Bragging rights for Boston: City records more commercial investment than New York
In the unending rivalry with New York, Boston just got a new bragging right.
Investment in commercial real estate in Boston has surpassed Manhattan to lead the country as the most liquid market, according to a report by the real estate data firm Real Capital Analytics.
Investment volume in Boston saw little more than a hiccup during the pandemic, the report said — and that’s backed up by what residents and workers see in the city each day: Construction cranes across much of the horizon, particularly in neighborhoods like the Seaport and Kendall Square.
Boston can thank its life sciences industry for much of that growth. In fact, Boston accounted for nearly one-fourth of all lab transactions nationwide last quarter, according to Real Capital Analytics.
Life science labs are being built in places like Cambridge Crossing, whose tenants include the drugmaker Sanofi, to the Seaport, where labs are being proposed at the far eastern reaches of the neighborhood, where developable land is still available. They’re also rising in less expected areas including just outside Union Square in Somerville, in downtown Malden, at the former Suffolk Downs and in Watertown’s Arsenal Yards.
The comparison with New York does have one caveat: the report includes only Manhattan, not the outer boroughs such as Brooklyn. But Manhattan nonetheless still far exceeds Boston in population and number of corporate headquarters.
The pandemic’s benefit
New York, like many other large cities, took a big hit by the pandemic, which allowed many office workers to work remotely and flee for less expensive places. Chicago and San Francisco, which have also been around the top nationally for commercial investment, also took a hit.
Boston was less affected, with many of its key industries, including life sciences, higher education and health care, more likely to require an in-person presence.
Mike Procopio, the CEO of Lynnfield-based builder Procopio Companies, called Boston’s new placement as the most liquid market — an indicator of investment level and return on investment — both not very surprising but also a sign of Boston’s durability to withstand the pandemic’s quick and drastic effect on the economy.
“What we’ve seen in the past five years, and even through the pandemic, is just incredible,” he said. “It is unique compared to a lot of other markets.”
Boston’s success in life sciences isn’t new, of course. Almost one-fourth of all life science venture capital in North America is flowing into the Boston area, according to Cushman & Wakefield.
The region has been first nationally in investment in the industry in the past five years, with its total of $12.9 billion elbowing out New York at $10.6 billion and the San Francisco area at $8.1 billion, according to Cushman & Wakefield. The Boston area’s rents are still more than one-third higher than any other area, at $97 per square foot.
Life science employment in the Boston area has also doubled in the past two decades, Cushman & Wakefield said, with more than 20,000 new workers. That also gives Boston more than 20,000 such workers than any other metro area.
Boston market’s durability
Researchers at the Boston offices of the real estate firm Colliers International have already noted the region’s lab expansion in particular, describing first-quarter growth this year at a “torrid pace.”
Lab vacancies were actually down in the first quarter from a year prior, at 5.3%, according to Colliers, including 1.5% in Cambridge.
“With immense [venture capital] funding and strong IPO markets, demand looks to remain strong for the foreseeable future,” Colliers researchers Aaron Jodka and Dion Sorrentino wrote. “Conversions, repositioned assets, and ground up construction are lining up to provide the next generation of lab product for space-starved companies.”
Office demand more broadly is not as strong, with many office tenants having given up space in subleases or moved to smaller spaces.
The Boston metro area’s office vacancy rate in the first quarter was 16.7%, up from 16.4% a year prior. In Boston itself, vacancy rose year-to-year from 14.7% to 15.7% and in Cambridge from 10.0% to 10.2%. (Manhattan’s vacancy rate was 18.7% in June, according to Newmark.)
The Boston region recorded $7.9 billion in total venture capital in the first quarter, according to PitchBook, placing it third behind only New York and the San Francisco Bay Area. Boston’s generally been third in that category, alongside Los Angeles, behind those other two for the past decade.
With life sciences joining two other often in-person fields, health care and higher education, Procopio said he expects Boston’s growth and attractiveness to investors to continue.
“It’s a unique market in Boston with those elements that allows Boston to punch well above its weight class,” he said. “I think Boston is finally getting its due as a top-tier investment market.”
[ SOURCE ARTICLE ]