Cambridge is Priciest Office Market in US. Here's Why

Being near Harvard, MIT, and life sciences means a lot in office valuations. More than anything, you could say.

Cambridge, Mass., remained at the top of the list of most expensive office submarkets by sale price for the second year in a row with a price per square foot of $1,803, according to a new report from Property Shark.

This year’s average price is 16% higher than last year’s $1,560.

CoStar Group tells GlobeSt.com that Cambridge had an average sales price of $1,990/SF, by far the highest price tag of any submarket in the Boston Metro area, according to Chris LeBarton, Director of Market Analytics.

The other markets in the top 10 priciest from Property Shark were in Silicon Valley; Los Angeles; Manhattan, N.Y.; and Seattle.

To make the cut, submarkets had to have a minimum of three transactions of office properties larger than 25,000 square feet last year.

Even Life Science Subject to Risk-Off Environments

LeBarton says that uncertainty across the office market means that even life science and lab office buildings are subject to risk-off environments.

“So, for Cambridge to not only outpace the next nearest submarket by an order of magnitude but to do so every year since 2019, speaks to its ecosystem’s unparalleled reputation and structural underpinnings,” he said.

“So, when macroeconomic environments shift, venture capital dries up, college enrollment trends dip, political parties change, or any other number of irritants to a highly technical and expensive industry flare, investors in the space will seek out certainty.

“Cambridge is consistently in the top one or two spots on every life science ranking list, the regional economy is built around knowledge sectors, nowhere has a better collection of world-class universities, and Boston has one of the highest qualities of life in the country.

What Would Upset the Apple Cart?

LeBarton said it’s unlikely for Cambridge to lose its secular stature or pricing power any time soon.

Based on conversations with stakeholders in the market, he said what could change things over time is complacency and not continuing to support the entirety of Boston’s life sciences ecosystem.

“If that happens, not only will near-in competitive spaces like Longwood/Fenway, Somerville, Watertown, and others keep scraping away tenants and encourage investment, but more significant hubs that are less expensive and potentially more business-friendly could make up ground,” according to LeBarton.

He said one head of an institutional owner said, “We do have to be careful that we don’t cause our own demise.”

The opportunity for growth is dynamic in Cambridge, but government policy around housing, transportation, taxation, etc. needs to stay aligned with that growth, LeBarton added.

Big-Name Companies Need to be Here

Tucker White, regional innovation & insights manager, Avison Young, tells GlobeSt.com that East Cambridge’s office rents are steep because of its proximity to Harvard and MIT.

“Companies such as Amazon, Microsoft, Google, Akamai, and Facebook, have operations here that are critical toward maintaining and advancing technical and intellectual capital,” White said. “This makes Kendall Square, arguably the most innovative square mile in the world.

“These operations are fueled through tapping Cambridge’s and Greater Boston’s talent and strong startup ecosystem.”

All these companies are also competing against the world’s largest and most expensive lab market, where large biotechs and pharmacy assist in placing upward pressure on rents, White said.