RWH - Q1 2021 Greater Boston CRE Market Report

2021 321 Commonwealth Rd, Wayland, MA 01778
Phone: 508-655-5626
Web : www.rwholmes.com

Q1 REPORT

Greater Boston Market Report

by R.W. Holmes Realty

SQ1UB2021 MARKET DATA

GREATER BOSTON SUBMARKETS

Q1 2021

128 CENTRAL (office)

SUBMARKET NEWS

MARKET RECAP
• An appetite remains for lab conversion opportunities – both industrial and office buildings with proper infrastructure

are good targets. We saw several notable sales on Pleasant St in Watertown in Q1: Sasaki’s building ($23M), FMS’
building ($21M), and Stop & Shop’s building ($35.5M), which will all be converted to lab. There is a deal pending for
21 Hickory in Waltham, owned by Meditech, which is rumored to be under agreement for over $50M ($463/SF).
• GMP space is popping up throughout Central 128. As a growing subset of life science space, most GMP/cGMP
requirements had to push out to I-495 to find adequate space. However, life science companies are getting creative
and finding ways to fit manufacturing into smaller flex or lab-ready buildings, as is the case with Snapdragon at 360
Second Ave and iVexSol in Lexington.

WHAT WE WILL BE WATCHING
• Office activity seems to be increasing along Central 128, especially for users over 5,000 SF as people feel more

confident in returning to work. While some tenants still look for short-term deals, many are open to 5+ year leases.
• We are seeing larger deals being completed in Q1, like Bank of America who is expanding by 23,000 SF at 1075 Main

St in Waltham. We will see if more companies step up for larger leases and solidify the continued need for office
space post pandemic.
• Several major developments have broken ground in Q1, such as Northland’s Newton project, Wellesley Office Park’s
multifamily conversion, and 300 Third Ave’s new lab building. We are eager to see how each of these developments
will impact their submarket.

RECAP OF MARKET HEALTH

28,500,000 14.5% $38.00/SF 533,000
TOTAL SQUARE FEET VACANCY RATE
AVERAGE RATE (GROSS) SQUARE FEET UNDER
CLASS A & B SPACE CONSTRUCTION

Q1 Transaction Breakdown Q1 Transactions by Size

NOTEWORTHY TRANSACTIONS

Lease Sale Lease
360 Second Ave, Waltham 840 Winter St, Waltham 275 Wyman St, Waltham
$58,100,000 ($429/SF)
51,000 SF Alexandria Real Estate Equities 226,000 SF
Snapdragon Chemistry ZoomInfo

Q1 2021

128 NORTH/ RT. 3 NORTH (office)

SUBMARKET NEWS

MARKET RECAP

• Vacancy losses were cut in half from Q4 2020 from -472,000 SF to -220,000 SF, a sign that the bleeding is starting to
stop. RSA has put up about 188,000 SF for sublease at 174 Middlesex Turnpike in Bedford – accounting for much of that
new vacancy in Q1.

• Leasing activity is up from 196,000 SF in Q4 2020 to 512,000 SF in Q1 2021 in new deals across the market. Tracelink’s
deal for 70,000 SF at 200 Ballardvale in Wilmington and Oncorus’ lease for 88,000 SF account for a large chunk of that.

• Institutional sale activity for stabilized office assets appears to be limited right now. This is not surprising given the
gravitation towards industrial and stabilized life science assets from investors.

WHAT WE WILL BE WATCHING

• Tracelink’s relocation from 400 Riverpark is an expansion by about 20,000 SF within the market, Oncorus’ lease at 1
Corporate is a relocation from Cambridge – both signs of growth for the market. We expect this trend to continue and to
see some requirements that were active pre-COVID come out of hibernation.

• On the investment side, the life science conversion followed by their lease up will likely have a dual effect, where newly
stabilized lab assets will become attractive and existing supply of under performing office will benefit from diminished
supply and should cycle back into favor over time.

