Greater Boston's Warehouse Market Dips For First Time Since 2012
Greater Boston’s industrial market had a slow start to the year in Q1 2017, as the warehouse sector posted negative absorption for the first time in 18 quarters. Despite the end to the performance streak, strong growth along the Route 128 corridor is keeping one expert from calling this a sign of a downturn.
“While the year is off to a slow start relative to the past few years, the overall trend for the market is still quite positive,” said Chase Bourdelaise, managing director of research and analytics at Transwestern Consulting Group. “The Boston economy is continuing to expand, especially as an end-of-line distribution center.”
Greater Boston’s warehouse market had 157K SF of negative absorption in Q1 2017, and the vacancy rate rose to 9% from the 8.8% seen at the end of 2016, according to a Transwestern report. The last time the market's vacancy rate increased was the second quarter of 2012.
Despite the setback, Bourdelaise said the vacancy rate remains close to its all-time low of 8.7% and rental rates are holding steady. While the industrial market as a whole had 54K SF of negative absorption in Q1 2017, it absorbed more than 1M SF over the last 12 months. This, combined with the strength of the Route 128 submarket, is driving Bourdelaise’s optimism.
The Route 128 North corridor led Greater Boston’s warehouse market in Q1 2017 with 222K SF of positive absorption, the most the submarket has seen since Q2 2013. The submarket’s central location at the heart of three interstates is driving its strength, Bourdelaise said.
Warehouse performance was particularly strong due to Stavis Seafoods moving into 45K SF at 1 Technology Park in Peabody and heating and cooling equipment distributor S.G. Torrice Co. taking 34K SF at 7 Lopez Drive in Wilmington. Continued interest and activity from e-commerce companies taking more space as they switch their supply chain to be closer to buyers should maintain the strong performance trend, Bourdelaise said.