BOSTON–Boston office rents continued to climb during the second quarter, and forecasters are optimistic for the year ahead, according to CBRE’s Q2 2019 Boston office market report.
In the Boston office market, asking rents continued to climb, reaching $64.51 per sq. ft. With rents only at $57.01 per sq. ft. at this time last year, year-over-year rent growth was 13.2%, the highest it has been in over a decade. In Q2, Class B rents remained flat from Q1. The Boston office market had a solid second quarter with 164,000 sq. ft. of positive absorption, and vacancy fell from 7.2% to 6.2%.
“In the Back Bay we saw several situations where a firm deliberately leased more space than needed and subleased the extra portion to ensure themselves a chance to expand. This is known as defensive leasing and indicates strength in a market,” said Suzanne Duca, Director of Research for CBRE.
CBD Office Market: The CBD had the strongest second quarter of all the Boston submarkets, boasting 383,000 sq. ft. of positive absorption. This leasing activity corresponded with a substantial drop in vacancy, which fell from 7.8% in Q1 to 6.1% in Q2. This is the lowest vacancy has been in the CBD since 2008.
Back Bay Office Market: Asking rents in the Back Bay continued to climb in the second quarter, breaking $70.00 per sq. ft. for the first time ever. This represents 9.1% growth year-over-year and validates the market’s resurgence in recent years, despite the rise of the Seaport. Vacancy also continued to compress, and fell to 5.5%, making it once again the lowest of the downtown submarkets.
Back Bay posted 232,000 sq. ft. of negative absorption in the second quarter; however, the bulk of that was not due to tenants moving out. Over 211,000 sq. ft. of space was put on the sublease market in a prime example of defensive leasing.
Seaport Office Market: Average asking rents in the Seaport remained relatively at $66.24 per sq. ft. and posted modestly positive absorption of 59,000 sq. ft. Vacancy tightened to 9.2%.