(To read more on the net lease market, click here.)
BOSTON-Two office markets just across town from each other experienced differing absorption rates during the second quarter of 2006, with the Back Bay gaining in absorption what the Financial District lost.
According to a study prepared by Richards Barry Joyce and Partners of Boston, the Back Bay had a positive absorption rate of 53,000 sf in the second quarter, which lowered vacancy rates in that neighborhood to 10.4%, a 0.4% drop over the same period last year. In the Financial District, a 52,000-sf negative absorption rate pushed vacancy up slightly by 0.1% to 12.7% for the quarter.
RBJ&P researcher Brendan Carroll tells GlobeSt.com that the similar absorption numbers are just coincidental and do not indicate a shift in the popularity of either neighborhood. "Statistically, a fairly healthy supply-demand balance can be found in both the Financial District and the Back Bay," says Carroll.
But while the expansion of financial and law firms has been driving the Financial District's market, the Back Bay is attracting a broad spectrum of users to what 15 years ago was a neighborhood dominated by financial institutions, Carroll says. "There is an attraction currently to what is referred to as the 24-7 environment of the Back Bay," he notes, adding that the neighborhood, with its nearby restaurants, shops and other amenities, appeals to firms that want to conveniently entertain clients.
But with its closeness to Faneuil Hall and the Boston waterfront, along with the advent of the long-awaited Rose Fitzgerald Kennedy Greenway, the Financial District is undergoing a renaissance that is also drawing companies to its tower space, Carroll says. "They are both different product types for different needs," he notes.
The drop in absorption rates in the Financial District appears to be just a one-quarter "blip" on the radar, the RBJ&P report notes, with positive absorption rates predicted for the rest of the year. As for the Back Bay, with a tightening office inventory, occupancy rates should continue to improve as the economy gains steam.
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