The Reason Boston's CRE Demand Is Still So Strong: Its Diversity
Boston’s commercial real estate market is hot. Vacancy remains historically low in existing office buildings, cranes are everywhere erecting more commercial & residential spaces, and tenants are clamoring to call the Hub home.
Analysts have long forecasted a bursting of the bubble, or at least a correction. Real estate is, after all, cyclical. Yet the city’s commercial real estate market remains strong, with no end in sight. But why?
One big reason for this is the diversity of globally recognized tenants wanting to come to Boston for its proximity to high-end academic institutions and the talent they churn out year after year. Boston is attracting lab and office tenants, companies both big and small, and both local and out-of-state businesses. Here’s a quick rundown of who these companies are, and from where they came:
Local groups growing
Much of the growth comes from existing downtown companies expanding to meet their own space needs. These include companies like Wayfair and DraftKings, which will expand into more than 400,000 SF and 105,000 SF within Boston, respectively. Other local companies continue to search for space in a Boston market that is very full: Boston-based Toast is seeking 125,000 SF within the city and CarGurus is looking for 150,000 SF.
Suburban firms moving downtown
Helping to sustain a trend, companies continue to migrate from locations in the suburbs to spaces in the urban core. They’re doing this for several reasons, not least to plant themselves closer to the younger workforce they want to attract, many of whom rely solely on public transportation to get around. These include PTC, which is moving its headquarters from Needham to 240,000 SF at 121 Seaport in Boston’s Seaport District; and Dutch firm Philips, which is vacating its North American headquarters in Andover in exchange for 243,000 SF in Cambridge.
Leaving Western Massachusetts
From time to time, a company headquartered elsewhere in Massachusetts will seek additional space in Boston. The latest example of this is Springfield-based Mass Mutual, which will build a new, 300,000 SF campus in Boston’s Seaport (while also expanding its Springfield headquarters).
Finally, but perhaps most notably, Boston has attracted several large out-of-state firms to within its borders. Last year, global technology company Aptiv added a 60,000 SF technology center in Boston, which joined campuses in Pennsylvania and California. General Electric left Connecticut for Boston, where it’s building its new 390,000 SF headquarters – set to open in 2021. And, of course, Amazon has upped its space requirement to more than 400,000 SF in Boston, a number that will certainly increase if the e-commerce behemoth chooses the city to site its HQ2.
How much longer will Boston’s commercial real estate remain hot? No one can truly say, but the diversity of those companies clamoring to come here – which is all of them, it seems – increases the likelihood that the city will remain a popular destination for years to come.