Boston Has Become a Prime CRE Investment Destination

Greater Boston area investment activity has surged to $24.9 billion since the start of the pandemic, as investors acquire assets with hopes of conversion to lab space & allocate more capital to Class A products as return-to-work operations ramp up, according to Avison Young’s Q2 report.

As return-to-work efforts amplify across the metro, the hybrid work model is having a direct effect on workplace strategy. Companies are becoming more efficient with their space, rightsizing their operations while emphasizing quality to help attract and retain employees back to the workplace.

The attractiveness has Marcus Partners enthusiastic about closing its recent Marcus Capital Partners Fund IV, a value-add real estate fund with commitments totaling $650 million.

That amount tops both the original $500 million fundraising target and $550 million hard cap, “a demonstration of investor confidence in the firm’s mission, team and investment strategy,” Marcus Partners said in a release.

The firm is active in three primary metro markets – Boston, New York and Washington, D.C., and recently said it has particularly focused its value-add strategy on industrial, multifamily and life science investments, while simultaneously possessing the ability to invest across additional property types.

Limited Supply Buoys CRE Value

Meanwhile, Yardi CommercialEdge defined Boston as a market, that “simply stated shows strength for CRE investment based on limited supply, occupancy growth, jobs (Life Science Tech hubs), and strong absorption.”

Boston’s strongest booster of rent development has remained the ongoing housing shortage, despite consistent deliveries during the pandemic. The metro has a tight rental market, with occupancy in stabilized properties up by 110 basis points in the 12 months ending in March, to 96.6%.

“As one of the most livable cities in the US, Boston, is also flourishing when it comes to mixed-use-development,” Yardi’s Manager, Business Intelligence, Doug Ressler, tells GlobeSt.com.

“With the second-highest share of apartments nationwide (42%), it’s an initiative to encourage mixed-use in the very core of the city is in the works, with local authorities planning to achieve housing growth, architecture preservation and a more climate-friendly community.”

Flight to Quality is Driving Traffic

Brian Tretinik, managing director, Bridge Investment Group, tells GlobeSt.com that investor appetite in Boston’s office market remains strong overall, though the pace of decision-making is still moving at a slower, deliberate pace as more companies begin to grapple with what their long-term needs and space usage look like.

“The flight to quality is driving much of the current activity as businesses try to secure space that will not only complement their return-to-work push but also enhance the ability to attract top professional talent,” Tretinik said. “We’ve seen evidence of that play out in real-time at local projects like 1200 Crown Colony, which has nearly 200,000 square feet of active proposals in play on the heels of a recent $10 million repositioning. Office owners and investors who have been aggressive with capital on these types of projects are at the front of the line in Boston right now.”