RECAP OF MARKET HEALTH

47,620,000 15.5% $25.50/SF 266,000
TOTAL SQUARE FEET VACANCY RATE
AVERAGE RATE (GROSS) SQUARE FEET UNDER
Q1 Transaction Breakdown CLASS A & B SPACE CONSTRUCTION

Q1 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Sale Lease
100 Crosby Dr, Bedford 1 Corporate Dr, Andover 4 Corporate Dr, Andover
$47,500,000 ($181/SF) $12,500,000 ($180/SF)
Redgate/AEW Asset Management 88,000 SF
Rhino Capital Oncorus

Q1 2021

NATICK/FRAMINGHAM (office)

SUBMARKET NEWS

MARKET RECAP
• The Natick/Framingham office market saw its first quarter of positive growth in nearly a year with net absorption

totaling just over 47,000 SF. Rates appear to have stabilized as well with asking rents getting close to where they
were pre-pandemic.
• Life Science Incubator ABI-Labs announced 21,310 SF in leases this quarter bringing their new 68,000 SF biotech
complex to near full occupancy. Notable additions include Cytovia and InstilBio.
• Single-story, flex buildings continue to be high in demand in Natick as evidenced by February’s sale of 15 Erie Dr
for $263/SF. A recent trend we are witnessing involves owner/occupants migrating from Rt 128 due to the lack of
inventory and perpetually escalating rental rates. When comparing the prospect of leasing flex space on Rt 128 for
low to mid 20’s NNN, the idea of purchasing their own building in Natick for $250-300/SF actually starts to make
sense.

WHAT WE WILL BE WATCHING

• Nevertheless, it is clear that there is still a long road ahead to begin to fill the nearly 800,000 SF of direct vacancy
currently outstanding. The average time a space spends on the market is another area of concern with the typical
vacant suite taking nearly 13 months to lease.

RECAP OF MARKET HEALTH

8,460,000 11.5% $25.50/SF 0
TOTAL SQUARE FEET VACANCY RATE
AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

Q1 Transaction Breakdown Q1 Transactions by Size

NOTEWORTHY TRANSACTIONS

Lease Lease Sale
1 Strathmore Rd, Natick 959 Concord St, Framingham 11 Pleasant St, Framingham

10,201 SF 10,852 SF $3,200,000 ($127/SF)
Electric Hydrogen Co. Tufts Medical United Clinical Laboratories LLC

Q1 2021

495 WEST (office)

SUBMARKET NEWS

MARKET RECAP

• Who will blink first? The current narrative in the market suggests that due to higher vacancy, landlords will have to drop
their rents, which is not always the case. Asking rents only declined $1.00/SF in the past year. With construction costs
rising exponentially, landlords cannot do a lot of work to their buildings and keep rents low.

• In the past quarter, availability has gone up just over 1% to land at 21%.
• Rumor Mill – eClinicalWorks is considering occupying 900 West Park Dr in Westborough (which they acquired in 2015).

The first class 193,000 SF office building was constructed 20 years ago and has never been occupied. Also, Amazon is
contemplating a sizeable transaction within the Westborough Technology Park.

WHAT WE WILL BE WATCHING

• Don’t look now, but there is a strong undercurrent of positivity. While a number of employees will continue to work from
home, there appears to be a sizeable contingent wanting to get back to the office. Most of the current activity has been
from tenants under 5,000 SF, but discussions with much larger tenants indicate they expect to be touring in Q3 2021.

• Noteworthy office building sales over the past quarter were non-existent in the Boros. With the uncertainty over the
past year, owners refrained from listing their buildings, but we expect office properties to start hitting the market late
Summer 2021.

RECAP OF MARKET HEALTH

12,050,000 21% $19.25/SF 0
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

Q1 Transaction Breakdown Q1 Transactions by Size

NOTEWORTHY TRANSACTIONS

Lease Lease Sublease
8 Technology Dr, Westborough 2 Cabot Rd, Hudson 1400 Computer Dr, Westborough

29,402 SF 35,000 SF 21,561 SF
Bradshaw Home Innoneo
KPM Analytics

Q1 2021

128 NORTH/ RT. 3 NORTH (industrial)

SUBMARKET NEWS

MARKET RECAP

• Institutional demand for flex/industrial assets is at an all time high, for both portfolios and individual buildings. Rhino
Capital’s purchases at 3 and 6 Riverside in Andover and 3 and 8 Federal in Billerica (340,000 SF), Berkeley Partners
purchasing 23 Rainin in Woburn, 33 Manning in Billerica, and 10 Technology Drive in Peabody (163,000 SF), and
NorthBridge collecting 146 Dascomb Rd in Andover and 150 Flagship in North Andover (350,000 SF) are all prime examples.

