IRR-Boston Mid-Year Viewpoint 2015 Local Market Report - Retail
As of mid-2015 the Boston retail market remains healthy with vacancy below 9% and many positives including some population growth, limited markets with overbuilding, constraints on development with respect to limited affordable available sites and permitting. REIS predicts that after ending Q1 2015 at 6.3% the vacancy rate for community-neighborhood centers will resume falling and reach 4.8% by year end 2018 before bumping up again slightly to just over 5% at year-end 2019. Market rents have generally been increasing at annual rates of 1-2% over the past several years and are projected to increase in the 3-4% range over the next 3 years.
The net lease investment sales market remains strong with the majority of retail sales in this sector. However, there have been a number of significant sales in the region of larger community centers. White City in Shrewsbury, a Shaw’s anchored center which was recently repositioned, recently sold. Westwood Station is actively being marketed and will attract many institutional investors at very aggressive rates. The Central Boston submarket has been strong. Vacancies are estimated to be below 5% in both neighborhood and community centers. Within the CBD, rents are rising and there is limited vacancy.
Positive absorption is expected to continue in the region for the short term and rental rates are expected to increase slowly. Construction will continue at a slow pace due to the constraints previously noted. Institutional investors continue to focus on the inner suburbs where cap rates are below 6.5% and well performing centers are achieving rates below 6%.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.