BOSTON—A strengthening economy fueled significant tenant demand in the fourth quarter and helped produce what commercial brokerage firm Transwestern | RBJ describes as the city's most dynamic year since 2006.
Transwestern | RBJ Northeast research director Chase Bourdelaise says the strong job market is fueling tenant demand and positive space absorption in Boston and surrounding areas such as Cambridge and the Route 128 markets. The office vacancy rate for Greater Boston ended 2015 at 12.1%, virtually flat as compared to year's-end 2014. The average vacancy rate for 2015 was 12.2%, the lowest rate since 2002. Class A asking rents in the region rose to $42.06-per-square-foot. Asking rents haven't been that high since 2002, Transwestern reports.
"Each submarket in Greater Boston had significant positive absorption during the quarter, an excellent indicator of overall market health," says Bourdelaise. "Some areas had results not seen in more than a decade. Taken together, it was one of the most dynamic quarters in the past decade."
A closer look at some of the submarkets shows just how strong the office market is here. For example, the vacancy rate (Class A and B space) in the Boston CBD was 9.1% in the fourth quarter of 2015 and the overall office asking rent stood at $49.81-per-square-foot. A total of 502,000-square feet of office space was absorbed in the CBD during the fourth quarter and Class A rents rose 24 basis points to $54.26-per-square-foot.
Another critical takeaway from the Transwestern report is that the number of Class A blocks between 20,000 square feet to 100,000 square feet in the Back Bay and Seaport districts are at their highest on record.
Bourdelaise tells Globest.com that there are 27 office properties in the Back Bay with that range of space availability on the market. Twenty-two of those space availabilities are located in Class A buildings and 5 are in Class B properties. He adds that there are 16 properties in the Seaport District with space availabilities between 20,000 square feet to 100,000 square feet (9 in Class A buildings and 7 in Class B buildings). Office vacancy in the Seaport District dropped to 8.3%, its lowest level since 2000 when inventory was 6 million square feet less than it is today. The Seaport District saw 566,000 square feet of positive absorption in 2015, led by PWC, which moved into its 350,000-square-foot headquarters space in the new 440,000-square-foot building completed this year at 101 Seaport Blvd.
The tightest market by far in the region is trendy Cambridge, which saw its vacancy rate fall by 1.8 percentage points from the third quarter to just 2.7% thanks to 204,000 square feet of positive absorption.
Bourdelaise says Cambridge's vacancy rate is the lowest on record. Asking rents for Class A space were higher, particularly in East Cambridge where rents are now at the rather lofty asking price of $73.38-per-square-foot. Overall Class A office rents in Cambridge rose 225 basis points to $62.64-per-square-foot.
There is 66,000 square feet of office space under construction in Cambridge, which is 100% pre-leased, he notes. The remaining approximately 1.5 million square feet of mostly laboratory/research space under construction at the moment is 76% pre-leased.
Bourdelaise is bullish on the region's future based on job growth and increased investment in real estate. "With more than 600,000 square feet delivered this quarter (region-wide), and an additional 4.2 million square feet in the construction pipeline, 2016 is shaping up to be a good year for real estate," he says.
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John Jordan
John Jordan is a veteran journalist with 36 years of print and digital media experience.
