Industrial Market


Vacancies in the Boston industrial market finished Q4 2022 at 2.8% in the warehouse segment and 4.7% in the flex segment, both record lows. Despite limited available space on the market due to tight occupancy rates, net absorption topped 370,000 SF last quarter and 1.8 million SF last year. The warehouse segment generated stronger demand on an absolute basis last year, but flex received stronger demand as a percentage of inventory and experienced greater vacancy compression. Plenty of deal volume also occurred in the market’s sizable pipeline, with under construction space totaling roughly 2 million SF and 14 million SF for flex and warehouse, respectively. Rent growth continued at a swift pace, especially in the flex segment which reached 11% in 2022. Flex rent growth last year matched its cumulative total across 2019-21. Industrial rent growth also reached 10% for the second consecutive year.

While the market’s fundamentals are in excellent shape, several macroeconomic trends presented headwinds last year. Combined net absorption for warehouse and flex space fell to its lowest total since 2019. E-commerce companies are contending with global supply chain disruptions and inflation-driven pressures on consumer spending. After several disappointing earnings reports, Amazon scaled back its national logistics footprint by 10-30 million SF. This included several closures in Massachusetts, but the company is still expanding its local inventory at a much faster rate than it is shutting locations. Biotech was affected by struggling public markets, with IPO activity slowing significantly and industry stocks underperforming the broader economy in 2022. Rising interest rates have also presented additional obstacles to dealmaking.


Despite macroeconomic headwinds, the Greater Boston industrial market is well positioned for long-term growth. E-commerce should have plenty of room for continued liftoff, with online sales as a percentage of total retail sales in the U.S. still trailing that of many other industrialized nations. Although biotech IPO activity floundered last year, VC investment still reached its second-highest year on record, after 2021. While dozens of local companies announced thousands of combined layoffs in 2022, overall scientific R&D jobs increased by about 12.6% in 2022, which roughly doubled growth in the broader professional and business services sector. As this influx of investment boosts the R&D capabilities of local firms, requirements for biomanufacturing and GMP space should also increase. President Biden also issued an executive order in the second half of last year that earmarked more than $2 billion across several departments to support domestic biotechnology and biomanufacturing.