Cheap Flex Space Ready For Export Growth | New warehouse with 145,000 square feet of space hits the market in Marlborough creating a glut
With American exports experiencing their greatest period of growth in 20 years, real estate watchers expect Greater Boston’s flex space — commercial space that can be adapted for office, warehouse, distribution or manufacturing use — to be snapped up at a furious pace.
The flex space market has two things going for it: Increased exporting by Massachusetts companies spurred by the weak dollar and the fact that practically no one is building new flex space.
Brendan Carroll, vice president of research at Richards Barry Joyce & Partners, a Boston-based commercial real estate broker, explained that tenants are looking for newer, modern flex space throughout Greater Boston, especially along the Interstate 495 corridor, which he described as “very flex-intensive.” The I-495 corridor makes up more than half of Greater Boston’s flex market, according to a recent RBJ market report, and had a vacancy rate of 16.4 percent in the second quarter.
“Flex properties that are older, more obsolete or located a distance from freeways or transportation are not really benefitting quite as much, but as the newer properties get absorbed, it’s a rising tide,” Carroll said.
Stability Spurt
During the second quarter, vacancy among flex space increased despite positive absorption, that is, more space being leased than vacated. Overall flex vacancy in Greater Boston stood at 16.9 percent at the end of the quarter, up 0.3 percent compared to the same period the prior year. But the market has been fighting back from a vacancy rate of nearly 25 percent just four years ago.
Also, Carroll explained that the second quarter’s vacancy increase is attributable to 417 South St. in Marlborough, a 145,000-square-foot flex building that hit the market during the quarter. The building was built on speculation and is empty. The property was the first flex building built in the region since 2005. In the four years between 2001 and 2005, 2.4 million square feet of flex space were built.
There aren’t any flex buildings currently under construction, Carroll said. Vacancy should decrease, he said, and rents should remain stable at around $9.30 per square foot.
The situation spells opportunity for landlords that may have expected continued flat demand. Carroll said manufacturers may be on the lookout for affordable space.
But while certain business conditions might be right, and affordable space might be available, Carroll said landlords probably shouldn’t expect much more than stability from the flex market.
The Associated Industries of Massachusetts might agree.
The manufacturer’s index of AIM’s Business Confidence Index was down nearly three points in July and below the index’s “neutral” mark of 50. “Manufacturers are clearly feeling the effects of the economic slowdown on national markets, although export sales are very strong with ‘traditional’ industries in particular benefiting from the weaker dollar,” said Alan Clayton-Matthews of the McCormack Graduate School of Policy Studies, University of Massachusetts, Boston.
WBJ Web Partners
Most Recent
Most Recent
0 Comments