Some of the larger warehouse transactions during the fourth quarter that fueled absorption gains included FedEx's lease for approximately 73,000 square feet at 10 Otis St. and DHL's move into 61,000 square feet at 1-5 Sassacus Drive, both in Westborough. Fresenius Medical Care's 48,000-square-foot deal at 20 Dan Road in Canton and Endeavor Robotics' 37,000-square-foot move to 19 Alpha Road in Chelmsford were the top flex deals in the fourth quarter. SABIC's 80,000-square-foot lease at 65 Middlesex Road in Tyngsborough was the top manufacturing property deal in the fourth quarter. The only notable departure in the industrial market was Central Pet and Garden, which moved out of its space at 800 John Quincy Adams Road in Taunton.

The warehouse market vacancy in Greater Boston rose slightly to 8.8%, at 2016 year's-end from the third quarter's record-low 8.7%. Average warehouse asking lease rates held steady at $6.05-per-square-foot.

The manufacturing vacancy rate was relatively flat at 12% from the previous quarter's 12.1% rate. Average asking lease rates for manufacturing space rose to $8.26-per-square-foot from $7.86-per-square-foot, thus regaining the mid-$8 mark that was seen at the beginning of 2016. Transwestern also reports that since the start of 2016, the Route 128 West vacancy rate has plummeted from 9.6% to a minuscule 1.4%.

The Greater Boston flex market hit its lowest vacancy rate on record, falling from 11.5% in the third quarter to 11.3% at the end of 2016. The 77,000 square feet of positive absorption for fourth quarter more than doubled the previous quarter's 35,000 square feet of absorption. The flex market saw a total of 653,000 square feet of positive absorption for the year.

The average asking lease rate for flex space in Greater Boston was $10.34-per-square-foot, a retreat somewhat from the $10.43-a-square-foot rate posted in the third quarter of last year, which was the second highest on record. Flex property owners have enjoyed positive absorption for 18 of the past 20 quarters and activity has led to the absorption of 2.7 million square feet of flex space during that period.

Transwestern's Bourdelaise in the quarterly industrial report touted the strength of the Boston economy, which he says continues to thrive and outperform the U.S. growth rate. He adds that Boston's key drivers—education, life sciences healthcare and real estate—continue to expand at a moderate pace and are outperforming other sectors.

Other positives for the market include the city's unemployment rate of 2.9% the lowest in more than 10 years. “While GDP growth continues to climb at around 3%, economists expect this growth to be modest,” Bourdelaise states. “As the economy and stock market strengthen, the decision by the Federal Reserve to increase interest rates will be one to play close attention to.”

BOSTON—All indications are that the Greater Boston industrial market will continue on its prolonged growth track in 2017 with key market segments expected to post lower or stable vacancy rates and higher rents.

The Greater Boston industrial real estate market ended 2016 on a strong note, according to a report authored by commercial brokerage firm Transwestern. In fact, the Greater Boston industrial market, which includes warehouse and manufacturing space, posted its 10 straight quarter of positive absorption in the fourth quarter of 2016. In the overall industrial market, 155,000 square feet of space was absorbed in the fourth quarter keeping the region's vacancy rate stable at 9.5%. For the year, four million square feet of industrial space was absorbed, fueled by 15 leases greater than 100,000 square feet, Transwestern reports. The fourth quarter average asking rent for industrial space in Greater Boston was $6.69-per-square-foot, an increase of 2.3% from three months earlier.

“The industrial real estate market is on a very strong run, with all three property types covered by our report posting positive results for the fourth quarter and the entire year,” says Transwestern northeast research director Chase Bourdelaise. “The fourth quarter had several key move-ins that helped sustain the healthy market fundamentals. We expect to see a similar level of activity in 2017 to maintain the momentum.”

The industrial market segments—warehouse, manufacturing and flex—are on extended runs of positive absorption. For example, the warehouse market, which posted 147,000 square feet of positive absorption in the fourth quarter of last year, has now seen 18 straight quarters of positive absorption. The flex market, with 77,000 square feet of space absorbed, is now on a five-quarter positive streak. The manufacturing sector, which squeaked by with 8,000 square feet of space absorbed, has now posted three straight months of positive absorption.

Some of the larger warehouse transactions during the fourth quarter that fueled absorption gains included FedEx's lease for approximately 73,000 square feet at 10 Otis St. and DHL's move into 61,000 square feet at 1-5 Sassacus Drive, both in Westborough. Fresenius Medical Care's 48,000-square-foot deal at 20 Dan Road in Canton and Endeavor Robotics' 37,000-square-foot move to 19 Alpha Road in Chelmsford were the top flex deals in the fourth quarter. SABIC's 80,000-square-foot lease at 65 Middlesex Road in Tyngsborough was the top manufacturing property deal in the fourth quarter. The only notable departure in the industrial market was Central Pet and Garden, which moved out of its space at 800 John Quincy Adams Road in Taunton.

The warehouse market vacancy in Greater Boston rose slightly to 8.8%, at 2016 year's-end from the third quarter's record-low 8.7%. Average warehouse asking lease rates held steady at $6.05-per-square-foot.

The manufacturing vacancy rate was relatively flat at 12% from the previous quarter's 12.1% rate. Average asking lease rates for manufacturing space rose to $8.26-per-square-foot from $7.86-per-square-foot, thus regaining the mid-$8 mark that was seen at the beginning of 2016. Transwestern also reports that since the start of 2016, the Route 128 West vacancy rate has plummeted from 9.6% to a minuscule 1.4%.

The Greater Boston flex market hit its lowest vacancy rate on record, falling from 11.5% in the third quarter to 11.3% at the end of 2016. The 77,000 square feet of positive absorption for fourth quarter more than doubled the previous quarter's 35,000 square feet of absorption. The flex market saw a total of 653,000 square feet of positive absorption for the year.

The average asking lease rate for flex space in Greater Boston was $10.34-per-square-foot, a retreat somewhat from the $10.43-a-square-foot rate posted in the third quarter of last year, which was the second highest on record. Flex property owners have enjoyed positive absorption for 18 of the past 20 quarters and activity has led to the absorption of 2.7 million square feet of flex space during that period.

Transwestern's Bourdelaise in the quarterly industrial report touted the strength of the Boston economy, which he says continues to thrive and outperform the U.S. growth rate. He adds that Boston's key drivers—education, life sciences healthcare and real estate—continue to expand at a moderate pace and are outperforming other sectors.

Other positives for the market include the city's unemployment rate of 2.9% the lowest in more than 10 years. “While GDP growth continues to climb at around 3%, economists expect this growth to be modest,” Bourdelaise states. “As the economy and stock market strengthen, the decision by the Federal Reserve to increase interest rates will be one to play close attention to.”