Boston Industrial Hits 10-Year High

BOSTON-Demand for industrial space in Greater Boston hasn't been this high in a decade, according to research from Richards Barry Joyce & Partners. Warehouse product drove absorption of 1.1 million square feet across the sector's three property types during the first quarter; the three-month tally is more than one-third that of the 3.1-million-square-foot total for space taken off the market over the past eight quarters, according to RBJ&P.

“This positive quarter for industrial properties did not occur in the vacuum, given that nationally we saw a rise in US goods consumption,” says Brendan Carroll, SVP of research for RBJ&P, in a release coinciding with the issue of indSTATus – Spring 2013, the company's quarterly report highlighting warehouse, flex and manufacturing property types. “Locally, we've now submitted our third consecutive quarter with all three industrial property types posting positive absorption.”

Warehouse saw positive absorption of 933,000 square feet during Q1, topping a previous record of 736,000 square feet absorbed in Q4 2006 and well ahead of the 10-year quarterly average of 67,000 square feet. The final three months of 2012 saw warehouse absorption of just 63,000 square feet, for example.

The property type finished Q1 with 17.8% vacancy, down from 19.3% at the end of 2012. Asking rents fell eight cents to an average of $5.26 per square foot.

In Greater Boston's flex market, vacancy was 18.3% at the end of Q1, essentially unchanged from the prior quarter, on 108,000 square feet of positive absorption. Asking lease rates dropped by five cents to $8.01.  RBJ&P notes that premium flex properties along Route 128 are dramatically outperforming the rest of the market, with vacancy in those properties dropping from an average of 21.3% to 11.8% over the past five quarters.

Although manufacturing space saw the smallest amount of absorption at 35,000 square feet, the property type also boasts the lowest vacancy rate at 16%, down from 16.8% three months earlier. Asking lease rates edged up by two cents to $6.29. 

“Over the past six quarters, tenants have expanded their footprint by 470,000 square feet of space, with vacancy dropping 2.5 percentage points during that period,” according to RBJ&P. “Also notable is the fact that manufacturing inventory offers tenants only one 50,000-square-foot choice that is less than 20 years old.”