COVID-19 Impact on Boston Office & Lab Market
The global spread of the COVID-19 virus has many across the real estate world deeply concerned. With news related to the virus seemingly changing each day or even hour, it is challenging for many investors to determine what the ramifications will be on their realestate portfolios. Many crucial questions, including how long this outbreak will last, how severe it will be, and how it will impact the economy, perhaps won’t be fully answered until months from now. Uncertainty seems to be the most apt way to describe the current environment.
At Lincoln Property Company in Boston, we too sometimes become lost in the barrage of updates and analyses of the COVID-19 outbreak. During this time of uncertainty, we want to remind our clients of some certainties of the Boston market that should provide a degree of confidence in the area’s economy and office and lab market. These factors, we believe, will help aid Boston in the coming months and position itself as an outperformer relative to the United States overall.
Five Reasons to Remain Optimistic
- Historically Strong Office & Lab Fundamentals
Boston has established itself as one of the most desirable office markets in the country and arrives at this uncertain time in a position of strength. Continual job growth above the United States average, plus muted levels of supply relative to history, have fueled an impressive and consistent vacancy compression. Greater Boston’s office and lab market ended 2019 with its lowest direct vacancy rate in nearly two decades, standing at roughly 8.7%. This rate is 310 basis points lower than its all-time historical average and nearly half of its peak rate in 2011.
- Quality & Diversity of Tenancy
Boston will likely benefit in this uncertain period from a robust and diverse tenant base. Many of the major occupiers of space aren’t just your run-of-the-mill office tenant. Boston is a magnet for globally prominent companies, many of whom have the resources and sophistication to help cope with the impacts of this virus. Massachusetts supports the headquarters for over 16 Fortune 500 companies, and another 66 have a significant presence in the market. Fortune 500 companies occupy nearly 24 million square feet of office space, or almost 14% of the entire occupied office and lab stock in greater Boston.
- Healthcare as an Important & Stable Factor
The list of Massachusetts based companies that have pivoted to focus on COVID-19 is long and filled with some of the area’s most prominent occupiers of lab and office space. Cambridge-based Moderna Pharmaceuticals was one of the first companies to submit a COVID-19 vaccine for testing. Takeda Pharmaceuticals, Biogen, and Alynlam Pharmaceuticals each are working on potential treatments for the disease. On the testing front, Marlborough-based Hologic and Waltham-based Thermo Fisher Scientific both have permission to distribute a COVID-19 test that can give results in hours.
- Limited Exposure to Hardest-Hit Sectors
While COVID-19 could disrupt industries across the spectrum, many of the most venerable aren’t major drivers of Boston’s economy. Boston’s economy has barely any direct employment in the energy sector. Boston also has less leisure and hospitality employment
- The Ability of Employees to Work from Home
According to the most recent US Census, many in this profession in Boston already worked at home prior to this virus spreading. In 2018, close to 11% of those in a professional, scientific, management field (where most software jobs fall) in Boston worked from home, more than double the overall average of 5.2%.
At Lincoln Property Company we will continuously try to help clients with research related to the ongoing COVID-19 outbreak. Please feel free to contact us if you have any questions or would like further information.