- Boston’s industrial market is surging with e-commerce related demand.
- Amazon’s occupancy growth has outstripped WeWork’s downtown (2.4% of the market vs. 2.2% for WeWork). And they aren’t done yet.
- Amazon is just getting started, and with new development and signed deals, will double their existing footprint. COVID-19 hasn’t slowed them down.
- E-Commerce warehousing and distribution centers are seeing ever growing tenant demand, beyond just Amazon. TJX is expanding locally.
- Demand has seen rental rates hold and even be surpassed while inventory continue to trade from increased interest in the capital markets.
The COVID-19 pandemic has had a large and immediate impact on business and on real estate, yet industrial is thriving. Stemming from a growth in e-commerce demand as remote work and retail restrictions have become the current practice in Massachusetts and beyond, industrial properties have seen a steady stream of tenant activity as e-commerce businesses pick-up in volume. In addition to the e-commerce, warehouse space is in high demand by a variety of users across industries responding to COVID-related demands.
Once again, Amazon is the big player in the Greater Boston industrial market. From the end of Q1 and through Q2, Amazon has continued to push their expansion in the region showing no signs of slowing as a result from current conditions while continuing to look for new locations. Amazon has now proposed a plan for a new urban warehouse location focusing on the Dorchester Avenue in South Boston for a potential 96,000 SF facility. In the past few years we have seen industrial operators largely avoid the urban core as they have been priced out by office, lab, and multi-family developers, but with these developers currently on hold and Amazon experiencing a surge in e-commerce revenue, the urban core is seeing renewed industrial interest. Amazon is also reportedly in talks with operators like JCPenney having already taken over one former JCPenney warehouse in Wisconsin.
Amazon has pushed tremendous growth in the last few years with their large scale deals signed at 1600 Osgood in North Andover, the former Necco Site at 135 American Legion Highway in Revere, and 50 Otis Street in Westborough. With the new urban interest and LOIs and signed deals mainly in the South and West markets, Amazon has ballooned to over three million SF of space and approaching four million with new construction at the aforementioned sites to potentially double that number. This has Amazon currently occupying nearly 2.5% of total market inventory having grown in such a short amount of time puts them ahead of the growth seen from WeWork in Boston from 2014-present, which grew to approximately 2.2% of that market.
The industrial market has also seen tremendous leasing and investment activity outside of Amazon. Industrial product continues to trade on the market not having seen a significant negative impact and in-fact increased interest as investors flock to the safety that industrial product has shown to be able to provide. Leasing activity has bolstered the strength of the capital markets as well. Traditional retailers continue to push towards e-commerce to adapt, with TJX being of particular interest as they are in the market for additional space as they have accelerated their online growth. Strong demand has seen both cap rates and rental rates holding strong and further, some groups in immediate need of space have been willing to exceed asking rents to secure space.
As the local, national, and international economies continue to adapt in the face of COVID-19, industrial product is seeing a renaissance from renewed and growing investment and tenant activity. Boston’s industrial market continues to grow as developers continue with speculative construction projects and are met with quick lease ups at or prior to delivery. Along with life-science, industrial seems to be a safe play in uncertain times.