ABG Commercial Realty  |  (617) 492 9900

View Saved Properties  |   Sign Up

Boston Area Office Market Report for Q2 2017

The Boston Office market ended the second quarter 2017 with a vacancy rate of 7.8%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,207,496 square feet in the second quarter. Vacant sublease space decreased in the quarter, ending the quarter at 2,270,773 square feet. Rental rates ended the second quarter at $22.25, an increase over the previous quarter. A total of six buildings delivered to the market in the quarter totaling 726,564 square feet, with 3,914,320 square feet still under construction at the end of the quarter.

Absorption

Net absorption for the overall Boston office market was positive 1,207,496 square feet in the second quarter 2017. That compares to positive 1,209,973 square feet in the first quarter 2017, positive 454,648 square feet in the fourth quarter 2016, and positive 2,586,794 square feet in the third quarter 2016.

The Class-A office market recorded net absorption of positive 1,021,886 square feet in the second quarter 2017, compared to positive 483,831 square feet in the first quarter 2017, positive 758,859 in the fourth quarter 2016, and positive 1,558,264 in the third quarter 2016.

The Class-B office market recorded net absorption of positive 29,352 square feet in the second quarter 2017, compared to positive 717,121 square feet in the first quarter 2017, negative (220,132) in the fourth quarter 2016, and positive 673,654 in the third quarter 2016.

The Class-C office market recorded net absorption of positive 156,258 square feet in the second quarter 2017 compared to positive 9,021 square feet in the first quarter 2017, negative (84,079) in the fourth quarter 2016, and positive 354,876 in the third quarter 2016.

Net absorption for Boston’s central business district was positive 148,606 square feet in the second quarter 2017. That compares to negative (381,832) square feet in the first quarter 2017, positive 47,604 in the fourth quarter 2016, and positive 823,470 in the third quarter 2016.

Net absorption for the suburban markets was positive 1,058,890 square feet in the second quarter 2017. That compares to positive 1,591,805 square feet in first quarter 2017, positive 407,044 in the fourth quarter 2016, and positive 1,763,324 in the third quarter 2016.

Vacancy

The office vacancy rate in the Boston market area decreased to 7.8% at the end of the second quarter 2017. The vacancy rate was 8.0% at the end of the first quarter 2017, 8.1% at the end of the fourth quarter 2016, and 8.2% at the end of the third quarter 2016.

Class-A projects reported a vacancy rate of 9.5% at the end of the second quarter 2017, 9.7% at the end of the first quarter 2017, 9.6% at the end of the fourth quarter 2016, and 10.1% at the end of the third quarter 2016.

Class-B projects reported a vacancy rate of 8.4% at the end of the second quarter 2017, 8.5% at the end of the first quarter 2017, 9.0% at the end of the fourth quarter 2016, and 8.8% at the end of the third quarter 2016.

Class-C projects reported a vacancy rate of 3.5% at the end of the second quarter 2017, 3.7% at the end of first quarter 2017, 3.8% at the end of the fourth quarter 2016, and 3.7% at the end of the third quarter 2016.

The overall vacancy rate in Boston’s central business district at the end of the second quarter 2017 decreased to 7.5%. The vacancy rate was 7.7% at the end of the first quarter 2017

Rental Rates

The average quoted asking rental rate for available office space, all classes, was $22.25 per square foot per year at the end of the second quarter 2017 in the Boston market area. This represented a 3.1% increase in quoted rental rates from the end of the first quarter 2017, when rents were reported at $21.59 per square foot. The average quoted rate within the Class-A sector was $27.65 at the end of the second quarter 2017, while Class-B rates stood at $20.98, and Class-C rates at $18.27. At the end of the first quarter 2017, Class-A rates were $26.45 per square foot, Class-B rates were $20.63, and Class-C rates were $17.94. The average quoted asking rental rate in Boston’s CBD was $46.35 at the end of the second quarter 2017, and $21.64 in the suburban markets. In the first quarter 2017, quoted rates were $46.02 in the CBD and $20.82 in the suburbs.

Deliveries and Construction

During the second quarter 2017, six buildings totaling 726,564 square feet were completed in the Boston market area. This compares to five buildings totaling 910,027 square feet that were completed in the first quarter 2017, two buildings totaling 61,600 square feet completed in the fourth quarter 2016, and 1,969,901 square feet in 10 buildings completed in the third quarter 2016.

There were 3,914,320 square feet of office space under construction at the end of the second quarter 2017. Some of the notable 2017 deliveries include: 123 Foley St, an 850,000-square-foot facility that delivered in first quarter 2017 and is now 100% occupied, and 50-60 Binney St at Kendall Square, a 505,000-square-foot building that delivered in second quarter 2017 and is now 99% occupied.

The largest projects underway at the end of second quarter 2017 were 100 Binney St at Kendall Square, a 431,500- square-foot building with 49% of its space pre-leased, and 200 Smith Street v Post, a 430,000-square-foot facility that is 0% pre-leased.

Sales Activity

Tallying office building sales of 15,000 square feet or larger, Boston office sales figures rose during the first quarter 2017 in terms of dollar volume compared to the fourth quarter of 2016.

In the first quarter, 32 office transactions closed with a total volume of $2,137,011,435. The 32 buildings totaled 4,664,644 square feet and the average price per square foot equated to $458.13 per square foot. That compares to 41 transactions totaling $750,969,549 in the fourth quarter 2016. The total square footage in the fourth quarter was 4,058,816 square feet for an average price per square foot of $185.02. Total office building sales activity in 2017 was up compared to 2016. In the first three months of 2017, the market saw 32 office sales transactions with a total volume of $2,137,011,435. The price per square foot averaged $458.13. In the same first three months of 2016, the market posted 38 transactions with a total volume of $1,012,140,930. The price per square foot averaged $305.83.

Cap rates have been higher in 2017, averaging 6.65% compared to the same period in 2016 when they averaged 6.01%. One of the largest transactions that has occurred within the last four quarters in the Boston market is the sale of One Federal Street in Boston. This 1,120,577-square-foot office building sold for $705,000,000, or $629.14 per square foot. The property sold on 4/28/2017.

Information provided by CoStar.com

LET US HELP YOU FIND PROPERTIES OF INTEREST.

Best Commercial Real Estate Advice
to Increase Your Investment Returns? Sign-up below...

Get the latest CRE News, Market Trends & Insights to make the best decisions.
Subscribe to our monthly newsletter! Let us better serve you.


First Name
Invalid Input

Last Name
Invalid Input

Email(*)
Invalid Input

Phone
Invalid Input

Preferred Email

Invalid Input
Invalid Input
Invalid Input

We hate SPAM and promise to keep your email address safe.