• As signaled by Continuus’ lease at 32 Cabot in Woburn, life science demand for clean, high-end flex product is still present
in the market. Despite a slight slowdown in leasing, activity is still taking place as demonstrated by transactions such as
Lowes and Homan’s Associates taking a total of 381,000 SF at 613 Main St in Wilmington.

• Rents continue to climb across the submarket. Recent institutional trades will likely have a continued effect on rents for
users, as the acquisition basis will drive rents up. Vacancy continues to be low and supply is short.

WHAT WE WILL BE WATCHING

• Individual buildings traded on average $50/SF lower than portfolios in Q1. We expect this gap to narrow as recent record
trades will force valuations higher.

• The fallout from record sales numbers will continue the rent growth we have witnessed over the past 3 years in the
industrial/flex market. Leasing activity dipped slightly in Q1, but will likely pick back up with renewed life science GMP
demand paired with E-commerce demand remaining steady.

RECAP OF MARKET HEALTH

94,500,400 5.7% $12.50/SF NNN 1,000,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE
SQUARE FEET UNDER
CONSTRUCTION

Q1 Transaction Breakdown Q1 Transactions by Size

NOTEWORTHY TRANSACTIONS

Lease Sale Sale
32 Cabot Rd, Woburn I.F. Dicenso Portfolio - Wilmington Novaya Portfolio - Billerica/Wilmington

49,600 SF $154,000,000 ($224/SF) $133,000,000 ($233/SF)
Bain Capital & Oliver Street Capital BentallGreenOak
Continuus Pharmaceuticals

Q1 2021

495 SOUTH (industrial)

SUSBUMBMARAKREKTENTENWESWS

MARKET RECAP
• Redevelopment and new construction are the new themes for 2021 along the I-495 South corridor. Companies of all

classifications are considering build-to-suit options. A full range of requirements from landscapers and service providers to
biotech companies are now in development of 30-50,000 SF properties.
• Despite the record high prices of new construction, other market forces such as limited supply, low interest rates and
surging post pandemic demand for products and services continue to fuel the industrial Market for Q1 2021 and the
foreseeable future.

WHAT WE WILL BE WATCHING

• The biggest challenge for 2021 will be budgeting for the cost of new projects given escalating construction prices and
continuing material supply shortages. All trades are still facing record demand, while the timing of Town permitting has
become even more unpredictable. Projects that were conceived over a year ago at an estimated $100/SF are now looking
at costs at or above $125/SF.

• Similar to 2020, limited purchase opportunities exist for all flex/industrial product and will continue to create record high
sale prices.

RECAP OF MARKET HEALTH

47,800,000 4% $10.50/SF NNN 620,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE SQUARE FEET UNDER

CONSTRUCTION

Q1 Transaction Breakdown Q1 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Sale Sale
5 Beeman Rd, Northborough 11 Forbes Rd, Northborough 572 West St, Mansfield
$4,833,333 ($138.10/SF)
$13,076,096 ($235.54/SF) $33,000,000 ($155.95/SF)
NorthBridge Wheelock Street Capital, LLC NorthBridge

Q1 2021

RT 24 (industrial)

SSUUBBMMAARRKKEETTNNEWEWS S

MARKET RECAP
• The industrial market remains tight for spaces under 25,000 SF with rents continuing to increase and inventory at an all

time low. Lease rates have increased $1.00- $2.50/SF over the last six months.
• A survey of industrial spaces over 100,000 SF along Route 24 shows 4 quality options while the same area offers only 9

viable spaces between 10,000 SF and 20,000 SF.
• The Braintree Planning Board has approved construction of a commercial complex on the site of the Graziano Concrete

Co. on Arnold St - just waiting on Conservation Commission’s approval. The property, which flanks the Monatiquot
River, is zoned for commercial use.
• Plans for the 14-acre Riverside Business Park calls for constructing a warehouse and light manufacturing building of
139,000 SF and an office building of 9,000 SF, as well as another approximately 50,000 SF commercial building. Most of
the existing structures on the site will be demolished, except for a small office and warehouse. The developer originally

proposed building 98 townhouses on the site, but changed course after “significant opposition” from neighbors

WHAT WE WILL BE WATCHING

• Inventory for industrial spaces 25,000 SF and under are quickly becoming rare leaving few alternatives for tenants.
• For tenants in this size range with leases expiring, there is little alternative but to renew at a premium rental rate.

