On Wednesday, November, 15, 2023 CREW Boston learned about current leasing trends in retail, office, and life sciences at our November Luncheon Program. The panel, moderated by CREW Network Immediate Past President Barbi Reuter, included Rachael Diharce, VP of Leasing at Samuels; Kristin Blount, Executive Vice President at Colliers; and McKenna Teague, Senior Vice President at CBRE.
All three women agreed that COVID changed the trajectory of leasing their particular asset class. As Rachael explained, consumer behavior in a post-COVID world means that if retailers want to remain competitive they need to provide curbside pick-up and same-day deliveries. Where office workers are still slow to return to majority in-office work weeks, office tenants want features that will entice workers to get back to their desks: more collaborative spaces; modern design that integrates sustainability and access to fresh air and the natural environment; building amenities, such as doggie daycares and on-site personal trainers or mental health professionals. Successful return to work policies are facilitated by making the office a “magnet not a mandate”, Kristin observed. COVID was a growth catalyst for much of the life sciences industry. But as companies realized that their office functions could be largely managed through hybrid, work-from-home, life sciences companies have put a greater emphasis on lab space. Whereas before COVID, a typical life science space would be split 50/50 between lab and office, post-COVID life science tenants want upwards of 60-70% of the space devoted to lab, which in turn means greater demands and need for power and air.
Now, on the other side of COVID, new trends are emerging. Old retail corridors are new again. Newbury Street is enjoying record high rents and record low occupancy. Suburban “downtowns” are bustling at lunchtime as hybrid workers meet for lunch or meetings near the home office. In contrast to the retail boom, many life science companies are contracting through lay-offs. There is more sublease space on the market. Whereas two or three years ago life science landlords could be bullish, they now need to be more flexible to keep tenants in their spaces and afloat to make it to the next round of funding.
What’s true for all three sectors is that costs – debt and construction – remain challenging for tenants and landlords alike. There’s 14.2M square feet of life science space already in construction, only 28% of which has been committed. As McKenna explained, “if you don’t have a shovel in the ground already, it will be hard to get your life sciences project financed.” Rachael added that for all the retail growth, she has had more retail deals die this year, most often because the tenant doesn’t have a capital partner.
But importantly, thriving cities aren’t a thing of the past. Companies may have satellite offices but their hub remains in the downtown. The COVID predictions that no one would return to the city didn’t prove true.
Thanks to our panelists Rachael, Kristin, and McKenna and moderator Barbi for this insightful discussion.
