Boston Construction & Development: 3 Key Takeaways from the Bisnow Panel

BOSTON CONSTRUCTION & DEVELOPMENT:
3 KEY TAKEAWAYS FROM THE BISNOW PANEL

ARCO New England Principal and Regional Manager, Jason Grant recently joined fellow industry experts as a panelist at Bisnow’s Boston Construction & Development event. His panel discussed construction challenges and opportunities, including the impacts of economic challenges such as rising interest rates, industries expected to continue driving demand within the market, and mitigating ongoing supply chain issues. Below are three key takeaways from the event.

 ARCO New England’s Jason Grant (middle) speaks during panel at Bisnow’s Boston Construction & Development event.

1
Record-setting demand is expected to keep speculative development construction activity high throughout 2023, but capital restraints will make new projects challenging.

As Boston and the greater New England market saw unprecedented demand for industrial space over the past few years, there was a growing amount of speculative development as vacancy rates hit record lows and tenants needed space quickly. Moving forward, the market will most likely see a decrease in speculative builds as rising interest rates and overall costs make financing ability more difficult. Backlogs from 2022 will keep construction activity at a high level for most of 2023, but new speculative development starts will slow. However, with demand for industrial space expected to continue despite economic challenges, major industry players with financing ability will likely remain active in the market.

With record-setting vacancy rates driving a need for space, ARCO has partnered with developer clients on more than 3.5 million square feet of speculative distribution and warehouse space throughout New England. Speed-to-market demands from tenants have led many developers to create facilities that feature flexible designs and incremental upgrades that decrease time on retrofit and increase marketability to a wide range of tenants, including those in growing industries within New England such as GMP and Life Science. Additionally, with a continued need for space, ARCO has seen many projects leased prior to completion of the building shell.

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Pictured above: 150,000 SF distribution facility completed for Marcus Partners in Franklin, Massachusetts, in which a lease to UPS and tenant improvement contract were executed during speculative warehouse construction.

2
Despite economic challenges, demand for industrial space is expected to continue in 2023.

While demand for industrial warehouse and distribution space is not expected to match the record-setting highs seen over the past two years, it will likely see continued growth in 2023. Broadly, demand will be largely driven by e-commerce, third-party logistics and parcel delivery, and large traditional retail users looking to expand their distribution networks. Industries uniquely positioned for success within Boston and the greater New England market due to the strong local infrastructure and labor force, such as manufacturing and life science, are also expected to drive demand for industrial space.

As the nation’s largest builder of distribution and warehouse space, ARCO has partnered with both developer and end-user clients on build-to-suit developments throughout New England. Currently, ARCO is building more than 2.5 million square feet of space for Fortune 500 online and traditional retailers as major players within the industry continue to expand their distribution networks nationwide.

Pictured above: Rendering of a 1.2 million SF distribution facility currently under construction in East Hartford, Connecticut, for National Development and Wayfair. ARCO and National Development are also building a 1.3 million SF distribution facility within the same industrial park for Lowe’s. 

3
Engaging a design-build contractor in a project's earliest stages is essential for success as supply chain disruptions continue.

While pricing for many major commodities began stabilizing at the end of 2022 and major spikes seen in response to Covid-19 are not likely to occur, supply chain disruptions are expected to continue impacting construction material lead times in 2023. Specifically, electrical switchgear and mechanical equipment lead times continue to be long, and getting permanent power to buildings can be challenging. Because of this, it is critical for the general contractor to be involved in a project’s earliest stages to avoid major schedule delays.

Design-build delivery is beneficial from both a cost and schedule standpoint as an integrated approach like ARCO’s consistently results in the most functional solution and tremendous time savings. In the current challenging market, our unique approach has been crucial in helping clients avoid major schedule delays and navigate ongoing supply chain disruptions. With preliminary design completed internally during the proposal phase, immediately upon project award, full design and buyout can begin simultaneously. This combined with ARCO’s national buying power allows for the purchase of long lead time materials well before mobilization resulting in significant overall schedule savings.

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Pictured above: 124,800 SF distribution facility currently under construction in Saco, Maine, for Calare Properties and a Fortune 500 snack food company.

THE ARCO ADVANTAGE

As an industry-leading design-build general contractor, ARCO offers the experience and expertise needed for a seamless design and construction process. ARCO is unique in that we offer preliminary design at no cost to our customers to remove the risk of substantial upfront costs. Our design-build delivery method addresses ongoing market challenges through integrated design and construction solutions that allow for early material procurement resulting in reduced risk and shorter project durations.

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DELIVERY
33% faster overall delivery
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SPEED
12% faster construction
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BUDGET
6% less total cost

ARCO is recognized by Engineering News-Record as the fifth largest design-build general contractor in the U.S. and the number one domestic builder of distribution and warehouse space.

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