Andover Snapshot: Shifting Inventory, Climbing Rents
Andover, MA has historically been a great option for tenants looking for space, value, and a premiere suburban location. With the onset of the pandemic and the market uncertainty that followed, occupiers expected to see rental rates lower and tenant advantage expand in the area. What played out was nearly the opposite: rents stayed steady, and then began to slowly increase. While this came as a surprise to many commercial tenants, the groundwork for this shift was in place long before 2020.
How We Got Here
Like most of its neighboring 495 submarkets, Andover is overbuilt with office product. The high-tech boom of the 80s and 90s led to substantial office development along the 495 corridor, and the burst of the dot-com bubble left the market oversaturated with vacant office space. This gave occupiers the upper hand: in a softer market, occupiers had the options and the leverage to negotiate favorable rental rates.
Where We Are Now
Since March 2020, the office landscape in Andover has shifted dramatically. An influx of office-to-lab conversions have artificially inflated the office market, with 20% of available inventory transitioning to life science space. In the past six months alone, over two million square feet of office inventory has been slated for conversion. This has brought vacancy down from 19.7% to less than 10%, with only one office space of over 30,000 square feet available in the entire Andover market (in December, there were more than a dozen). Faced with shrinking office inventory, occupiers are losing leverage in the market.
As landlords and developers continue to capitalize on the life sciences boom in Greater Boston, office occupiers will have less competing inventory to choose from. As such, we expect rental rates in Andover and similar markets to steadily climb. When making real estate decisions, occupiers should cast a wide net to maximize building and landlord options – consider Tewksbury, Wilmington, Salem, and Lawrence as well as Andover. Additionally, we recommend extending the typical project timeline to allow ample time for evaluation and due diligence. With many landlords strongly considering lab conversions, renewal dates are more rigid than ever, and occupiers should be equipped with as much information as possible to navigate the evolving market.As always, Cresa’s team of advisors is here to help. To learn more about trends in the suburban market or for help navigating your company’s real estate needs, reach out to our team.