ABG Commercial Realty  |  (617) 492 9900

View Saved Properties  |   Sign Up

Boston Area Office Market Report for Q4 2018

The Boston Office market ended the fourth quarter 2018 with a vacancy rate of 7.6%. The vacancy rate was up over the previous quarter, with net absorption totaling positive 27,397 square feet in the fourth quarter. Vacant sublease space increased in the quarter, ending the quarter at 2,348,220 square feet. Rental rates ended the fourth quarter at $23.28, an increase over the previous quarter. A total of six buildings delivered to the market in the quarter totaling 980,044 square feet, with 4,281,701 square feet still under construction at the end of the quarter.

Absorption

Net absorption for the overall Boston office market was positive 27,397 square feet in the fourth quarter 2018. That compares to positive 2,214,406 square feet in the third quarter 2018, positive 754,534 square feet in the second quarter 2018, and positive 173,235 square feet in the first quarter 2018. Tenants moving out of large blocks of space in 2018 include: PTC, Inc. moving out of 307,253 square feet at 140 Kendrick Street; and Novartis Institutes moving out of 255,440 square feet at 100 Technology Square; and GE Healthcare moving out of 208,101 square feet at 200 Forest Square. Tenants moving into large blocks of space in 2018 include: Shire moving into 226,678 square feet at 75-125 Binney Street; SharkNinja moving into 211,610 square feet at 89 A Street; and The Boston Consulting Group moving into 196,247 square feet at 200 Pier Four Boulevard. The Class-A office market recorded net absorption of positive 62,052 square feet in the fourth quarter 2018, compared to positive 1,454,303 square feet in the third quarter 2018, positive 750,470 in the second quarter 2018, and positive 175,006 in the first quarter 2018. The Class-B office market recorded net absorption of negative 195,513 square feet in the fourth quarter 2018, compared to positive 647,811 square feet in the third quarter 2018, positive 42,936 in the second quarter 2018, and negative 37,345 in the first quarter 2018. The Class-C office market recorded net absorption of positive 160,858 square feet in the fourth quarter 2018 compared to positive 112,292 square feet in the third quarter 2018, negative 38,872 in the second quarter 2018, and positive 35,574 in the first quarter 2018. Net absorption for Boston’s central business district was positive 59,235 square feet in the fourth quarter 2018. That compares to positive 1,034,281 square feet in the third quarter 2018, positive 473,235 in the second quarter 2018, and positive 463,995 in the first quarter 2018. Net absorption for the suburban markets was negative 31,838 square feet in the fourth quarter 2018. That compares to positive 1,180,125 square feet in third quarter 2018, positive 281,299 in the second quarter 2018, and negative 290,760 in the first quarter 2018.

Vacancy

The office vacancy rate in the Boston market area increased to 7.6% at the end of the fourth quarter 2018. The vacancy rate was 7.4% at the end of the third quarter 2018, 7.5% at the end of the second quarter 2018, and 7.6% at the end of the first quarter 2018. Class-A projects reported a vacancy rate of 9.5% at the end of the fourth quarter 2018, 9% at the end of the third quarter 2018, 9.2% at the end of the second quarter 2018, and 9.3% at the end of the first quarter 2018. Class-B projects reported a vacancy rate of 8.1% at the end of the fourth quarter 2018, 8% at the end of the third quarter 2018, and 8.1% at the end of the second and first quarter 2018. Class-C projects reported a vacancy rate of 3.1% at the end of the fourth quarter 2018, 3.3% at the end of third quarter 2018, 3.4% at the end of the second quarter 2018, and 3.3% at the end of the first quarter 2018. The overall vacancy rate in Boston’s central business district at the end of the fourth quarter 2018 increased to 5.9%. The vacancy rate was 5.4% at the end of the third quarter 2018, 5.6% at the end of the second quarter 2018, and 5.7% at the end of the first quarter 2018. The vacancy rate in the suburban markets increased to 8.3% in the fourth quarter 2018. The vacancy rate was 8.1% at the end of the third quarter 2018, and 8.2% at the end of the second and first quarter 2018.

Rental Rates

The average quoted asking rental rate for available office space, all classes, was $23.28 per square foot per year at the end of the fourth quarter 2018 in the Boston market area. This represented a 0.6% increase in quoted rental rates from the end of the third quarter 2018, when rents were reported at $23.15 per square foot. The average quoted rate within the Class-A sector was $29.42 at the end of the fourth quarter 2018, while Class-B rates stood at $21.44, and Class-C rates at $19.83. At the end of the third quarter 2018, Class-A rates were $29.44 per square foot, Class-B rates were $21.29, and Class-C rates were $19.35. The average quoted asking rental rate in Boston’s CBD was $48.27 at the end of the fourth quarter 2018, and $22.31 in the suburban markets. In the third quarter 2018, quoted rates were $50.50 in the CBD and $22.06 in the suburbs.

Deliveries and Construction

During the fourth quarter 2018, six buildings totaling 980,044 square feet were completed in the Boston market area. This compares to 14 buildings totaling 1,921,030 square feet that were completed in the third quarter 2018, two buildings totaling 618,677 square feet completed in the second quarter 2018, and 139,764 square feet in six buildings completed in the first quarter 2018. There were 4,281,701 square feet of office space under construction at the end of the fourth quarter 2018. Some of the notable 2018 deliveries include: 121 Seaport Boulevard, a 458,642-square-foot facility that delivered in second quarter 2018 and is now 88% occupied, and 100 Binney Street at Kendall Square, a 431,500-square-foot building that delivered in third quarter 2018 and is now 100% occupied. The largest projects underway at the end of fourth quarter 2018 were 145 Broadway, a 486,048-square-foot building with 100% of its space pre-leased to Akamai, and 250 North Street, a 430,000-square-foot facility that is 99% pre-leased.

Sales Activity

Tallying office building sales of 15,000 square feet or larger, Boston office sales figures rose during the third quarter 2018 in terms of dollar volume compared to the second quarter of 2018. In the third quarter, 30 office transactions closed with a total volume of $1,485,939,420. The 30 buildings totaled 3,005,686 square feet and the average price per square foot equated to $494.38 per square foot. That compares to 33 transactions totaling $1,448,454,480 in the second quarter 2018. The total square footage in the second quarter was 3,037,901 square feet for an average price per square foot of $476.79. Total office building sales activity in 2018 was down compared to 2017. In the first nine months of 2018, the market saw 98 office sales transactions with a total volume of $3,712,477,472. The price per square foot averaged $356.25. In the same first nine months of 2017, the market posted 106 transactions with a total volume of $5,745,165,651. The price per square foot averaged $388.18. Cap rates have been lower in 2018, averaging 6.56% compared to the same period in 2017 when they averaged 6.60%. One of the largest transactions that has occurred within the last four quarters in the Boston market is the sale of Exchange Place in Boston. This 1,234,434-square-foot office building sold for $845,000,000, or $684.52 per square foot. The property sold on 11/29/2018.

Information provided by CoStar.com

This website uses cookies to improve your experience. By clicking accept and continuing on this site, you consent to our use of cookies. Read more in our privacy policy.
Ok Decline