Northeast Real Estate Business

JAN-FEB 2016

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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www.REBusinessOnline.com Northeast Real Estate Business • January/February 2016 • 19 M A R K E T H I G H L I G H T: B O S T O N In 2015, the Greater Boston industri- al market was characterized by robust investment sales activity. According to Real Capital Analytics, 136 indus- trial sale transactions occurred over the past 12 months valued in excess of $1.3 billion. For comparison, 107 industrial sales transactions occurred in 2014 and 89 in 2013. Buyers — pre- dominantly local operator/syndica- tors and institutional investors — are targeting Class A high-bay warehouse facilities with strong building features and excellent accessibility. As vacancy continues to fall for these assets and asking rents approach the mid $6-per- square-foot range, we have seen many space users trend toward build-to-suit projects over the course of the past 12 to 18 months. With heightened sales activity, prices are approaching (and in some cases exceeding) replacement cost for the frst time in the post-crisis era. Further, many of the dated existing facilities throughout the state of Mas- sachusetts can no longer satisfy the operational needs of today's occupier without signifcant renovation. With increasing frequency, we are seeing tenants enter the market with highly specialized space needs that are dif- fcult and expensive to accommodate within an existing building. Many of these tenants are able to justify the cost premium associated with build- ing a new facility versus occupying a heavily renovated existing facility. The operational effciencies and sav- ings are also a key factor in a tenant's decision to build-to-suit. Evidence of this trend can be seen in the past year's build-to-suit ac- tivity throughout metropolitan Boston. After acquiring 115 acres within Taunton's Myles Standish In- dustrial Park, Martignetti Liquors came out of the ground with their new 680,000-square-foot headquarters facility in 2015. The facility is a con- solidation of the company's Braintree and Norwood locations. Down the road from Martignetti, Sullivan Tires moved into its new 200,000-square- foot distribution facility built by The Maggiore Companies. Other major in- dustrial projects throughout the state include Potpourri Group breaking ground on a 450,000-square-foot facil- ity in Littleton, Victory Packaging con- structing a 250,000-square-foot facility in Bellingham and M.S. Walker plan- ning to construct a 140,000-square- foot facility in Dedham. To cap off the year, Amazon closed on 77 acres of land in Fall River, where it plans to construct a 1 million-square-foot dis- tribution facility. 2015's large space commitments are indicative of how well the indus- trial sector has rebounded since the recession. We anticipate that 2016 will continue to see strong leasing funda- mentals as more large availabilities are leased. Characteristic of the trend throughout the U.S. industrial mar- ket, we anticipate that much of the demand for distribution space will be driven by online retailers, third- party logistics companies and tradi- tional consumer goods companies. Many landlords are recognizing the value and increasing scarcity of large- block opportunities, as evidenced by Campanelli marketing approximately 900,000 square feet of build-to-suit industrial space in Bellingham while also considering beginning the project speculatively. Each of these new de- velopments is a positive step as Great- er Boston's industrial market adapts to the specialized needs of today's oc- cupiers. J.R. McDonald Executive Managing Director | Brokerage Tyler McGrail Associate Director | Brokerage Sam Hallowell Associate Director | Capital Markets Newmark Grubb Knight Frank BOSTON INDUSTRIAL MARKET SEES ROBUST SALES ACTIVITY AND INCREASING DEVELOPMENT S O M E T H I N G S G E T B E T T E R W I T H A G E The SIOR designation has distinguished leaders in industrial and ofce real estate services for 75 years. When only the best will do, SIOR members are the key to your success. www.sior.com

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