Industrial Space Strength: What Does 2025 Hold?

The industrial marketplace in greater Boston has been extremely active for some time, no doubt helped by behemoths like Amazon driving the need for more warehouse space during the peak of COVID-driven consumer spending. However, even as the need to have groceries and other sundries delivered to consumers’ doorsteps has subsided, landlords with industrial properties in their portfolio aren’t experiencing too much difficulty finding end-users to fill the space.

Like other segments in the local commercial real estate landscape, demand can go up and down quickly as new properties are added to meet demand, and then a gradual surplus can develop as big movers pull back. However, New England features a novel mix of industrial corridors which each serve a different type of tenant - and is a contributing factor to demand for warehouse space staying strong even as the unprecedented surge of the pandemic era begins to fade away.

The Three Pillars of Massachusetts Industry

Let’s review the basic ebb and flow of the industrial segment to the north, south, and west of Boston: as you head north, you’ll find traditional industrial manufacturing. While Massachusetts has a long-standing reputation for being a hub of advanced manufacturing, those properties north of the city skew more old-school in purpose yet have the equipment and talent to step up to more technical applications as needed. We see limited supply and deals tipping back to the landlord’s favor in this part of the market.

Going west of the city is lower inventory but also lower demand. This has to do with a few key factors, the biggest of which is lack of accessibility to Route 95 and the Boston to New York corridor. While the development costs are ultimately lower, it’s also more difficult to justify if a business or tenant needs easy access to points south, including Rhode Island - and the South Coast of Massachusetts tends to be more appealing for this reason.

Speaking of, when industrial and flex space shoppers look to the south, they find a variety of attractive features: for one, there’s the interstate access and easy travel to major metros in the Northeast corridor. In addition, there’s more land up for grabs which boosts the potential for new developments. It’s an ideal market for tenants but does have a limiting factor: the local talent pool is better suited for logistics support, hence why many of the current industrial tenants are more likely to be on the warehousing and inventory side of the equation.

Really, if an occupier needs an industrial space for inventory management, looking south of Boston makes sense. But where technical expertise is required, industrial properties north of the city are where the best mix of space and people exist, even if the former is typically only available in limited quantities.

Logistics Versus Semiconductors

For the foreseeable future, additional investments in the area’s industrial property supply will rely on continued growth in third-party logistics support and/or advanced manufacturing. If demand for those services stay high, expect to see the local industrial space marketplace continue to expand with the caveat being that the need for space is tightly related to business growth. Unlike a biotech firm that can blow up overnight and suddenly need a larger footprint, the local industrial players are likely to be more conservative when it comes time to expand.

Developers in this market will need to decide whether to deliver a building with significant infrastructure resources to support the needs of advanced robotics, batteries, and more, or to keep it simple and plan on the Amazon impact extending into the future. One of those end-users tends to scale back space requirements as consumer demand falls, while the other needs to count on a high-tech workforce and advanced facilities being nearby. Regardless of intended use, the region’s industrial and flex properties will likely enjoy continued demand as inventory remains low and development zones are limited.

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