RECAP OF MARKET HEALTH

40,770,000 5% $9.50/SF NNN 0
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE SQUARE FEET UNDER

CONSTRUCTION

Q1 Transaction Breakdown Q1 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Lease Sale
295 Constitution Dr, Taunton 61 Leona Dr, Middleborough 300 Foxborough Blvd, Foxborough

$4,875,000 ($114.71/SF) 75,000 SF $43,100,000 ($177.51/SF)
Berkeley Partners Peloton BentallGreenOak

Q1 M2021 ARKET TRENDS

THE CONTINUED RISE OF WATERTOWN

THE CONTINUED RISE OF
WATERTOWN

In our Q4 2018 report, we highlighted the growth of Watertown and its potential as a major life science cluster.
Two years later, we reflect on just how quickly Watertown has established itself as a major market for life sciences.
EXPONENTIAL GROWTH IN SALE PRICING
With Watertown now acknowledged by major life science companies in Kendall Square as a viable
relocation option, the surge of development to meet the life science demand has caused exponential
appreciation in the average sale price. Not only are we seeing buildings with lab conversion potential
sell for unprecedented prices, but also buildings that have redevelopment capabilities to build the
surrounding ecosystem – housing, retail/amenities, etc. In the past 5 years, the average sale price has
increased from $250/SF to $342/SF – a 36% increase in value. This growth in pricing outpaces Boston proper.
ANYTHING THAT CAN BE CONVERTED TO LAB, WILL BE CONVERTED TO LAB
In the last year, it seems like almost every month there was a new proposed lab redevelopment popping up
in Watertown. In the past year, the following major projects have been proposed or started construction:
• Mt Auburn Club – National Development and Alexandria look to develop the site into
a 255,000 SF lab research facility.
• Arsenal Yards – Building on their current life science leasing success, Boylston Properties is
underway on their spec construction of 165,000 SF lab space.
• 66 Galen St – Boston Development Group has proposed a 450,000 SF life science campus
at the former VW dealership.
• 700 Pleasant St – The current Stop and Shop location was purchased in Q1 2021 by Equity
Industrial Partners. They plan to redevelop the 70,000 SF site into a life science campus.
• 85 Walnut St – Westbrook Partners has received approval to convert 85 Walnut St into a
215,000 SF life science building.
• 64 Pleasant – Berkeley purchased the 97,000 SF Sasaki HQ in Q1 2021 and will modernize
the building to be lab-ready.
• 580 Pleasant – Purchased by Griffith Properties, the 145,000 SF facility will be gutted and
converted to Class A lab.
VACANCY RATES COMPARABLE TO KENDALL SQUARE
When looking at existing lab building vacancy, Watertown rivals Kendall Square. Buildings with existing lab
space have a vacancy rate of 1.1% in Watertown - only three suites are currently available in the entire market.
The entire office/lab market in Watertown has an 8% vacancy rate for Q1 2021. The limited supply has been
caused by an influx of Kendall Square based life science companies finding Watertown as a viable relocation
option, plus several large office properties removed from the market as they are converted to lab. The
following are examples of companies that left their Cambridge address for a Watertown HQ in the past year:
• ALS Therapy Development Institute – 16,000 SF- 480 Arsenal St.
• Pandion Therapeutics – 21,200 SF-131 Coolidge Ave.
• Center for Advanced Biological Innovation and Manufacturing – 40,000 SF- The Arsenal on the Charles
• Arkuda Therapeutics – 10,800 SF- Arsenal Yards
• Constellation Pharmaceuticals – 79,000 SF- The Arsenal on the Charles
We see no end in sight for the remarkable growth in Watertown as the city has opened its arms to redevelopment
and life science demand continues to outpace existing supply.

Thank you to all of our clients for your continued
t r u st i n R .W. H olmes over the past 45 years . We
wish you and your families continued health and

happiness.

CORPORATE LEADERSHIP TEAM

Garry Holmes Dean Blackey John Eysenbach Craig Johnston Paul McKeon Arthur Amadei
President Managing Director Executive Vice Senior Vice President Director of Senior Vice President
President Finance

David Gilkie Robert Strelke Jim Bartholomew Mike Ogasapian Elizabeth Holmes Samantha Ludwig
Senior Vice President Vice President Vice President Assistant Vice Director of Corporate Marketing
President
Services Manager