The Boston office market has been heavily impacted by a downshift in demand, with the life sciences sector, once a major driver of leasing, remaining dormant throughout 2024. Other key industries, such as technology, finance, and professional services, are in a holding pattern, with few large leases signed this year. This lack of leasing activity has been compounded by a significant wave of new deliveries, contributing to the highest vacancy rate in the metro’s history at 13.9%. This mirrors the national figure, but Boston’s vacancy rate has more than doubled from its low of 6.7% in Q4 2019, with projections indicating it will surpass the national rate by mid-2025.
Foot traffic data indicates a 10.3% year-over-year improvement in Boston office attendance, the largest increase among major U.S. metros. Despite this improvement, Boston still lags behind the national average, with office attendance at 67.4% of pre-pandemic levels. Though recovery is underway, office attendance is still below full recovery, leading to significant space reductions. Over the past 12 months, tenants have returned 5.3 million square feet of space, marking the largest negative absorption in the city since 2001. With availability now surpassing 18%, including 13 million square feet of sublease space, the market faces challenges in absorbing the surplus supply.
The market has seen an influx of new space, with 17 million square feet delivered in the past three years, the highest rate of construction in over two decades. This surge in supply has been a major contributor to the spike in available space. Furthermore, Boston is set to face additional challenges with another 7.6 million square feet of office space slated to be delivered by the end of 2026, much of it geared toward labor-oriented development. This excess supply is expected to continue exerting downward pressure on the market.
Transaction volume in Boston was subdued through 2024, recording the lowest sales volume in the past 15 years. Only two transactions reached the nine-figure mark: a leasehold for lab-oriented office buildings and a new construction asset in the urban core, both of which were largely leased at the time of sale. Despite rate cuts at the end of 2024, liquidity has not returned to the market, and there is a likelihood of repricing among distressed assets. However, new construction assets in the central business district are still setting records for price per square foot.
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