RWH - Q2 2021 Greater Boston CRE Market Report

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Q2 REPORT

Greater Boston Market Report

by R.W. Holmes Realty

SQ2UB2021 MARKET DATA

GREATER BOSTON SUBMARKETS

Q2 2021

128 CENTRAL (office)

SUBMARKET NEWS

MARKET RECAP
• The increase in lab conversions has led to a tightening office market. We are seeing an increase in office users touring

the market and now finally signing leases rather than sitting on proposals. These groups are finding a limited supply
of office in certain pockets of the market – like Hartwell Ave in Lexington, Winter Street in Waltham, and throughout
Watertown.
• The sales market remains extremely tight which has led to owner occupants and investors now competing at the same
price point. Previously, owner occupants would have easily outbid investors.

NOTEWORTHY NEWS
• Lab buildings or “lab ready” buildings continue to increase in value. It is no longer surprising to see buildings selling for

over $600/SF. We expect to see a fully leased Lexington lab property come to market for over $1,000/SF in the coming
months. Unsolicited offers to owners with lab buildings or “lab ready” buildings are hitting tremendous numbers as well.
• We are seeing an uptick in office users in the market, particularly an increase in users between 7,000 – 20,000 SF. Many
are still trying to determine their exact headcount, but most have realized that the pandemic has caused a change in
their office requirements that needs to be addressed before employees come back – there is a growing trend with
executives wanting to be closer to their homes since they are the ones in the office every day.
• Lab conversions continue to be on every owner’s mind. While at first glance it seems like all these conversions will
lead to excess supply, we still see lab vacancy rates in the major 128 Central market close to 1% in the major markets
(Watertown/Waltham/Lexington) and a strong back log of lab tenants looking for space from 10,000 – 50,000 SF.

AREAS OF CONCERN
• For many of the office tenants out in the market right now, we are seeing a demand for quick turnarounds on space

occupancy. For example, 10,000 SF users looking to occupy space within 120 days. Previously, this size user would be
out in the market 8-12 months in advance. This shortened timeline is putting pressure on landlords to deliver spaces
and perform buildouts in extremely fast time frames – something that is even more difficult with construction material
delays.
• The lab demand continues to outpace supply. While there are a few “lab ready” options for life science companies,
those who need a Class A lab building are left with essentially zero move-in ready options in the current Central 128
market. As a result, Central 128 will continue to lose tenants to other growing clusters further along 128 or the Mass
Pike west corridor.

RECAP OF MARKET HEALTH

28,540,000 12.5% $38.25/SF 593,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

NOTEWORTHY TRANSACTIONS

Sale Lease Sale
10 Maguire Rd, Lexington 1210 Washington St, Newton 153 & 211 Second Ave, Waltham

308,826 SF 39,000 SF 153,000 SF
$66,465,000 ($215/SF) Panera Bread $100,000,000 ($653/SF)

Q2 2021

128 NORTH/ RT. 3 NORTH (office)

SUBMARKET NEWS

MARKET RECAP
• Medical office has seen a resurgence as an attractive asset for investors as seen with 323-325 Lowell St. in Andover.

Underwriting for property leased by any of the regional healthcare entities has been highly sought after post-Covid.
• Office-to-Lab conversion continues to increase. We are only in the beginning of this stage in the North of Boston

markets. The degree of delivery spectrum need not be very robust for many lab users but will require base building
investments on the part of owners looking to attract tenants of that nature.

NOTEWORTHY NEWS
• Despite a further dip in absorption in Q2, leasing activity remained steady. IBM’s deal at CrossPoint in Lowell, a

downsize from their 500,000 SF campus in Westford, which accounted for a large portion of space coming available.
What will happen with their previous building remains TBD.
• Lab conversion continues to be a growing trend that will allow for large blocks of vacancy and end of cycle buildings
to be brought back into performance. Ingenuity Properties’ building at 3 Van de Graaf in Burlington and Atlantic
Management’s 4 building campus at 3000 Minuteman in Andover are both prime examples of prospective new
buyers beginning due diligence to convert.

AREAS OF CONCERN
• With the growing cost of construction, what effect will that have on the ability to make these lab conversions

happen? Will rents begin to shift upward to yield an appropriate return and is that sustainable?

