Q2-2018-IndustrialReport

Q2

INDUSTRIAL STATISTICS WAREHOUSE

2018

WAREHOUSE

TOTAL INVENTORY (SF)

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q2 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

ASKING RENT ($/SF)

TOTAL

93,437,196

6,295,131

6.7%

(23,502)

325,098

$7.30

Total Vacancy

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 TRENDS • A handful of large move-outs in Greater Boston’s warehouse market pushed net absorption into the red for the first time in over a year. Big-Hearted Books, Serta, EMS Warehousing and CGI Technologies all vacated space during the second quarter.That being said, vacancies only inched up by 10 basis points over the quarter, and rates remain well below historical averages. Strong leasing and persistent demand across multiple industrial sectors, including e-commerce, bodes well for warehouse market fundamentals in the near term. • Robust demand for prime warehouse space has led to more build-to-suit construction in the marketplace. National Development and Charles River Realty are planning a fully-refrigerated wholesale center at 130 Eastern Avenue in Chelsea for Baldor Boston, LLC.Work continues on Spears Manufacturing’s new 112,500-square-foot distribution center adjacent to Norton Commerce Center.Americold Logistics’ 173,000-square- foot refrigerated facility in Middleborough, which will support Ocean Spray production and operations, is slated to deliver later this year as well. • Some developers have opted for speculative construction.The Gutierrez Company recently broke ground on a 220,106-square-foot facility at the Crossroads Industrial Park in Northborough. Campanelli continues to move forward on the 127,500-square- foot 353 Maple Street and the 300,000-square-foot 351 Maple Street, both in Bellingham.All three projects are slated to deliver by the end of this year.While the construction pipeline has expanded, developers will likely struggle to keep pace with tenants’ robust demand for modern, state-of-the-art warehouse product. • Investors remain active in the Greater Boston warehouse market. In a sale-lease back, The Seyon Group acquired the 350,469-square-foot 560West Street in Mansfield from owner-user Medline Industries for $38.5 million or $110/SF. The tenant is rumored to be planning a new 800,000-square-foot facility in Uxbridge, and plans to lease their current location for a number of years. Infill warehouse product has been a highly desirable asset class, too. Calare Properties purchased the 31,950-square- foot 777 N Shore Road in Revere for $12.4 million or $388/SF at a 6.7% cap rate. Developers also remain attracted to older product facing functional obsolescence. Exeter Property Group divested 26 Cook Street in Billerica to Premier Storage Investors, who plans to redevelop the property into a self-storage facility. Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 • The nation’s tight labor market remains a headwind for warehousing and distribution. Given the meteoric rise in e-commerce and online shopping, the trucking industry in particular is facing a shortage of workers. One estimate puts national job openings in this industry at 63,000 this year, and the number is expected to increase moving forward.As a result, trucking wages are also rising swiftly.Year-over-year growth was roughly 4% of as May, which is nearly double overall national wage growth.While Boston is not a major national distribution hub like Atlanta or Chicago, these national trends are sure to have a local impact.

14%

Total Vacancy TOTAL VACANCY 12%

14% 10%

12% 8%

10% 6%

8% 4%

6% 2%

5-Year Historical Average = 8.7%

4% 0

2013

2014

2015

2016

2017

2018

2%

0%

2013

2014

2015

2016

2017

2018

NET ABSORPTION & SUPPLY Net Absorption

2,500

Net Absorption 2,000

2,500 1,500

2,000 1,000

1,500 500

SF (000s)

0

1,000

500 -500

SF (000s)

-1,000

0

sking Rent ($/SF) $7.30

2013

2014

2015

2016

2017

2018

Net Absorption New Supply

-500

-1,000

2013 Notable Transactions 2014 NOTABLE TRANSACTIONS

2015

2016

2017

2018

Net Absorption New Supply

Medline

Champagne Logistics Arnold Industries (Bossard)

Archive America

Lighthouse Fiber

50K SF

125K SF

200K SF

275K SF

350K SF

Route 495 South Route 128 South Route 128 North Route 495 West

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