Warehouse & Flex Market
FEW LARGE BLOCKS & STRONG USER DEMAND
Greater Boston’s warehouse market has shown tremendous growth during the past 24-36 months, vacancy is near record lows and rents are exceeding previous highwater marks. A significant portion of the demand surge stems from the Boston’s steadily growing population base which has increased 9% over the past 7 years. The combination of increased population density and today’s “on demand” delivery environment has pushed the industrial envelope.
The lack of viable development sites, particularly for 500,000 SF or larger facilities, has generated tremendous competition for modern high-bay warehouse and as a result rents have jumped significantly. Well located, quality construction is commanding $7.00 NNN and on the sale cap rates have compressed to 6.0% for comparable product.
NEW ECONOMY TENANTS & RENTS ON THE RISE
The Greater Boston flex market has become the home many of today’s most innovative tenants. The type of tenants that have been filling the flex market are shifting away from generic warehouse use and incorporating elements of office, R&D, manufacturing and product testing. Typically requiring 13’+ clear and large open floorplates these “new economy” tenants include market segments such as robotics, biotechs and autonomous vehicles.
Looking forward expect the market to maintain very tight vacancy rates and average rents will continue rising. Current market conditions are the result of strong demand and weak supply. As construction costs continue rising, the delivery of new flex space becomes increasingly challenging so watch for the conversion of older, lower clear height warehouse buildings into flex uses.