RESEARCH 4Q 2019

BOSTON
INDUSTRIAL MARKET
SHIFTING INDUSTRIAL LANDSCAPE DRIVES CURRENT CONDITIONS
MARKET FUNDAMENTALS FORWARD
Annual absorption was last negative in 2011. In the eight years since, total
As major players made big moves, Boston’s industrial market closed out
annual absorption has exceeded 1.0 million square feet six times.
a strong 2019 with all fundamentals trending in the right direction. Total
vacancy hit historic lows at 6.0% as absorption rebounded, adding All of the 2.3 million square feet under construction is located in the
729,898 square feet to the 1,377,289 square feet of total absorption for warehouse/distribution subtype; 58.0% is located in the South submarket.
the year. The under-construction pipeline gained steam, as 138,000
Only 17 high-bay options exist in the market with availabilities of 100,000
square feet of new inventory broke ground. Average asking rents
square feet and up. An additional six are spec developments.
continue to climb at a steady clip as demand grows across the three
different industrial subtypes. There are 11.5 million square feet of active
requirements, which account for just over half of the 21.8 million square
MARKET ANALYSIS
feet of currently available inventory.
Asking Rent (NNN) and Vacancy

KEY PLAYERS RESPONSIBLE FOR MARKET $10 15%

SUCCESS
$8 12%
Three major deals by Amazon set the tone early in what amounted to a
strong closing quarter for 2019. The first commitment for 233,880 $6 9%
square feet at 480 Sprague Street to occupy the entire Dedham $4 6%
warehouse/distribution facility. The second, which received significantly
$2 3%
greater media coverage, actually shifted market statistics and will go
down as one of the largest industrial deals ever signed in Boston’s $0 0%
history. Amazon leased the entire 826,338 square feet at the former 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
Necco candy manufacturing facility at 135 American Legion Highway in Average Asking Rent (Price/SF) Vacancy (%)
Revere. The large availability, which has been on the market for the last
four quarters with an asking rent of more than $16.00/SF, helped push Net Absorption (SF, Millions)
average asking rates to historic highs. 135 American Legion Highway
solely accounted for 6.4% of the vacant inventory last quarter and is 1.5
responsible for the $0.10/SF drop in overall average rent, as total 1.0
average rents dropped 1.1% quarter-over-quarter for the first time two 0.5
years. The final deal, committed by Amazon in the final moments of the
0.0
quarter, was for the entire 300,000 square feet at the recently
-0.5
constructed 351 Maple Street in Bellingham.
-1.0
4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
Although average asking rates for the warehouse/distribution subtype
declined slightly over the quarter, the R&D/flex and general industrial
subtypes continued to flourish. General industrial saw total vacancy
MARKET SUMMARY
drop to 5.6%, while R&D/flex market also witnessed historical lows at Current Prior Year Ago 12 Month
Quarter Quarter Period Forecast
7.1%. The entire market now sits at 5.9% direct vacancy, the first time
Total Inventory (MSF) 213.6 213.5 212.5 
ever dropping below the 6.0% point. In addition to the Amazon deals,
significant transactions this quarter, mostly in the South submarket, Vacancy Rate 6.0% 6.4% 6.5% 
helped drive the overall availability rate back down to nearly 10.0%. Quarterly Net Absorption 729,898 (16,506) 143,517 
Imperial Bag & Paper in Franklin, Restoration Hardware in Canton, and
Average Asking Rent $9.10 $9.20 $8.77 
Boston Trolley in Quincy combined for more than 450,000 square feet of
new commitments, which will help make up for two new vacancies, as Under Construction (SF) 2,249,000 2,110,923 1,069,029 
Coke vacated 171,100 square feet in Waltham, and Haemonetics left Deliveries (SF) 0 0 477,500 
180,000 square feet in Braintree.

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4Q 2019 BOSTON INDUSTRIAL MARKET

