts 591,000 square feet of warehouse/distribution space will be added in this submarket from 2013 to 2015.
  • “An after market auto parts dealer is seeking to relocate to 450,000 square feet in the west suburbs,” according to Jones Lang LaSalle.
  • In the I-90 South/I-495 Submarket, Reis reports a vacancy rate of 10.2%, and an average asking rent of $5.77 psf for 15.7 million square feet of warehouse/distribution space.
  • The vacancy rate was down 20 basis points during the quarter but is up 20 from a year earlier. The average effective rent is up 1.2% from a quarter earlier to $4.89 psf.
  • For all its West submarkets combined, Cushman & Wakefield reports a vacancy rate of 20.1% and a direct rental rate of $4.90 psf for warehouse/distribution space and $7.11 psf for high-tech.
  • “The second quarter also witnessed the delivery of the fully vacant 417 South Street located in Marlborough (495 West) comprising 145,600 square feet of new Flex space,” according to this source.
  • “Trellborg Sealing Solutions signed an agreement to relocate to 10 Forbes Road in Northborough,” according to Jones Lang LaSalle. “The precision manufacturing firm expanded their presence to 80,000 square feet.”
  • For 5.1 million square feet of Flex/R&D space in the I-90 South/I-495 Submarket, Reis reports a vacancy rate of 22.9%, down 10 basis points for the quarter and an asking rent of $8.77 psf, unchanged from the prior quarter.