RECAP OF MARKET HEALTH

47,620,000 16% $26.00/SF 266,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

NOTEWORTHY TRANSACTIONS

Lease Lease Sale
900 Chelmsford St, Lowell 1600 District Ave, Burlington 323-325 Lowell St, Andover

150,000 SF 61,000 SF 69,992 SF
IBM Butterfly Network $55,200,000 ($788.66/SF)

Q2 2021

NATICK/FRAMINGHAM (office)

SUBMARKET NEWS

MARKET RECAP
• It is good to see several leasing requirements slowly gobbling up some of the larger blocks of sublease

space out there. At 492 Old Connecticut Path in Framingham, Visible Body is taking close to 20,000 SF of
the former shadow space left behind by Virgin Atlantic. At 175 Crossing Boulevard in Framingham, two
recently inked subleases, 19,920 SF and 18,573 SF respectively, absorbed a good portion of space formally
occupied by Boston Heart. Within the very same office park at 9/90 Crossing, a large biotech investor is
said to have four buildings, currently owned by UBS and National development, under agreement. We are
told the new investor’s plan is to keep most of the 465,000 SF portfolio intact as office/lab space while
converting about 60,000 SF at 200 Staples Drive to lab space.
NOTEWORTHY NEWS
• Calare’s freshly inked purchase of 100 Staples in Framingham (157,133 SF) will be an interesting barometer
in determining whether the Natick and Framingham office market is poised to rebound in the second half
of 2021 and beyond. Calare is looking to initially attract 50,000+ SF users to the fully vacant complex. Lab
conversion is also a possibility, although ceiling height may limit the use to every other floor. One thing is
for sure though, at $60/SF there should be enough resources available for Calare to both carry the vacancy
if need be and absorb significant improvement costs for prospective suitors.
AREAS OF CONCERN
• Thus far, most of the larger lease deals completed in 2021 have predominantly been subleases. It remains
to be seen when direct space might follow suit.
• With construction costs at an all-time high, Natick and Framingham Landlords who have not seen the
same rent appreciation as their 128 brethren, are now really feeling the pinch when pricing outfit up for
prospective tenants. Even paint and carpet is now said to be averaging $10/SF which can quickly decimate
margins when we are talking about rents that top out in the mid to high $20’s. Typically longer-term leases
would help absorb these costs, but coming off the uncertainty of the past 18 months, some tenants are
skittish to commit to longer term deals.

RECAP OF MARKET HEALTH

8,450,000 11% $25.50/SF 0
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

NOTEWORTHY TRANSACTIONS

Sale Sublease Lease
100 Staples Dr, Framingham 6 Mercer Rd, Natick
492 Old Connecticut Path, Framingham
157,133 SF 7,785 SF
$9,500,000 ($60/SF) 19,964 SF Kula Bio
Visible Body

Q2 2021

495 WEST (office)

SUBMARKET NEWS

MARKET RECAP
• With BJ’s and Marvell taking large chunks of space, vacancy rates were not as badly impacted in the 495

market.
• In a potential sign of things to come, a company that has been working from home for the past year or

so, Acosta, will be coming back into the market by taking space at 293 Boston Post Road in Marlborough.
With that said, it will be interesting to see if more companies determine that eliminating the office is not a
sustainable long-term option.

NOTEWORTHY NEWS
• BJ’s taking 190,000 SF at The Campus at Marlborough is a big win for the city. While there is still term left

at their current HQ, keep an eye out for a potential redevelopment of that site.
• Marvell Semiconductor is taking 60,000 SF at 8 Technology Drive in Westborough, taking that 110,000

square foot building to full capacity.
• Lincoln Property Co. closes on 12 acre land parcel at 1000 Nickerson Road within the Marlborough

Technology Park. 120,000 SF spec 30’ clear warehouse/R&D/biomanufacturing to be delivered Q4 2022.
Interesting, as this site was intended to be 1st class office within the Park.

AREAS OF CONCERN
• While the news is good that both BJ’s Wholesale and Marvell Semiconductor have signed long-term leases

in the Boros, they are both taking less space than they currently occupy. This is a trend that we are seeing
in companies of all sizes. What is different about these two deals is they are long-term; whereas most
tenants are looking for flexible short-term deals.
• The direct vacancy rate has ticked up slightly to 21.5%, the above bullet point gives us pause that the rates
will not be going down any time in the near future.

