In brief
- 1
Industrial is still the strongest sector. Vacancy fell to 4.2% from 4.8% and rent rose 5.8% to $9.25/SF NNN. Industrial took $210M, 43% of the $485 million invested in 2025, as cap rates tightened from 6.50% to 6.25%.
- 2
Retail space is the tightest it has been in 20 years. Vacancy is 5.4% after six straight quarters of positive absorption, average rent is $18.50/SF NNN, and grocery-anchored space draws the strongest demand.
- 3
Apartments are still short of demand. Multifamily vacancy is 3.1% and average rent $1,850/month, up 4.5%, with 2BR averages from $2,100 in Worcester Downtown to $2,600 in Marlborough.
- 4
Office is the one sector going the other way. Vacancy rose to 12.8% from 11.6%, with 1.2 million SF of sublease space, and cap rates moved from 8.00% to 8.50%. Class A holds at 10.2% vacancy against 18.3% for Class C.
Executive Summary
Central Massachusetts starts 2026 on solid footing. Industrial fundamentals are holding, retail vacancy is at a historic low, and multifamily demand keeps outrunning supply.
Key Metrics at a Glance
| Sector | Vacancy | YoY Change | Rent Trend |
|---|---|---|---|
| Industrial | 4.2% | -0.6% | +5.8% |
| Retail | 5.4% | -0.8% | +3.2% |
| Office | 12.8% | +1.2% | -1.5% |
| Multifamily | 3.1% | -0.4% | +4.5% |
Industrial Market
Vacancy: 4.2% (down from 4.8% YoY)
Absorption: 1.8 million SF (trailing 12 months)
Average Rent: $9.25/SF NNN (up 5.8% YoY)
Outlook: I expect 4-6% rent growth in 2026. Cap rates stable at 6.0-7.0%.
Retail Market
Vacancy: 5.4% (20-year low)
Absorption: Positive for 6 consecutive quarters
Average Rent: $18.50/SF NNN (up 3.2% YoY)
Demand by Category:
| Category | Demand Level |
|---|---|
| Grocery-anchored | Very Strong |
| QSR/Fast Casual | Strong |
| Medical Retail | Strong |
| Fitness/Wellness | Moderate |
Office Market
Vacancy: 12.8% (up from 11.6% YoY)
Sublease Availability: 1.2 million SF
Average Rent: $22.50/SF gross (down 1.5% YoY)
Key Trends: Tenants keep moving to better buildings. Class A is holding at 10.2% vacancy against 18.3% for Class C.
Multifamily Market
Vacancy: 3.1% (near historic low)
Average Rent: $1,850/month (up 4.5% YoY)
| Submarket | 1BR Avg | 2BR Avg |
|---|---|---|
| Worcester Downtown | $1,650 | $2,100 |
| Shrewsbury | $1,900 | $2,400 |
| Marlborough | $2,100 | $2,600 |
Investment Market
Total Volume (2025): $485 million
| Sector | Volume | % of Total |
|---|---|---|
| Industrial | $210M | 43% |
| Multifamily | $145M | 30% |
| Retail | $85M | 18% |
| Office | $45M | 9% |
Cap Rate Trends:
| Sector | Q1 2025 | Q4 2025 | Trend |
|---|---|---|---|
| Industrial | 6.50% | 6.25% | Compressing |
| Multifamily | 5.75% | 5.50% | Compressing |
| Retail | 7.25% | 7.00% | Stable |
| Office | 8.00% | 8.50% | Expanding |
2026 Outlook by Sector
Industrial: POSITIVE. E-commerce demand, limited supply, strong rent growth
Retail: POSITIVE. Not much new supply, essential retail doing well
Office: CHALLENGING. Structural headwinds, with a few good Class A plays
Multifamily: POSITIVE. The housing shortage is not going away, and MBTA Communities is pushing new development
Key Themes for 2026
- Rate Environment: Lower interest rates are helping deals pencil
- Distressed Opportunities: Loan maturities are creating chances to buy
- Sustainability Focus: ESG requirements are working their way into decisions
- Secondary Market Appeal: Outside investors are finding value in Central MA
Lornell Real Estate publishes quarterly market reports for Central Massachusetts. Contact us for detailed market data.
Capitalization Rate (Cap Rate) is a way to estimate the return on an investment property. You divide net operating income by current market value.
Sources: CoStar Group, MBTA.
Limitations: Market data, projections, and trend analyses reflect conditions at publication. Commercial real estate markets are inherently cyclical, and submarket and property-level performance can diverge significantly from the regional averages cited. Demographic data, employer information, and regulatory conditions are subject to change. This article does not constitute investment advice. Conduct property-specific due diligence and consult qualified professionals before making investment decisions.
Get the Fall 2026 Worcester market report
An owner's guide in thirteen pages, from CoStar's 10 August 2026 data and the city's own records: each sector's vacancy, rents and record prices, why small industrial is full while big boxes are not, what sold and to whom, the submarket spreads, and what it all means if you own a building in Worcester County. Every figure names its source.
