Commercial real estate industry insights.

Boston’s Diverse Economy Drives Building Boom

by Matthew Wood, MAI, MRICS | Jan 26, 2022

Beantown is a boomtown.

Greater Boston is undergoing another wave of building activity that is rapidly modernizing this historic place. Throughout the metro area, mega-real estate projects have been plentiful, and more are on the way.

In the commercial market, building activity is vigorous. According to Boston Planning and Development Agency data, about 6.0 million-square-feet in commercial space was approved in 2020, the city’s second-highest number of non-residential projects since 2014. Many area residential projects also are underway or in the planning stage, with some of these units designated as much-needed affordable housing. 

Boston owes much of its robust real estate activity to a diverse economy. This includes life sciences, healthcare, technology, finance, education, tourism, commercial fishing and food processing, publishing and government.

Of those industries, life sciences and technology companies are cited as the biggest drivers of Boston metro’s office market activity. They led a rebound in office leasing last year, which played a big role in the Boston-area office market recovering faster from the pandemic’s impact than other major U.S. cities. There is reported to be over 25 million square feet of lab development (both ground-up and conversions), currently in the pipeline for greater Boston and the suburbs over the next five years. East Cambridge in particular has some of the lowest vacancy and highest rents in the country for life science space with rents now north of $120 SF NNN and transactions well over $2,000 SF. It’s unclear how much of this planned new supply will become reality, however, as the unprecedented rent growth should logically stabilize to more normal levels as continued supply enters the market and tenants have more options.

The meteoric growth of these industries in Boston is attributed to massive investment activity, a heavy concentration of life sciences researchers and top-rated academic facilities including Harvard and MIT both located in Cambridge, and access to a highly educated workforce. Greater Boston’s reputation as a major life sciences and tech center led one industry report to proclaim Cambridge’s Kendall Square as “the most innovative square mile on the planet.”    

To satisfy demand, developers have been rushing to convert more offices into labs with most planned ground-up office deals also now pivoting to lab projects. The move is driven by a dearth of financing for speculative office projects and more investor interest in speculative lab projects.

As a result of rental rates in East Cambridge effectively doubling over the last five years, new lab clusters have emerged in the Seaport, South Boston, Watertown and Waltham areas due to their more affordable price points.  Bio manufacturing is also an emerging trend as the local life science corporations look to bring intellectual property (IP) in-house and locate manufacturing capabilities near their offices.

Other major new and renovation projects include mixed-use developments housing lab and tech spaces, offices, retail, hospitality and residential, as well healthcare and educational facilities, and industrial buildings.

Here is a rundown of some major Boston-area real estate projects:

  • Suffolk Downs Redevelopment – Built in 1935, the former 160-acre horse racing track in East Boston will be repurposed as a 16 million-square-foot mixed-use development, one of the largest building projects in the city’s history. The redevelopment project will have approximately 10,000 residential units, of which several hundred will be affordable housing. The project also includes lab, office, retail and hotel space, as well as 40 acres of open space.   
  • Winthrop Center – Located in Boston’s financial district, Winthrop Center will be Boston’s fourth tallest office tower when completed. The planned 54-story, $1.2 billion building will include office, retail and residential. Billed as the world’s first global Class-A office building, the tower will be one of the country’s most energy-efficient and environmentally friendly buildings.
  • Fenway Center – Located near the famed home of the Boston Red Sox, this mixed-used development project will include 960,000-square-foot life sciences campus and other commercial spaces. It’s adjacent to a luxury apartment complex.
  • Massachusetts General Hospital – The hospital was recently given approval for a $2 billion, one million-square-foot expansion. The project will include two patient care towers, additional beds, and new facilities for cancer and cardiac patients.   
  • South Boston Innovation Campus – The 10-story, 380,000-square-foot building will be situated on a four-acre site in the South Boston Waterfront area. The building will include space for labs, research and development and offices.
  • Union Square Revitalization Project – Located in the northwestern Boston suburb of Somerville, the $2 billion, 2.4 million-square-foot mixed-use project broke ground on a 15-acre site in 2021. The project will include lab and office space, residential, retail, restaurants, parks and open space.
  • Washington Village – Construction began last year on the first phase of this mixed-use development in South Boston. The initial phase is part of a one million-square-foot plan to redevelop five acres of a former industrial site in the Andrews Square area. Plans call for a mix of residential, retail and restaurant space. The project will also include a public park.
  •  Allston Yards — This 1.2 million-square-foot, multi-phase mixed-use development will be one of Boston’s newest neighborhoods when completed. It will include residential, lab and office space, retail, restaurants, and other commercial uses.
  • Riverside Station – Another mixed-use development is the Riverside Station project in the Boston suburb of Newton. After scaling back its original proposal for the 13-acre site, plans call for a one million-square-foot development which will include lab and research space, residential, retail and other commercial spaces.
  • 601 Congress Street – An office-to-lab conversion, the planned 14-story building in Seaport is the former headquarters of the John Hancock Life Insurance Cos.

These projects and others underway are reshaping greater Boston and will strengthen this market’s economic prospects well into the future.