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