RECAP OF MARKET HEALTH

12,050,000 21.5% $19.25/SF 0
TOTAL SQUARE FEET VACANCY RATE
AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

NOTEWORTHY TRANSACTIONS

Lease Lease Sale
350 Campus Dr, Marlborough 8 Technology Dr, Westborough 100 Bearfoot Rd, Northborough

190,000 SF 60,000 SF 19,800 SF
BJ’s Wholesale Club Marvell Semiconductor $3,150,000 ($158.33/SF)

128 NQ22021 ORTH/RT. 3 NORTH (industrial)

SUBMARKET NEWS

MARKET RECAP
• Demand for newer product continues to attract users. Several speculative and build-to-suit projects are either

proposed or under way such as Home Depot in Tewksbury (700,000 SF) and Monogram Foods in Haverhill
(135,000 SF).
• Demand for R&D, cGMP, and lab space continues as seen with Purehoney Technologies taking 18,000 SF at 3
Federal in Billerica, Boston Metal signing up for 18,000 SF at 80 Commerce in Woburn, and Brooks Automation
taking 36,000 SF at 33 Glen St. in Chelmsford.

NOTEWORTHY NEWS
• Sales volume continues to be strong as investors remain bullish on industrial asset types. 12-month sales

volume continues to climb as well, up to $1.3B in Q2.
• Leasing activity remains very strong, with Q2 seeing several new leases over 30,000 SF inked. As a result of Q2’s

strong leasing activity, absorption made a net gain of 1,300,000 SF in Q2 from Q1.
• Newer industrial product for both R&D flex and high bay warehouse continues to yield a 20%-30% higher rental

rate on average across the North market.

AREAS OF CONCERN
• With several speculative projects for new industrial/R&D in the pipeline but not scheduled to deliver until

2022, how will users looking for premium space manage in the meantime?
• Since valuations have climbed to an all-time high for both lease rates and sales, could the I-495 belt no longer

be the safe haven for tenants looking for rent relief?

RECAP OF MARKET HEALTH

94,830,000 5.5% $12.60/SF NNN 835,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE SQUARE FEET UNDER

CONSTRUCTION

NOTEWORTHY TRANSACTIONS

Sale Sale Lease
PGA Realty Portfolio 101 Billerica Ave, Billerica 11 Technology Dr, Chelmsford

151,000 SF 443,124 SF 68,000 SF
$32,180,000 ($213/SF) $60,600,000 ($136/SF) U.S. Environmental Protection Agency

Q2 2021

495 SOUTH (industrial)

SSUUBBMMAARRKKEETTNNEWEWS S

MARKET RECAP
• The tightening market conditions are expected to continue through the balance of 2021 while existing

companies continue to hold fast to current locations for the foreseeable future. Lease rate increases may
seem difficult to absorb, however, pale in comparison to relocation and tenant fit up construction costs.
• Owners with excess land will do well to complete their permitting while demand is expected to continue for
the balance of 2021 as well as 2022.

NOTEWORTHY NEWS
• Heavy transaction activity continued in the second quarter of 2021 along the 495 South Corridor as investors

and users grabbed the last remaining availabilities for leasing as well as purchasing industrial and flex
product. The vacancy rates declined further with significantly higher absorption from a year ago along with
declining construction of only 444,000 SF in primarily large box warehouse deliveries.
• The most significant investor activity resulted in another record breaking purchase price of $218/SF for
427,500 SF in Bellingham at 351 & 353 Maple St-netting the seller over $17,000,000 from their purchase
only 8 months prior.

AREAS OF CONCERN
• The greatest concern for manufacturing and distribution companies will be the challenge of hiring labor

while they continue to grow through the post pandemic recovery. Relocations for growth will be challenged
further for fear of losing existing employees.

RECAP OF MARKET HEALTH

48,000,000 4% $10.60/SF NNN 835,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE SQUARE FEET UNDER

CONSTRUCTION

NOTEWORTHY TRANSACTIONS

Sale Sale Sale
351 Maple St, Bellingham 353 Maple St, Bellingham 419 Maple St, Bellingham

300,000 SF 127,500 SF 507,500 SF
$65,508,772 ($218.36/SF) $27,841,228 ($218.36/SF) Price Not Disclosed

Q2 2021

RT 24 (industrial)

SUUBBMMAARRKKEETTNNEWEWS S

MARKET RECAP
• The industrial market remains vibrant with low inventory of spaces 30,000 SF and under. Rents and

vacancies continue to stay at historical high rates and continue to inch up each quarter.
• Recent leasing has left the Easton Industrial Park with only 1 vacancy. Vacancy rates remain low in the Avon

