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Here's What We're Watching in 2020

Author: Aaron Jodka

By Aaron Jodka  | DECEMBER 2019

As 2019 winds to a close and we reflect on trends and drivers of the market, here are six areas among a few we’ll be watching in 2020 and beyond:

2020 Outlook_visual

Transportation comes to the forefront. Just about anyone will tell you how tough their commute has become. Surveys and articles have highlighted the area’s congestion, a symptom of record-high employment. As business and neighborhood groups as well as government look for solutions and options, this will remain a key issue in 2020 and beyond.

U.S. economic growth decelerates. Most economists predict another year of growth in 2020 but at a slower pace than in 2019. With an election on hand and ongoing political turmoil, plus the continued grounding of the Boeing 737, growth should ease over the next 12 months.

Life science expansion continues. Since 2016 more than two million SF of suburban demand has been driven by Cambridge companies expanding or relocating. Moderna has continued its growth in Norwood, while record-high rents are making alternatives outside of Cambridge more palatable. Look for more suburban growth next year.

The amenities arms race is still on. Walk through a Class A building’s lobby in downtown and odds are it’s received some capital improvements in recent years. Whether it be upgrades to lobbies, common spaces, fitness, outdoor spaces, or more, landlords have been spending on their properties and are continuing to do so. Vacancies are low today, but these bells and whistles matter to tenants.

Even higher urban rents. Rents have topped $100/SF in the Back Bay on select deals. We haven’t seen that downtown yet, but with a renovated One Post Office Square coming, and rents pushing into the $90s at the top of towers, it is just a matter of time before the $100 mark is hit downtown. 2020 may very well be that year.

Finally, Boston remains a capital magnet, as our market is a top choice nationally, and globally. With so much capital chasing few deals, it’s a dogfight out there: Foreign capital is challenged by domestic capital (pension fund advisors, and separate accounts) for trophy deals. In addition, recapitalizations are becoming more prevalent. Investors keep Boston as a hold but hedge their bets a bit by taking some capital off the table.

Meanwhile, as you take stock of these trends, Colliers wishes you a happy holiday season and happy new year.

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