Already nearly four months into the year, 2014 is off to a strong start for industrial real estate sales and leasing. With strong positive absorption of square footage and growth in several key sectors including medical, food and auto parts, user buyer, owner occupant and new construction, the momentum in the industrial real estate sector in the Greater Boston area is impressive, as I’ve recently written about in the New England Real Estate Journal and Northeast Real Estate Business. Here are some areas of activity that are particularly hot:
- Medical: The medical field has seen extensive growth over the last couple years, specifically medical device manufacturing. For example, Owens & Minor, a Fortune 500 company, added 100,000 square feet to its Franklin location at 135 Constitution Dr., which now totals 227,000 square feet. Life sciences companies have continued to fuel the industrial market especially in neighboring communities outside of Cambridge. Genzyme recently took space in Ames Park in Somerville and Biogen Idec renewed its space on Medford Street in Somerville.
- Food: Over the last two years, companies in the food sector have also seen an increase in large merger and acquisition activity among competing companies. Michigan-based Gordon Food Service acquired Perkins, a Taunton-based food-service and equipment distribution company in the first quarter of 2012.
- Auto: Certifit, an auto parts manufacturer, expanded from 20,000 to 30,000 square feet in the second quarter of 2012 to Walpole Park South’s new spec building, while O’Reilly Auto Parts purchased 15 Independence Dr., a 370,000 square foot distribution center in Fort Devens.
- User Market Acquisition: User market acquisition has been very active as companies look to buy properties and owner occupy them. In the south market alone, NAI Hunneman is in negotiations for about 10 transactions totaling more than 700,000 square feet.
With competitive pricing, vacancy rates down, and aggressive interest rates, the market is very strong right now. For example, Myles Standish Industrial Park in Taunton is currently in negotiations for more than 2 million square feet for both users and developers. With more than 140 buildings sold in 2013 in the Greater Boston area, 70 were in the last quarter of 2013. Vacancy rates are down from 10 percent in 2012 to an astonishingly low 8 percent.
As we look to the second quarter, the industrial market is not showing signs of slowing down. In the coming months, I’ll be monitoring the medical, food and auto industry and will report on the outcome of the Myles Standish negotiations.
Cathy Minnerly is an executive vice president and principal at NAI Hunneman