Q1-2018-IndustrialReport

Q1

INDUSTRIAL STATISTICS WAREHOUSE

2018

WAREHOUSE

TOTAL INVENTORY (SF)

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q1 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

TOTAL

93,170,977

6,272,456

6.7%

295,600

295,600

Total Vacancy

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 017 Q3 2017

14%

Total Vacancy TOTAL VACANCY 12%

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 • Activity abounds in the Greater BostonWarehouse market, with net absorption totaling roughly 788,000 square feet over the past four quarters and vacancies trending below 8% for the last eight quarters. Move-ins fromWilliams Sonoma in Taunton, Zippyshell in Hyde Park, and S.G.Torrice Company in Mansfield drove much of this quarter’s activity. Strong leasing and persistent demand across multiple industrial sectors, including e-commerce, bodes well for warehouse market fundamentals in the near term. • Robust growth has characterized the Greater Boston Warehouse market over the last five years. A majority of both supply and demand growth occurred in the region’s top distribution hubs; Route 495 South and Route 128 South, which account for nearly 50% of the metro’s total warehouse inventory and 43% of total net absorption since 2013. With that said, fundamentals have improved swiftly in most other markets as well. Both Route 495 North and Northeast posted double- digit vacancy declines over the last five years, and 6 out of the 10 industrial submarkets in Greater Boston boast sub-5% vacancies as of the first quarter. • Built-to-suit construction and preleasing have been driving activity as well. The 57,300-square-foot 45 Panas Road in Foxborough delivered this quarter, fully occupied by IDI Distibutors. Baldor Boston, LLC executed a lease for 100,000 square feet at a new facility in Chelsea. National Development and Charles River Realty Investors demolished a 37,000-square-foot industrial building at 130 Eastern Avenue and plan to develop a fully-refrigerated wholesale center on the site. Spears Manufacturing is also building a new 112,500-square-foot distribution center adjacent to the Norton Commerce Center. 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. • A handful of large vacancies hit the market this quarter. Crystal Cold Storage moved out of 90,855 square feet at 15-23 Sycamore Avenue in Medford while Crown Cork & Seal put 85,414 square feet on the sublease market at 14 Aegean Drive in Methuen. In Revere, Mark’s Distributors consolidated out of 70,000 square feet at 2050 Revere Beach Parkway and Expeditors International vacated 79,500 square feet at 3 Technology Drive in Peabody. • Until recently, rather tepid rent growth has characterized the local and national warehouse markets. From 2014-18, lease rates increased by more than 20% in Greater Boston, with a majority of the gains occurring over the last five quarters.

10%

14%

12% 8%

10% 6%

4%

8%

2%

6%

5-Year Historical Average = 9.2%

0%

4%

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

SF (000s)

1,500 50

1,000

0

SF (000s)

500

-500

g Rent /SF) $7.29

2013

2014

2015

2016

2017

2018

Net Absorption New Supply

0

-500

2013 NOTABLE TRANSACTIONS Notable Transactions 2014

2015

2016

2017

2018

Net Absorption New Supply

Williams Sonoma

Anixter

Baldor Boston

Chex Finer Foods

Ocean Air

40K SF

65K SF

90K SF

115K SF

140K SF

Route 495 South Route 495 West

Urban Core Route 495 North

2