ABG Commercial Realty  |  (617) 492 9900

View Saved Properties  |   Sign Up

Boston Area Office Market Report for Q1 2018

The Boston Office market ended the first quarter 2018 with a vacancy rate of 7.8%. The vacancy rate was unchanged over the previous quarter, with net absorption totaling negative (121,136) square feet in the first quarter. Vacant sublease space decreased in the quarter, ending the quarter at 2,165,045 square feet. Rental rates ended the first quarter at $23.10, an increase over the previous quarter. A total of three buildings delivered to the market in the quarter totaling 69,000 square feet, with 4,701,849 square feet still under construction at the end of the quarter.

Absorption

Net absorption for the overall Boston office market was negative (121,136) square feet in the first quarter 2018. That compares to positive 201,142 square feet in the fourth quarter 2017, positive 401,382 square feet in the third quarter 2017, and positive 1,113,846 square feet in the second quarter 2017. The Class-A office market recorded net absorption of positive 132,402 square feet in the first quarter 2018, compared to positive 432,156 square feet in the fourth quarter 2017, positive 419,929 in the third quarter 2017, and positive 680,439 in the second quarter 2017. The Class-B office market recorded net absorption of negative (278,728) square feet in the first quarter 2018, compared to negative (144,148) square feet in the fourth quarter 2017, positive 93,164 in the third quarter 2017, and positive 250,446 in the second quarter 2017. The Class-C office market recorded net absorption of positive 25,190 square feet in the first quarter 2018 compared to negative (86,866) square feet in the fourth quarter 2017, negative (111,711) in the third quarter 2017, and positive 182,961 in the second quarter 2017. Net absorption for Boston’s central business district was positive 455,952 square feet in the first quarter 2018. That compares to positive 94,567 square feet in the fourth quarter 2017, positive 226,304 in the third quarter 2017, and positive 291,271 in the second quarter 2017. Net absorption for the suburban markets was negative (577,088) square feet in the first quarter 2018. That compares to positive 106,575 square feet in fourth quarter 2017, positive 175,078 in the third quarter 2017, and positive 822,575 in the second quarter 2017.

Vacancy

The office vacancy rate in the Boston market area remained at 7.8% at the end of the first quarter 2018. The vacancy rate was 7.8% at the end of the fourth quarter 2017, 7.7% at the end of the third quarter 2017, and 7.6% at the end of the second quarter 2017. Class-A projects reported a vacancy rate of 9.3% at the end of the first quarter 2018, 9.4% at the end of the fourth quarter 2017, 9.3% at the end of the third quarter 2017, and 9.3% at the end of the second quarter 2017. Class-B projects reported a vacancy rate of 8.6% at the end of the first quarter 2018, 8.4% at the end of the fourth quarter 2017, 8.3% at the end of the third quarter 2017, and 8.2% at the end of the second quarter 2017. Class-C projects reported a vacancy rate of 3.6% at the end of the first quarter 2018, 3.6% at the end of fourth quarter 2017, 3.5% at the end of the third quarter 2017, and 3.4% at the end of the second quarter 2017. The overall vacancy rate in Boston’s central business district at the end of the first quarter 2018 decreased to 5.7%. The vacancy rate was 6.1% at the end of the fourth quarter 2017, 6.2% at the end of the third quarter 2017, and 6.5% at the end of the second quarter 2017. The vacancy rate in the suburban markets increased to 8.5% in the first quarter 2018. The vacancy rate was 8.3% at the end of the fourth quarter 2017, 8.2% at the end of the third quarter 2017, and 8.0% at the end of the second quarter 2017.

Rental Rates

The average quoted asking rental rate for available office space, all classes, was $23.10 per square foot per year at the end of the first quarter 2018 in the Boston market area. This represented a 1.9% increase in quoted rental rates from the end of the fourth quarter 2017, when rents were reported at $22.67 per square foot. The average quoted rate within the Class-A sector was $30.71 at the end of the first quarter 2018, while Class-B rates stood at $20.49, and Class-C rates at $18.68. At the end of the fourth quarter 2017, Class-A rates were $29.36 per square foot, Class-B rates were $20.16, and Class-C rates were $18.80. The average quoted asking rental rate in Boston’s CBD was $50.07 at the end of the first quarter 2018, and $22.02 in the suburban markets. In the fourth quarter 2017, quoted rates were $48.30 in the CBD and $21.76 in the suburbs.

Deliveries and Construction

During the first quarter 2018, three buildings totaling 69,000 square feet were completed in the Boston market area. This compares to four buildings totaling 598,112 square feet that were completed in the fourth quarter 2017, seven buildings totaling 681,592 square feet completed in the third quarter 2017, and 727,564 square feet in six buildings completed in the second quarter 2017. There were 4,701,849 square feet of office space under construction at the end of the first quarter 2018. Some of the notable 2018 deliveries include: 198 Charlton Rd, a 44,000-square-foot facility that delivered in first quarter 2018 and is now 18% occupied, and 380 Main St, a 20,000- square-foot building that delivered in first quarter 2018 and is now 94% occupied. The largest projects underway at the end of first quarter 2018 were 145 Broadway, a 486,048-square-foot building with 100% of its space pre-leased, and 100 Binney St, a 431,500- square-foot facility that is 100% pre-leased.

Sales Activity

Tallying office building sales of 15,000 square feet or larger, Boston office sales figures fell during the fourth quarter 2017 in terms of dollar volume compared to the third quarter of 2017. In the fourth quarter, 39 office transactions closed with a total volume of $789,821,050. The 39 buildings totaled 3,445,180 square feet and the average price per square foot equated to $229.25 per square foot. That compares to 35 transactions totaling $955,351,336 in the third quarter 2017. The total square footage in the third quarter was 3,577,083 square feet for an average price per square foot of $267.08. Total office building sales activity in 2017 was up compared to 2016. In the twelve months of 2017, the market saw 146 office sales transactions with a total volume of $6,683,697,626. The price per square foot averaged $362.07. In the same twelve months of 2016, the market posted 172 transactions with a total volume of $4,361,977,935. The price per square foot averaged $288.31. Cap rates have been higher in 2017, averaging 6.62% compared to the same period in 2016 when they averaged 6.57%. 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

{spam:body}