According to a fourth quarter market report prepared by Cresa, rents have already topped the $60-per-sf benchmark predicted earlier this year in the Back Bay and Financial Districts, where some buildings are commanding rents as high as $62 per sf.
Sciolla says the scarcity of office space in the city, where 800,000 sf of office space has been absorbed this year, may prompt some businesses to look for alternatives that could include job outsourcing or relocating to the suburbs where rents are cheaper. "I think tenants will become more prudent with their space needs, especially when it gets to that $60 threshold," Sciolla predicts.
Since the first quarter of 2006, class A rents in Boston, including the Financial District, Back Bay, North Station, South Station and Fort Point Channel areas, have increased on average from $41 per sf to $45 per sf as the city's vacancy rate has dropped below the 15% mark. Class B rents have also increased on average from $28 to $33 per sf during that same period.
The rising rents are also expected to burn off landlord concessions as tenants compete for what little contiguous space remains available, Sciolla notes.With rents on the upswing, tenants who need more space should move quickly before prices rise even further, he says. "If they are going to make a decision, they should create two or three options in order to leverage landlords and create some deals," he says. "It's urgent they do that sooner rather than later."
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