The Newmarket Industrial Development Area (IDA) is the largest and one of the last industrial areas in Boston. Over the years, we have represented buyers, tenants, landlords, and sellers in Newmarket and around those South Boston industrial areas. Recently, we were asked by a strategic developer to share an analysis of the neighborhood, specifically commenting on reasons why Newmarket is an ideal location for specialized industrial tenants like tough tech, Industrial Outdoor Storage (IOS) users, and other specialized manufacturers.
Our analysis features three particularly attractive characteristics of the Newmarket IDA: logistics access to all of New England, value pricing compared with the other urban markets that are close to downtown Boston, and highly flexible industrial zoning throughout the Newmarket IDA including the rare and mysterious IOS! However, there are four major detracting elements: rampant drug use and homelessness, lack of parking for most sites, lack of access to Boston's train system, and the existent industrial uses that are stinky and generally unpleasant neighbors.
Value Play
The location is obviously incredible, and the type of industrial uses you can house there are endless. Newmarket has historically done very well because it was a value location for a lot of users. You could be near the city and not a lot relative to places like Seaport, Brighton, or Charlestown, and this has attracted many tenants.
Value Pricing Compared With Other Urban Markets
Pricing does not incrementally go up the closer you get to Boston. It does not start at $20 per SF in Wilmington then, $21 in Woburn, $22 in south Woburn, $23 in Winchester, $24 in Medford, $25 in Charlestown. If a tenant says, “I need to be within twenty minutes of downtown. I’m willing to pay X,” there is little difference between Medford, Woburn, Lynn, Everett, or even Canton for that matter.
Flexible Zoning
Very few parts of Boston allow for unfettered uses, such as Industrial Outdoor Storage (IOS). Newmarket IDA allows for nearly all of them.
Inner Urban Access
Companies that have a true need to be in Newmarket are people who are distributing products to downtown Boston. Or, if you are in the food business, it is good for you because you need to be near the water. City Fresh Foods is one such company that has programmatic needs to be in the exact location in which it is situated. We helped them relocate their production and Industrial Outdoor Storage parking for their commercial vehicle fleet.
The Detractors
While sad and systemic, there is a significant homeless population that has bequeathed the nickname “Methadone Mile” to those parts of Melnea Cass Boulevard and Massachusetts Avenue. This has created a stigma to that neighborhood that is sad for the people and has created hardship for the businesses.
Lack of Parking
Another problem is parking, there is simply very little parking. We have had numerous listings, four or five in the last couple years, where that is the main problem and moving those listings has been hindered because of the simple lack of available parking on site and offsite.
Lack of Access to Boston's Train System
The lack of public transportation is also a great concern to a company considering moving into that neighborhood. There is no commuter rail stop other than Newmarket, and getting to Newmarket stop is a hike from a lot of places around Newmarket. Yes, there is a bus system, but there is a big difference, particularly for a company looking to relocate and recruit from Greater Boston, between the bus system and the train system. The closer to public transit you can get, namely the train, the better. Car parking always helps, but when you are in the city, there are going to be a lot of people that do not drive.
Stinky and Generally Unpleasant Neighbors
Then there are the neighbors. The neighbors at this time are fish people, meat people, kind of stinky, smelly type uses.
What Happens to Rent?
All of this shows up in rent. We just did a lease at $14 a square foot in Newmarket Square for the building. We were looking at another one at $16 or $17, which you would think is insanely low, but based on all the things mentioned above, the value to the tenant needs to come from somewhere, and historically it comes from pricing concessions. The existing building quality is so low that tenants are having to go in and spend a lot of money on the buildings, which they will do for a discount. If it was a beautiful, nice building, you might be in the mid-to-upper $20’s, but that is not the reality.
If you can do generally an $18 to $25 a square foot deal, there will be tenants that can pay that. If you need $30-plus in your model to work, then you will need to underwrite for significantly more vacancy and also a healthier capital expenditure budget, just because the demand is not that high at that price.
Putting Together a Healthy Deal in Newmarket
Newmarket IDA is a fantastic neighborhood for healthy businesses, but putting a healthy deal together for landlord and tenant alike will take a thoughtful approach to address transportation, safety, cap ex, and rental rate concerns. There will always be companies who need to run their businesses close to the city, and Newmarket will be a great location for a business like this.
How Prescott IOS can help YOU
Prescott IOS leases and sells Industrial Outdoor Storage (IOS) real estate nationwide. If you need to find IOS property for your business, or if you own IOS property and want to better understand its value, email help@prescottios.com or call (617) 999-0057.
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