BOSTON-For a pretty impressive five quarters now, the Boston office market has experienced positive growth, according to Richards Barry Joyce & Partners’ senior vice president of research, Brendan Carroll. And it seems the firm’s most recent OfficeSTATus report indicates that this positive commercial real estate trend will continue. The area continues to attract major companies and to lease up space.
In the past quarter, the report reveals that the number of properties that gained tenants in the market outnumbered those properties that lost tenants: 16% gained occupancy and 13% saw occupancy decrease. Carroll opines, “It’s the continuation of a trend we’ve been seeing from 5 quarters ago - of positive and organic growth. “ And why? “the area’s value proposition has largely been the same for decades: skilled labor force, world class education, topographical desirability and, in a way, the knowledge economy.” These factors are attracting and should continue to attract big lease signings to the area. For instance, Google “recognizes” the world of taking space in Cambridge – right near Harvard, and MIT to name but two – and the coffee giant Keurig recently signed up for significant space in Burlington, Massachusetts. Carroll says this company’s decision is “basically the example of a business that has been successful locally and with new technology.” The move points to “significant expansion, [and]new construction in the market.”
Also of note is the fact that local class A office rent growth slowed to a 0.3 % a 0.3 percent annualized rate after having grown at a 5.2 percent rate in the preceding two years, a fact about which Carroll does not express much concern.
“Probably landlords feel like they’re at the right place [with rents],” he says. “I don’t read anything into the fact rent growth has slowed.” He adds that since rents have grown over the past 3 consecutive quarters, it likely indicates that landlords were underpricing space in an effort to lease up. Now everything has hit a sweet spot, rents are less apt to rise.
Going forward, Carroll thinks that things should stay around the same for the market. “There’s the expectation that this is going to continue,” he explains. “What will happen is more continued organic growth in the Boston market – suggested by the lease signings we’ve seen over the past quarter.” He does note that with European uncertainty, overseas buyers of local product may defer purchase decisions, which could trickle down and negatively affect the market. At this point, such a scenario remains only a concern as Carroll says its “not really something I think has been notably observed yet, it’s just a potential.”
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