Boston Office Market Sees Second Consecutive Positive Absorption Quarter
"Green shoots appear to be emerging," according to Colliers.
Demand for office in Boston is starting to pick up again. It’s not the same as it once was before the pandemic but the asset class continues to improve.
In Colliers’ Boston Metro Office Summary third-quarter report, the market absorbed more than a million square feet of product over the past six months. That marks the second straight quarter of positive demand – and just the first time that’s happened in roughly three years, according to the CRE services firm.
The vacancy rate of 23 percent has been flat over the past two quarters. However, that figure is still 10 percentage points above the pre-pandemic low.
“Green shoots appear to be emerging,” Colliers said.
“The amount of sublease space available (3.5 million SF) continues to shrink, to its lowest level since 2022.”
In fueling Boston’s office turnaround, Colliers said that “Inner Suburbs and Route 128 Mass Pike submarkets have been the biggest beneficiaries.” Waltham has seen major activity, with Evolv grabbing 86,000 square feet of Wolverine space, and Commonwealth Financial securing a deal for 150,000 SF of space.
The biggest overall deal in Boston in the third quarter went to BioMed Realty, which paid $361.5 million for a Cambridge property. That was followed by Shannon Life Sciences, and JAS Investment Group, which bought assets in the city for $55.7 million and $30 million respectively.
Office direct asking rents average $64.17 full-service gross. The highest rents were in Cambridge, which averaged $80.80 FSG.
“Other contributors to positive momentum include some companies reabsorbing sublease space, high-vacancy buildings earmarked for conversions to other property types, and a drop in the number of large new vacancies coming to market,” Colliers said.
But going forward, there are some concerns over local employment, with Colliers noting that “heavy office” industries have been trimmed.
“The reduced white-collar workforce and the number of tenants with leases rolling that could downsize may both forestall a sustained recovery,” The Canada-based company warned.