Thursday, June 12, 2014, 11:36am
Greater Boston’s busy development scene shows little sign of slackening through 2015 with strong demand for commercial and multifamily properties, analysts predicted at an industry event Thursday.
Tenants are in the market for 4.4 million square feet of office space in downtown Boston, an increase of 69 percent from 2012, said Rebecca Galeota, a senior vice president at Cassidy Turley.
“The flight to urbanization only plays to the strengths of our city,” she said.
In Cambridge, there’s demand for 3.5 million square feet of office and lab space, said Curtis Cole, a partner with CBRE New England. Rents for top properties in East Cambridge are $75 per square foot, surpassing the previous high of $72 in 2007, Cole said.
One sector that shows potential vulnerability is the apartment market, where more than 1,200 units are under construction this year with close to 8,000 more in the pipeline for 2015 and 2016.
Boston’s current 3.8 percent apartment vacancy rate is expected to peak at 6.1 percent in 2016, according to Hans Nordby, a managing director for CoStar Group.
“We’re starting to see a slowdown in new projects, as some of the projects do not meet their pro formas. We’re starting to see more concessions,” he said.
Four apartment properties have been acquired in Back Bay this year for condo conversions, said Chris Sower, a partner at Boston Realty Advisors. Approximately 2,100 condo units are in the development pipeline in the next two years.
New Boston condo projects are selling quickly, with nearly 50 percent of the 83 units at the Ink Block condos in South End selling pre-opening at prices averaging $1,000 a square foot, he said.
“The big question is where we’ll be in 2015 and 2016. We’ll see demand drivers on the employment side, but the condo conversion and development market will be a very active conversation,” Sower said.
NAIOP-Massachusetts hosted the midyear market roundup at the Seaport Boston Hotel. The event was sponsored by First Niagara, Boston Realty Advisors, Cassidy Turley, CBRE New England, Cushman Wakefield, JLL, Banker Tradesman and Solomon McCown.