Greater Boston’s commercial real estate markets posted positive results in the third quarter. In the office market, the suburbs led the way accounting for the majority of the market’s more-than one million square feet of positive absorption. The lab market, particularly in Kendall Square, remains tight and industrial vacancies have reached another new low. Greater Boston’s near-term outlook remains decidedly positive as continued growth in the local economy bodes well for commercial real estate demand.
Here are some highlights from our Q3 2016 market reports:
- Office market: The Greater Boston office market posted another positive quarter with more than 1.4 million square feet in positive absorption. Build-to-suit construction, particularly the completion of Partners Healthcare’s 850,000-square-foot office in Somerville, was the driving force behind the majority of this demand. Metrowide vacancies declined by 30 basis points compared to the second quarter and remain 60 basis points below year-ago levels, with a majority of submarkets seeing fundamental improvements.
- Industrial market: Vacancies in the Greater Boston industrial market have reached another low, ending the third quarter at just 8.3%. Year-to-date, the market has absorbed 3.5 million square feet of industrial space. Large users remain focused on core markets north and south of Boston while redevelopment projects continue to remove infill industrial space from the inventory. Given such positive fundamentals, industrial landlords have been consistently raising rents in the Greater Boston area. As of the third quarter, lease rates expanded by 6.4% on a year-over-year basis, averaging $8.10 per-square-foot. Although leasing momentum has slowed from last year’s rapid pace, demand for modern, high-quality industrial space remains solid.
- Life sciences market: While the third quarter produced some mixed results, the Greater Boston lab market is as hot as ever. A reshuffling of tenants in the Cambridge markets kept positive absorption below recent historical trends; Infinity Pharmaceuticals’ departure of 51,000 square feet at 780 Memorial and Metabolix’s relocation to Woburn accounted for the lion’s share of negative absorption this quarter. The continued conversion of 50 Hampshire Street and the addition of 80 Guest Street in Brighton also added new lab space to the inventory. With that said, metrowide vacancies are sub-4% and East Cambridge vacancies are still below 1% as the race for space remains heated. Look for market conditions to improve next quarter as there are several deals that are nearing the finish line.
Read our full Q3 office/industrial market report here
Read our full Q3 biotech market report here