The Greater Boston Industrial Market continued to flourish in Q3 2021. While other sectors have dealt with varying levels of disruption throughout the coronavirus pandemic, industrial has only strengthened. The rise of e-commerce and the life sciences sector, both nationally and locally, have supported the industrial market’s recent growth. E-commerce sales were on the rise even before the pandemic, which only spurred faster growth, peaking at more than 40% year-over-year in the middle of 2020. The online shopping boom has spurred many large logistics leases and developments from Amazon and other major retailers. The life sciences market has also grown significantly during COVID, with record VC funding pouring in. While the story of this sector’s growth tends to focus on lab/R&D properties, it’s also spurring an increased need for biomanufacturing/GMP facilities.
Occupancies and rents in the Boston Industrial Market remain near record highs. Leasing activity continued its strong pace in the third quarter, bringing annual net absorption past 3.5 million square feet. Warehouse vacancy continued its downward compression and finished the quarter at its lowest level on record, at about 3%. Flex demand was also positive for the third consecutive quarter, pushing its annual net absorption numbers above 1 million square feet. Warehouse development has increased, as strong rent growth has enticed developers to move forward on projects. The investment sales market has boomed, with transaction volume topping $750 million in the third quarter and $2 billion so far in 2021
The growth of e-commerce sales and the life sciences industry should continue to drive the performance of the Boston Industrial Market over the near term. Although e-commerce sales growth has fallen from its peak over the last 12 months, it has continued to grow at about double the pace of its pre-pandemic levels in 2021. Online shopping still accounts for a smaller share of total retail sales in the U.S. compared with other industrialized nations, meaning there should be plenty of more room for takeoff. In the GMP segment, VC funding for biotech in Massachusetts has already smashed its previous record in 2021, with still a quarter to go. As this influx of cash boosts the R&D capabilities of many local firms, companies should also require additional space for biomanufacturing space.