Q2-2018-IndustrialReport

INDUSTRIAL STATISTICS FLEX / R&D

FLEX / R&D

TOTAL INVENTORY (SF)

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q2 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

ASKING RENT ($/SF)

TOTAL

52,505,099

4,939,252

9.4%

114,507

424,837

$11.39

Vacancy by Submarket VACANCY BY SUBMARKET

TRENDS • Greater Boston’s Flex/R&D market continues to benefit from the growing tech, biotech, and light manufacturing industries. Vacancies ended the second quarter at 9.4% as the market absorbed more than 100,000 square feet. Repligen took occupancy of close to 65,000 square feet at 111 Locke Drive in Marlborough, and ETM Manufacturing moved into 23,200 square feet at 24 Porter Road in Littleton after purchasing the building. Persistent demand from technology-related companies is expected to drive growth in the local Flex/R&D market in the coming quarters. • The Route 128 Loop boasts some of the strongest Flex/R&D fundamentals in the region. Vacancies ended the second quarter of 2018 at just 5.8%; this is about half the rate in the Route 495 Loop and well below the rate in the Urban Core. Asking rents are well above the metrowide average, at $14.55/SF. However, space in close proximity to Boston maintains a $6-11/SF premium over space located in Route 128 South and Route 128 North. Users like Novanta (147,370 SF) and Alkermes (5,535 SF) are the types of firms leasing Flex/R&D space in the Route 128 markets. • Analog Devices announced plans to consolidate its facilities across Massachusetts and relocate its headquarters from Norwood to Wilmington, where the company already maintains a large footprint. As part of a nearly $160 million project, the firm is planning to renovate its existing facilities (500,000 square feet of office, Flex/R&D and manufacturing space) as well as construct an additional 175,000-square-foot Flex/R&D building. The project also includes 50,000 square feet of community space (i.e., a fitness center and café). The company will keep a small presence in Norwood and Chelmsford as well as its recently opened startup incubator in downtown Boston. Work on Analog Devices’ expansion is expected to finish between 2019 and 2020. • Infill locations are in high demand from both Flex/R&D users and investors. In Boston’s Seaport, 908 Devices is expanding their production operations and moving its headquarters to the Pappas Commerce Center in the third quarter. The manufacturer has leased 37,500 square feet at 645 Summer Street leaving 18,000 square feet behind at the Innovation & Design Building. Rafi Properties recently acquired the Ames Business Park, anchored by Greentown Labs, in Somerville during the second quarter. The site includes a mix of office, flex/R&D and industrial buildings. • With vacancies declining by 580 basis points over the last 5 years, it’s not surprising Flex/R&D lease rates are surging in Greater Boston. Space runs from $7-$10/SF in the Route 495 Loop to the high-teens to low-twenties in the Route 128West/Northwest and Urban Core submarkets. Overall asking rents rose to $11.39/SF in the second quarter; increasing by 7.6% over the last 12 months. Infill locations, close to population centers, have seen the steepest inclines in recent years. From 2014-18, Flex/R&D asking rents expanded by 68% in the Urban Core, 40% in Route 128 Northwest, and 34% in Route 128West.As fundamentals remain strong, look for more rent gains in the near future.

19%

17%

14%

12%

10%

7%

5%

2%

0%

2013

2014

2015

2016

2017

2018

Route 495/Metrowest

Route 128

Urban Core

NET ABSORPTION AND ASKING RENT

700

$12

600

500

$10

400

300

$8

200 SF (000s)

100

$6

Net Absorption and Asking Rent

0

Asking Rent ($/SF) $11.39

-100

$4

2014

2015

2016

2017

Net Absorption

Asking Rent

NOTABLE TRANSACTIONS Notable Transactions

Novanta

908 Devices

Consolidated Sterilizer

Cross River Center

Endeavor Robotics

5K SF

50K SF

95K SF

140K SF

185K SF

Route 128 Northwest

Urban Core Route 495 North

3