Joe Sciolla, managing principal with Cresa Partners Boston office, tells GlobeSt.com that with such a small number of owners controlling two of the city's key office markets, landlords could "attempt to wrest control away from tenants" who have for years enjoyed a tenants' market for rented office space.
"There is a sense of urgency in the next couple of months," says Sciolla, noting that increased space demands along with a 30% hike in the cost of building materials for tenant improvements in the last 24 months indicate that rents are trending upward.
While an improving economy and other factors could help level out the playing field, Sciolla cautions that tenants should create alternative options if they want to maintain leverage with an existing landlord.
David Begelfer, head of the Boston Chapter of the National Association of Industrial and Office Properties, sees things differently, however. He tells GlobeSt.com that even though eight landlords control the lion's share of office space in the Back Bay and Financial District, the market remains competitive. "I think this is a tempest in a teapot," he says. "The bottom line is that there is no one dominant."
The eight major players in the Boston market are Equity Office, which controls 8.5 million sf; followed by Beacon Capital, which owns 4.2 million sf; Tishman Speyer, owner of 2.6 million sf; Boston Properties, which has 2.4 million sf; Brookfield Properties, which owns 1.9 million; and Chiofaro Co., which has 1.8 million sf. Along with Rose Associates, with 1.1 million sf, and SITQ/Immoblier, which holds 785,000 sf, the eight control 23.5 million sf of the 28 million sf in Downtown's class A office tower market, according to a study by Sciolla.
Yet despite their dominance in the market, Begelfer says rising occupancy rate in class A office space plays more of a role in rent increases than ownership. "What's having an impact is that we're slowly reducing the vacancy rate. Yes we will see rents rising on that basis but rents would be going up if you had 10 owners or if you had one."
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