By Aaron Jodka | FEBRUARY 2020
At the Colliers In Focus Live “Main Stage” event at Big Night Live, Managing Director Frank Petz looked at the narrative of Boston’s development cycle head-on.
He pointed out that we are in the midst of the biggest construction cycle in Boston’s history when all property types are included. Office and lab development has picked up, and the question of whether the city is overbuilding is on market players’ minds. But Petz clearly asserted that there is no concern today: Preleasing is very strong.
The projects delivered in 2019 were fully leased, and demand continues for the remaining assets. In fact, through 2022, projects in the core of Boston are 66% preleased. While a total of 7.8 million SF of projects is under development, there’s no need to worry. This is tied to the urban development narrative of Colliers Executive Vice President Chris Cuddy, since rising rents and strong tenant demand are supporting this development cycle. And further, connecting back to Colliers Executive Vice President Evan Gallagher’s commentary, the shift to life science is real and isn’t changing. In a clear hierarchy of land values, lab space is well ahead of other uses.
The yields and returns offered by lab outpace any and all alternatives. If lab is feasible, developers will value land at $300–$400 per SF FAR. This is a roughly 2x+ multiple on other property types. Just a few short years ago, apartments were at the top of this hierarchy. Today, because of the growth of e-commerce, as previously noted by Senior Vice President PJ Foster, industrial players can compete with apartment developers for land. Expect to see a further pivot in future development to lab, thanks to demand, rents, and ultimately, higher returns.