Just as COVID-19 has widened inequities throughout the U.S. economy, the pandemic is separating commercial real estate sectors into stark categories of haves and have-nots.
Demand for life science and logistics properties far exceeds supply in Greater Boston, while office, retail, hotel and urban apartments are struggling, CBRE executives said at a virtual forum Thursday.
Strong venture capital and private equity investment in life science companies, including those pursuing COVID-19 vaccines and therapies, is generating demand for lab space throughout the region, Vice Chairman Steve Purpura said.
“The next 24 months is going to be undersupply and overdemand,” Purpura said. “We feel we’re at a negative vacancy at the moment.”
Local brokerages’ research divisions are tracking approximately 2 million square feet in life science companies’ space requirements, prompting a wave of suburban office conversions and speculative new developments.
Industrial properties are the other significant driver of development because of demand for e-commerce distribution centers, Senior Vice President Rachel Marks said. The brokerage is tracking 30 million square feet of industrial tenants in the Greater Boston market which only has 13 million square feet of vacancies, much of which is functionally obsolete, Marks said.
The outlook is bearish for the office market where a wave of office sublease listings topping 2.1 million square feet during the work-from-home era have brought a halt to 38 consecutive quarters of rent growth, Senior Vice President Lauren Lipscomb said.
“We expect the number of options to increase as tenants question their return-to-the-office timeframe,” Lipscomb said.
A divide is opening up in the multifamily market as Boston apartment demand feels the decline in off-campus college renters and the short-term corporate stay market.
Rents have declined 11 percent and occupancy has declined 4.5 percent, according to a recent survey of class A properties containing 10,000 units in the urban core, Vice Chairman Biria St. John said.
“The issue is there’s no demand in the urban core,” St. John said.
Suburban markets have registered slight gains, with rents up 0.5 percent and occupancy rising 1.5 percent according to a survey of class A properties totaling 11,000 units.