CAPITAL MARKETS LOOKING FORWARD

Class A and Value-Add Assets Continue to Trade
After a relatively uneventful third quarter, investment sales transactions
picked back up to close the year on a high note. Investment in both
warehouse/distribution and R&D/flex have proven worthy, as those
asset types continue to grow in value, and trade for unprecedented
numbers. Although cap rates continue to shrink, there has been a slight
pull-back by some of the institutional-grade capital that has come from
out of the market. These players are still highly active in the industrial
asset type. Still, deal flow in the Boston metro is not what it was a year
ago. That being said, local players are all-in on the growing industrial
inventory, even as land becomes scarce and quality product moves
further away from Boston’s urban core.
In the one of the most significant deals of the quarter, NorthBridge
purchased 160 Dascomb Road in Andover from a partnership of
Condyne and Greenstreet Partners. The 125,600-square-foot R&D/flex
facility is 100% occupied by a tenant roster that includes Anixter
International and Lockheed Martin. The sale totaled $26.3 million, or
$208/SF. Other significant deals of the quarter included Marcus
Partners’ purchase of a portfolio for more than $80.0 million. The
largest asset was Avon Industrial Park at 57 Littlefield street, a 426,872-
square-foot property, which Novaya and Investcorp sold for $70/SF.
Also included in the sale were 326 Ballardvale Street, 176 Grove Street
and 1 First Avenue in Peabody.
Scarce Supply Will Continue to Drive Demand
All in all 2019 was a great year for Boston’s industrial market as vacancy
dwindled further, new construction grew, and investment volume stayed
consistent. Looking to the new decade, the outlook remains positive, yet
questions loom over how the upcoming elections will impact direct
investment into industrial assets. Moreover, the ongoing trade sanctions
have benefitted many American manufacturers but have hurt others,
leaving industrial tenants unable to make major business decisions for
the not-so-distant future. The lack of available space is now a realistic
issue for many tenants, whether they are new or looking to expand in
the market. There are currently 17 existing options with 100,000 square
feet of available space, the majority of which are in the I-495 loop. It is
nearly impossible to find quality space close to Boston, especially as
more than 6.0 million square feet in the urban core has been
demolished since 2002.
Expect companies to continue relocating farther from Boston,
expanding the metro well into Worchester County. The scarcity of land
is also pushing new development farther from the dense populations
that include workers or the final destinations for last-mile logistics hubs.
Even so, the industrial landscape will remain one of the hottest asset
classes well into the future. As long as tenants can afford growing rents
and investors are willing to pay historic highs, Boston’s industrial market
will continue to flourish.

SELECT LEASE TRANSACTIONS

Tenant Building Submarket Lease Type Square Feet

Amazon 135 American Legion Highway Central Direct 826,338

Imperial Bag & Paper Co. 100 Financial Park Drive South Direct 300,000

Amazon 351 Maple Street South Direct 300,000

Restoration Hardware 15 Campanelli Circle South Direct 81,870

Boston Trolley 199 Commander Shea Boulevard South Direct 68,900

AVERAGE ASKING RENT BY PROPERTY TYPE CONSTRUCTION AND DELIVERIES

Average Asking Rent ($/SF) Square Feet, Thousands

$15 2,500
Thousands

$12 2,000

$9 1,500

$6 1,000

$3 500

$0 0
4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19

Wh/Dist R&D/Flex General Under Construction Deliveries

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4Q 2019 BOSTON INDUSTRIAL MARKET

SUBMARKET STATISTICS
Total Under Total Qtr YTD WH/Dist R&D/Flex Total
Inventory Construction Vacancy Absorption Absorption Asking Rent Asking Rent Asking Rent
(SF) (SF) Rate (SF) (SF) (Price/SF) (Price/SF) (Price/SF)

Urban 23,104,079 0 4.9% 716,090 679,857 $12.97 $24.29 $14.91

North 76,321,404 160,000 4.9% 46,748 654,489 $8.65 $11.18 $9.64

South 77,883,632 1,322,000 7.1% 45,775 111,785 $6.92 $12.99 $7.46

West 36,297,618 767,000 6.9% (78,715) (68,842) $7.49 $11.56 $9.17

Market 213,606,733 2,249,000 6.0% 729,898 1,377,289 $7.87 $12.34 $9.10

SUBMARKET STATISTICS BY SUBTYPE

Total Qtr YTD Total
Total Inventory Under Construction
Vacancy Absorption Absorption Asking Rent
(SF) (SF)
Rate (SF) (SF) (Price/SF)

General Industrial 59,774,646 0 5.6% 55,385 (205,335) $7.89

R&D/Flex 52,826,264 0 7.1% 166,028 458,699 $12.34

Warehouse/Distribution 101,001,973 2,249,000 5.7% 508,485 1,123,925 $7.87

Market 213,606,733 2,249,000 6.0% 729,898 1,377,289 $9.10

INDUSTRIAL INVESTMENT
$1,000 $200

$800
$150
$600
$100
$400
$50
$200

$0 $0
4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 2Q18 4Q18 2Q19 4Q19
Sales Volume ($ Millions) Average Price/SF

SELECT SALE TRANSACTIONS

Address Submarket Property Type Sale Price Price/SF Square Feet

10-20 Dan Road, Canton South R&D/Flex $34,000,000 $158 215,000

57 Littlefield Street, Avon South Warehouse/Distribution $30,000,000 $73 407,500

160 Dascomb Road, Andover North R&D/Flex $26,250,000 $208 125,600

326 Ballardvale Street, Wilmington North Warehouse/Distribution $22,400,000 $76 293,980

© NEWMARK KNIGHT FRANK | 2019 RESEARCH | 3

4Q 2019 BOSTON INDUSTRIAL MARKET

LIZ BERTHELETTE JONATHAN SULLIVAN MICHAEL MALINCONICO

Research Director Research Manager Senior Research Analyst
617.863.8377 617.863.8421 617.863.8428
elizabeth.berthelette@ngkf.com jonathan.sullivan@ngkf.com michael.malinconico@ngkf.com

Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in
historical statistics including availability, asking rents, absorption and effective rents. Newmark Knight Frank Research Reports are available at www.ngkf.com/research

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© NEWMARK KNIGHT FRANK | 2019 RESEARCH | 4