Boston Industrial & Logistics: Key Takeaways from the Bisnow Panel

Jason Grant , President of ARCO’s New England division, recently joined fellow industry experts as a speaker at Bisnow’s Boston Industrial & Logistics Summit. Jason’s panel discussed current supply and demand drivers in Boston, what that means for current opportunity, and the outlook of the future pipeline. Below are some key takeaways from the event.

Current Market Situation

The industrial market has normalized back toward pre-pandemic levels as a backlog of space from record highs sparked by Covid hit the market and financing became more difficult. Vacancy rates in Boston remain relatively low at around 5 – 6%. Leasing activity for large blocks of space has slowed, but there is still strong demand for smaller spaces and multi-tenant facilities.

Additionally, fundamental changes driven by the pandemic’s impact on business operations have solidified Boston as a top-tier market. The Boston industrial market, as well as nationwide, is poised to move forward, especially as interest rates decrease, which is expected to stimulate more leasing activity.

Construction Pricing & Material Lead Times

Construction prices are stabilizing both nationally and in Boston,? due to subcontractor backlog not being as robust as in recent years, leading to increased competition in pricing. In New England, construction costs have decreased in the range of approximately 5-10%, with even more significant drops in regions like the Southeast and Southwest. This shift is prompting developers and end-users to reassess and reprice their projects. Notably, prices for key materials like steel and roofing, which spiked during COVID, are now seeing the largest declines.

While many supply chain challenges have stabilized, lead times for some materials, such as electrical switchgear, remain lengthy. However, partnering with a proactive design-build general contractor can help mitigate potential scheduling issues.

Multi-Tenant Facilities & Smaller Blocks of Space

While companies are often taking more time to assess their space needs in light of higher interest rates, tenant demand in Boston, as well as nationwide, remains. A notable trend is the increasing preference for smaller suite sizes, typically between 25,000 and 100,000 square feet. Multi-tenant facilities are particularly appealing, as they allow owners to achieve rent optimization more quickly.

Conversely, the big box segment has seen the steepest decline in leasing activity. However, specialty users, especially in the food and beverage sector, are retrofitting these larger spaces, a trend observed across the country. Key regions, including New England, are still seeing some new construction. While many developments focus on smaller footprints, larger developers are also pursuing campus projects with long-term potential. Many new projects are also build-to-suit.

Future Pipeline & Demand Drivers

Looking ahead, the industrial market retains a positive outlook. As interest rates decline and uncertainties diminish, activity is expected to rise. Despite existing challenges, the Boston industrial sector is poised for a strong recovery and ongoing growth, driven by shifting tenant demands and a focus on specialized industries.

Nationally, the food and beverage sector continues to be a major demand driver, while in Boston, manufacturing and pharmaceutical industries are key players. Despite rising vacancy rates, the life sciences and advanced manufacturing sectors remain attractive, as companies relocate their manufacturing closer to research and development centers.

About ARCO National Construction | New England

ARCO National Construction | New England is a premier, full-service design-build general contractor with more than 30 years of experience providing clients with complete project delivery throughout the United States. As the nation’s largest builder of warehouse and distribution space, we pride ourselves in offering the best, most cost-effective, single-source, turnkey solutions and adding value to every project.

With 48 offices in major markets coast to coast, ARCO offers the strength and presence of a national general contractor with the focus, attention, and regional expertise of a local builder. ARCO’s proven design-build approach combines quality of design and construction, management of expense, and adherence to schedule into a single point of responsibility. ARCO offers preliminary design at no cost to our customers to remove the risk of substantial upfront costs. For more info visit, https://www.arconational.com/boston-industrial-logistics-summit-key-takeaways-from-the-bisnow-panel/