Three Major Industrial Trends Leading to New Construction

Nationally the industrial market continues to impress as outsized demand, coupled with limited supply, is driving extremely positive fundamentals. Boston is no exception with industrial vacancies reaching a 15-year low in the third quarter and asking rents continuing to increase at a double-digit pace.

Developers continue to break ground, but new supply remains moderate. Demand for newer, higher-quality warehouse space has incited construction in the Boston metro. Build-to-suit activity, including projects for Martignetti Companies, New England Ice Cream and Pfizer, dominates. However, developers are willing to begin construction on a speculative basis.

Most recently, ground is being cleared at 45 Panas Road, Foxboro for a 50,000 square foot office/warehouse building with a host of features including; 32’ clear heights, ten loading docks, and ESFR sprinklers. NAI Hunneman south market experts Cathy Minnerly and Ovar Osvold are the exclusive agents for the property which sits in a market where available space remains at a premium. Just up the road Minnerly and Osvold have taken one of the area’s most attractive industrial parks to 96% occupancy, making 45 Panas a much welcome addition to inventory in the market.

 

45 Panas Road - New 50,000 Warehouse/Office Building on Rt 1.

45 Panas Road – New 50,000 Warehouse/Office Building on Rt 1.

 

Below are three major trends we’re seeing in our local market:

  1. Big Box retailers have arrived! Traditionally, large-scale distribution operations have passed over the New England region due to cost and geographic location. However, changes in consumer spending patterns are driving retailers and internet-retailers to locate closer to consumers and stores as well as reduced shipping times.
  2. E-Commerce is changing the game. Not only has internet retailing shifted where distribution centers are located, but it has also changed the type of warehouses being built. According to a recent article in the SIOR report, e-commerce tenants require “800-feet deep with no pass-through,” larger footprints, more workers and parking spaces due to increased automation. Amazon’s new one million square foot distribution center in Fall River is a prime example. Minnerly & Osvold sold the land for the construction of the new facility which offers a premier location off a new $34 million highway interchange on Rt 24 and opened in September.
  3. Modern industrial space is still in vogue. Buildings with 30’+ clear heights, ESFR sprinklers and wider column spacing are top choice among industrial users. Metrowide there are only a handful of buildings that meet this criteria that have 50,000 SF or more of available space. Given the demand for this space landlords are able to garner a rent premium with lease rates in the $6-7/SF range.

Heading into the fourth quarter we expect industrial fundamentals to remain positive. That being said, growth will likely be more measured compared to recent history as we near cyclical peaks.

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