No End In Sight With Industrials
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CRE Market Insight: Industrial Sector
August 2022
In the past two-and-a-half years since the pandemic struck, demand for industrial warehouse and distribution center space is at an all-time high. Rents are climbing rapidly, and vacancy rates have plummeted. And new supply has been slow to catch up.
In the Greater-Boston area, many industrial properties are older than similar ones in other parts of the country and in need of modernization. But developable land is scarce and costly.
Increasingly, companies and developers in search of industrial space are looking west toward Worcester, Central Mass and the MetroWest region to find better value.
What's Driving Demand?
Surging consumer spending, volatility in global supply chains, e-commerce distribution and life science growth have companies and developers scrambling for a limited amount of industrial space.
Government stimulus funds enabled families to go on a buying spree from the comfort of their homes. In 2021, U.S. e-commerce sales totaled $960.1 billion, up from $811.6 billion one year earlier.
This surge in online spending has also sparked retailers to adjust their business strategies to remain competitive. Retailers must now have nimble supply chains in place if they are going to compete in a new world where same- or next-day delivery is expected.
And there is no end in sight to the surge in online spending. Online consumer sales are projected to exceed $1.3 trillion by 2025. At this point, online sales could top 25% of total retail sales, and same-day deliveries will become the industry norm.
Why Looking West of Boston for Industrial Properties Makes So Much Sense?
There are several reasons why companies and developers are pursuing these properties:
- Major transportation routes such as the Mass Pike, I-495, I-290, I-395 and Route 146 make west of Boston perfect for moving goods and supplies.
- Companies can pay less for industrial space west of Boston than they would in the city.
- Developers can acquire industrially zoned land sites to construct new, state-of-the-art facilities at far more competitive pricing.
- There is more existing space and developable land available west of Boston than in the city.
- Companies and developers have more flexibility in how they can use industrial space west of Boston than they would in the city. Large land parcels also allow for more outside storage that support e-commerce and the need for a high density of parking.
Who’s Competing for Industrial Space West of Boston?
Competing for industrial space is a growing manufacturing sector, including brand manufacturers looking to “re-shore,” contract manufacturers, biomanufacturers and even cannabis cultivators.
Competing specifically for warehouse and distribution center space are retailers – both traditional and online – and third-party logistics players like FedEx and UPS, along with the likes of Walmart, Target and Best Buy.
These companies and developers want nimble supply chains so they can deliver last-minute inventory in urban areas with a high population density. They expect efficient, new, modern warehouse/distribution centers for robotics, along with 32’ to 36’ clear heights for increased efficiency and racking capacity. And they want their facilities situated where they can easily access a large talent pool.
In the past year, several notable brands and experienced developers have been competing for industrial properties west of Boston. These include:
Amazon
Later this year, Amazon will open a 120,000-square-foot last-mile delivery center at the site of the former Greendale Mall in Worcester. It also will move into a 350,000-square-foot warehouse space refurbished by GFI Partners in Fitchburg.
Last year, Amazon bought an industrial park in Westborough at 4400 Computer Drive for $65 million. It plans to reposition the 93-acre property with a new 221,000-square-foot building to be used as a last-mile e-commerce fulfillment center. And, in Charlton, Amazon bought a 98-acre plot of land due to become a construction site for a $300 million distribution center. According to proposals, the facility includes a 560,000-square-foot footprint and a five-story warehouse with 10,000 square feet of office space – roughly 2.8 million square feet of new, state=of-the-art distribution space.
The Kraft Group
In May 2022, Kraft Group subsidiary Rand-Whitney broke ground on a packaging warehouse on Route 140 in Boylston. One month earlier, Kraft Group subsidiary Unified purchased a 99,000-square-foot industrial warehouse in Webster. And in March 2022, the Kraft Group purchased a Northbridge warehouse partially leased to UN1F1ED² Global Packaging Group for $20 million.
Criterion Group
In Worcester, New York-based real estate firm Criterion Group purchased a 5.3-acre industrial lot near the airport along Goddard Drive for almost $9.6 million. Criterion also bought the former Showcase Cinemas North for $9 million and intends to use the property for industrial development or other ancillary uses related to e-commerce. It also bought a 248,768-square-foot industrial warehouse from Primetals Technologies, an older industrial property located adjacent to Route 290 that will be redeveloped similar to the Brooks Street property.
Worcester Development Corporation (WBDC)
The WBDC has been reported to be focusing on revitalizing a large industrial swath of the Greendale area in Worcester. The Greendale Revitalization Project will focus on an area between the former Greendale Mall site north to Mountain Street, an area that includes the former Showcase Cinemas site and Saint-Gobain. Access to Route 190, Route 290 and the Massachusetts Turnpike will be exceptional.
Considering Investing in Industrial Property West of Boston? See What Others Miss.
The search for industrial space is extremely competitive – and sometimes requires much imagination. As you can see with the recent development activity noted above, finding the right industrial space could involve the knock-down of a movie theater, the rehab of an older industrial warehouse or the remediation of a large industrial swath of land.
The brokers at Kelleher & Sadowsky were able to help uncover these opportunities – even when these properties were not listed on the market.
If you are looking to lease or buy an industrial property west of Boston, think Kelleher & Sadowsky. No one knows the Worcester, Central Mass or the MetroWest region better than our firm. For more than four decades, we have helped hundreds of companies and developers find properties that meet and exceed their expectations. Along the way, we have earned a reputation for honesty, integrity and unparalleled local knowledge.
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