BOSTON’S INDUSTRIAL FORECAST: 3 KEY TAKEAWAYS FROM THE BISNOW PANEL
Langan’s John Plante, ARCO New England’s Jason Grant, and Equity Industrial Partners’ Hunter Emerson at the Bisnow Boston Industrial Forecast event.
``Boston has turned into more of a spec warehouse market than it used to be. We're seeing a lot more projects go on spec because you don't have the time and ability to wait, tenants need space now.``
ARCO New England Principal and Regional Manager, Jason Grant recently joined fellow industry experts as a panelist at the Bisnow Boston Industrial Forecast event. Vacancy in the Boston-area industrial real estate market hit an all-time low at the end of 2021, which is changing the development strategy for many players. His panel discussed this along with other trends impacting warehouse development, including site selection, space utilization and operations, design flexibility, and more. Below are three of the key takeaways from the event.
While Boston has historically served as a last mile and consumption market, as demand for industrial space continues to grow, it is quickly becoming more of a traditional distribution market like that of central Pennsylvania or the Carolinas. According to reports from CBRE, vacancy rates have hit record lows, making it extremely difficult for tenants to find space, leading to a growing amount of speculative development. In fact, ARCO is currently building more than 3 million SF of speculative warehouse space throughout the New England region.
Over the past two years, the shift to online shopping sparked by the pandemic has led to major demand for distribution and logistics space as both e-commerce and traditional retailers work to expand their distribution networks nationwide. Further, ongoing supply chain disruptions caused by overwhelmed ports have led to accelerated demand as end-users look to overcome the challenges of just-in-time production networks and mitigate further disruptions by stockpiling input materials and finished goods. This movement toward shorter, more resilient supply chains has further increased competition for prime real estate within the market.
In addition to industrial, Boston is also seeing growth in the life science and biopharmaceutical industries, further increasing competition for site space as developers and owners look to bring new facilities online quickly.
Above: 143,640 SF distribution facility for NorthBridge Partners with a tenant fit-out for Amazon which included additional dock positions and parking.
Above: 150,000 SF distribution facility for Marcus Partners in Franklin, Massachusetts. Lease to UPS executed mid-construction with tenant fit-out completion expected June 2022.
Speed to market demands from end-users and supply chain disruptions are causing developers and owners to take a different approach to site selection. As lead times on key materials continue to be long for a variety of resources including steel, roofing, and precast concrete, contractors like ARCO are working with clients to maximize speed to market by rethinking the sequence in which development activities take place.
Previously, a site would be selected, followed by due diligence, entitlement, permitting, and then building. Now, contractors are working with developers and owners to begin ordering materials such as steel and roofing prior to entitlement to mitigate delays and long lead times.
Additionally, many large distribution users are now willing to compromise ideal geographic location for timing benefits. This has led to increased development in markets west of Boston, such as throughout Connecticut, as they offer land availability, as well as access to labor.
Further, the speed to market demands of tenants have now led developers to create speculative builds that focus on decreasing time on retrofit. Full dock, lighting, and HVAC packages along with speculative office spaces can all be incorporated to ensure tenants are fully operational within the facility as soon as possible.
Beyond building square footage, developers and owners are now looking to strategically maximize facility and site flexibility as evolving trends in labor, logistics operations, and automation impact the needs of tenants and end-users.
Factors such as car and trailer parking are becoming increasingly important as warehouse labor has increased more than 150% over the past several years and distributors have fleets larger than ever before. The average number of docks and drive-in doors per facility has increased to accommodate large distribution operations and automation trends such as conveyor systems that require vehicles to enter the facility.
Additionally, developers and owners are looking to maximize flexibility to accommodate a variety of end-user types, especially GMP, as Boston is uniquely positioned for that market. By choosing to add incremental costs such as upgraded roof structure dead load, floor slab accommodations for future plumbing, and heavier infrastructure into a speculative build, developers can create a facility that is GMP ready.
Above: 119,000 SF flexible industrial facility for Calare Properties in Acton, Massachusetts, capable of accommodating warehouse, manufacturing, flex office, technology, and biopharmaceutical end-users.
THE ARCO ADVANTAGE
ARCO’s extensive preconstruction services address the crucial elements of warehouse construction in the earliest stages of a project, allowing for decisions to be made with full knowledge of their impact on cost, schedule, and scope. Our unique design-build process removes the risk of overspending on design and construction by providing clients with a firm price proposal and yields an average overall delivery speed 33% faster than that of traditional plan-and-spec construction.
ARCO is recognized by Engineering News-Record as the #1 largest domestic builder of distribution and warehouse facilities and the 7th largest design-build firm in the United States. Contact us today to learn more about how we can provide creative solutions and alternatives to make your warehouse construction project feasible, regardless of complexity or scale.
