Greater Boston office market: slow quarter, strong fundamentals

BOSTON – Greater Boston’s office market had an uncharacteristically slow second quarter, posting 102,000 square feet of negative absorption, according to Transwestern Consulting Group’s “officeSTATus – Q2 2017” report.

Despite the negative quarter, only the second in more than four years, the market remains robust, with a strong 12.3 percent vacancy rate and 1.7 million square feet of positive absorption during the last 12 months.

“A slow quarter comes as a bit of a surprise in Greater Boston, given the tremendous results of the past four or five years,” said Chase Bourdelaise, Managing Director of Research and Analytics. “There were no huge events to cause the soft quarter but rather a lack of any major expansions, alongside a few consolidations. Based on the number of good-sized leases pending in the near-term, we feel that the market will be back to positive in very short order.”

Chase Bourdelaise

Highlights from the report include:
• Market-wide vacancy dropped to 12.3 percent from 12.5 percent in the prior quarter.
• Boston CBD’s 195,000 square feet of negative absorption during the quarter is balanced by its 622,000 square feet of positive absorption during the past 12 months.
• Vacancy in Boston remained steady at 9.4 percent, although Class A average asking lease rates rose significantly from the prior quarter, from $55.79 to $57.13 per square foot.
• The Cambridge market had 108,000 square feet of negative absorption.
• Cambridge vacancy rose 1 percentage point to 3.8 percent, still well below the five-year average of 5.7 percent.
• The Interstate 495 market posted 396,000 square feet of positive absorption, the largest since 2008, extending its streak to three quarters.
• Vacancy along I-495 decreased 1.8 percentage points to 19.9 percent, while average asking lease rates for Class A space rose slightly to $22 per square foot.
• Along Route 128, there was negative absorption of 179,000 square feet, pushing vacancy up a slight 0.3 percentage points to 13 percent.
• Despite the negative quarter, the three Route 128 submarkets have totaled 602,000 square feet of positive absorption during the past 12 months.

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