BOSTON—Keen demand for the city's high-rise office properties from the tried and true legal and financial services industries has dropped the vacancy rate in these trophy properties to the lowest level in eight years.
Brokerage firm JLL in its 2017 “Skyline” report of office properties of 15 stories or higher in major markets across the United States, reports that while the City of Boston has seen an uptick in TAMI (technology, advertising, media and information) firms, the lion's share of leasing velocity in the city's 46 Class A high-rise office buildings in Boston still comes from what JLL characterizes as a “healthy mix” of law firms and financial services companies.
The 10.7% vacancy rate within the Boston high-rise property market remains below the national average. The current vacancy rate in Boston's Skyline properties is the lowest it's been since 2009, JLL reports. Low-rise rents are currently average $56.23-per-square-foot while space above the 30th floor is fetching $70.71-per-square-foot.
Overall high-rise rents in Boston jumped to $62.13-per-square-foot on average, fourth most expensive in the nation. Cambridge office rents, while not part of JLL's Skyline report, have grown by an impressive 68% in the last five years, reaching $70.77-per-square foot. New York City's high-rise properties rank number one among the 57 North American markets with an average Skyline rent of $87.90-a-square-foot, followed by Washington, DC and San Francisco.
“The Boston Skyline market has experienced slow to moderate growth in the last year and is expected to continue on that path through 2017,” says Lisa Strope, New England research director. “From an economic standpoint, 2016 was a great year. In fact, the Boston MSA recorded the largest decline in unemployment rate of major U.S. metros last year.”
JLL notes in its report that Boston landlords continue to invest in their properties to remain competitive. For example, 100 High St., 100 Summer St., 53 State St., and 33 Arch St. have joined a growing list of property owners that have reduced rentable space at their properties to make room for conference center space and other amenities for tenant use.
The two new properties that were added to the Skyline roster in the city—888 Boylston St. and 100 Northern Ave.—helped fuel 1.4 million square feet of positive absorption since the new deliveries were nearly fully pre-leased. This was the third consecutive year of positive net absorption in the Boston skyline and this is expected to continue based on the 3.8 million square feet of demand JLL is currently tracking in Boston's CBD. 100 Northern Ave. in the Seaport, developed by Fallon Co., is the home of Goodwin Procter, while the 888 Boylston St. building, developed by Boston Properties, is 91% leased.
In Boston, there is just under 1.1 million square feet of skyline product under construction or under renovation, all of which is scheduled to be delivered in 2018, and is currently 38.4% pre-leased. JLL says it does not expect any additional high-rise office project to break ground without a significant pre-leasing commitment.
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John Jordan
John Jordan is a veteran journalist with 36 years of print and digital media experience.