Industrial Park, York Industrial Park (Randolph) and the East Randolph Industrial Park.
• The greater Braintree industrial market is about 94% occupied.
NOTEWORTHY NEWS
• Ryan Realty Trust, developers of Ryan Industrial Park, Route 138, Raynham, have announced the ground-

breaking for their newest industrial spec building. This 66,000 SF building will offer units of 6,500 SF and up
for lease including drive in and dock high loading and 22’ clear ceiling heights.
• Less than a mile away from the Raynham Industrial Park, Bay Colony Properties have announce plans for a
spec 400,000 SF industrial building offering clear height of 36’ and slated to be ready for occupancy in 2022.
• Adjacent to the Raynham Industrial Park the steel is up for 4 spec buildings totaling 27,500 SF offering 1,500
SF units with 16’ ceiling height and drive in loading.
• The Silver City Galleria, a mall in Taunton just off the Route 24/Route 140 interchange, was recently torn
down and sold to Portman Industrial of Atlanta for $75 million. The mall was originally built in 1992 on 147
acres. The land is permitted for over 1,100,000 SF of industrial development.
AREAS OF CONCERN
• There are few choices for industrial spaces under 15,000 SF. New spaces to the market lease within weeks.
• The larger spaces (100,000 SF plus) continue to have challenges leasing with some properties showing
vacancies over 1.5 years especially for older buildings that lack sufficient clear height and loading capacity.

RECAP OF MARKET HEALTH

40,770,000 4.5% $9.60/SF NNN 289,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE SQUARE FEET UNDER

CONSTRUCTION

NOTEWORTHY TRANSACTIONS

Sale Sale Sold
116 Lundquist Dr, Braintree 121 Liberty St, Brockton 55 Messina Dr, Braintree

52,000 SF 40,000 SF 58,935 SF
$7,950,000 ($152.30/SF) $4,599,000 ($114.98/SF) $17,500,000 ($296.94/SF)

Q2 2M021ARKET SPOTLIGHT

THE REINVIGORATION OF FENWAY

THE REINVIGORATION OF FENWAY

As we’ve seen in several of the Boston submarkets, the growing demand for life science space has led to new
construction and proposed developments that significantly alter the submarket’s vibrancy and character.
Fenway is one of the newest submarkets to join this list.

Why Fenway?

In the past 10 years, major developers such as Skanska, the Abbey Group, and Samuels & Associates, have been
investing heavily in the Fenway market. These developers focused on large scale residential and retail, laying
the foundation to attract future developers and tenants interested in vibrant environments and the “Live Work
Play” model.

For the developers entering the Fenway market, or further committing to the submarket, additional qualities
that have attracted them to the market focus on accessibility. The multiple public transportation options, being
the “gateway” to Boston, and access to Longwood Medical all have led developers to believe that Fenway can
be the next life science cluster.

Changes Coming to Fenway

In 2021, several major developments have been proposed or broken ground. Here is an overview of some of
them:

IQHQ & Meredith’s $1B Air Rights Project
Life Science developer, IQHQ, has teamed up with local developer, Meredith Group, to build 960,000 SF
of life science space on the air rights space over the Mass Pike. IQHQ acquired the property in April
2021 for $55M. This will be the largest air rights structure built in Boston since 1980. The project is
scheduled to be completed in 2025.

IQHQ – 109 Brookline Ave
IQHQ is looking to further engrain themselves in the Fenway market with their proposed 250,000 SF
lab/life science development at 109 Brookline Ave. They purchased the site in 2020 for $27M.

Alexandria and Samuels & Associates
Alexandria made headlines earlier this year with their $1.52B recapitalization deal to partner with
Samuels & Associates at the Landmark Center properties. The site includes 401 Park, 201 Brookline
Ave - a 14 story office/lab property under construction, and the current Bed, Bath & Beyond site.
The BB&B site is under review to be converted into a 550,000 SF, 13 story lab building.

WS Development & The Red Sox
Earlier in 2021 WS Development paired up with The Red Sox ownership, the Fenway Sports Group, and
the D’Angelo Family to propose a 2.1M SF mixed-use redevelopment across 13 Fenway properties.
The 8 acre site will house 1.7M SF of lab space, 216 residential units, and 212k SF of retail.

Noteworthy Office News

Fenway has also been a location of interest for notable office tenants in the Boston area, particularly forming
a growing interest from high growth technology companies. Earlier this year, Whoop signed one of the largest
Boston leases to date at Related Beal’s One Kenmore Square property. The fitness tracker company will be
taking down 121,000 SF in mid 2022. Additionally, Fenway-based Toast announced plans to go public with an
upcoming IPO that could be valued around $20 billion.

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

happiness.

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Garry Holmes Dean Blackey John Eysenbach Craig Johnston Paul McKeon Arthur Amadei
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David Gilkie Robert Strelke Jim Bartholomew Mike Ogasapian Elizabeth Holmes Samantha Ludwig
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