Report: Available manufacturing space along I-495 dwindles
While manufacturing vacancy remains higher along the I-495 corridor than areas closer to Boston, new tenants are eating up empty space at a faster clip than those settling closer to Boston.
That’s according to Transwestern|RBJ, the Boston commercial real estate brokerage, which publishes quarterly reports detailing commercial real estate trends in all sectors. The report covering manufacturing, flex and warehouse space, indSTATus—Fall 2014, showed a continued contraction of available manufacturing space in particular in the third quarter, which ended Sept. 30.
A market-wide turnaround in Q3
This occurred in communities along I-495, from Franklin to Chelmsford. In the third quarter, all I-495 submarkets covered by Transwestern absorbed 133,000 square feet of vacant manufacturing space. In the previous 12 months, I-495 absorbed 72,000 square feet.
Meanwhile, the rest of the market saw more vacant space in the previous 12 months, with absorption increasing by 161,000 square feet. But the third quarter marked a turnaround, with the absorption of 187,000 square feet in the Greater Boston manufacturing market.
Asked why vacancy in the manufacturing market is declining, Chase Bourdelaise, research director at Transwestern, pointed to improved business conditions.
“I think manufacturing has rebounded a bit this past year. People are optimistic about in-sourcing of manufacturing inside the U.S.,” Bourdelaise said.
But why I-495 submarkets, which include several MetroWest cities and towns, are seeing vacancy decline more quickly is less clear. Bourdelaise said part of it could be that vacancy is higher along the I-495 corridor, meaning there is more space available for absorption. In the third quarter, the vacancy rate for all I-495 submarkets stood at 16.3 percent, compared with 10.4 percent in the Route 128 submarkets, and 9.4 percent in Boston.
Bourdelaise said it’s important to note that just a few lease deals can significantly impact vacancy rates. To illustrate the point, Bourdelaise noted that 63 percent of I-495 vacancies are concentrated in two buildings: a 165,000-square-foot structure at 210 Grove St. in Franklin, and a property in Tewksbury.
“If you remove those two buildings, I-495 vacancy drops to 6.7 percent,” Bourdelaise said.
Hudson, Marlborough leases boost absorption
Among tenants that recently signed leases in the I-495 region, contributing to third-quarter absorption, are Industrial Supply Packaging Inc., which leased 67,000 square feet at 428 Main St. in Hudson, and Partners Pharmacy, which leased 26,000 square feet on Cedar Hill Road in Marlborough.
But Jack Healy, director of operations at Worcester-based Massachusetts Manufacturing Extension Partnership (MassMEP) suspects it’s more than a numbers game when it comes to I-495’s relatively high absorption rate in the manufacturing space. He thinks the improved economy is encouraging manufacturers to grow. If they’re in the market for more space, they look west for more affordable real estate, as well as employees.
“The labor market out here to support manufacturing is a lot more attractive than (it is) closer to Boston,” Healy said.
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