Boston’s Premier Buildings Continue to Perform Amid Uncertainty, but no Office Building Trades in the CBD for 18 Months

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BOSTON—Boston’s premier office buildings continue to perform amid uncertainty in an increasingly bifurcated market, but there have been office building trades in the Central Business District (CBD) for six quarters, according to a report by JLL.

Source and Graphic Credit: JLL

Here are some of the highlights from the JLL report:

  • New construction continued to be a bright spot, but occupancy losses in existing buildings weighed on the market
  • Absorption in the first half of 2023 was -2.6 million s.f., with more than -1.2 million s.f. of that coming from subleases alone.
  • There have been no office building trades in the CBD for six quarters, as values remain clouded amid an uncertain future of office.

“Direct vacancy in the region rose to its highest point since the aftermath of the Great Financial

Crisis. This has been fueled in part by larger tenants no longer simply placing space on the sublease market but making more permanent decisions about their needs going forward,” the report said.

The report said that the sublease market still saw a good deal of activity.

“There is now more than 4.2 million s.f. of sublease space available in the city and almost 8 million s.f. across the region, both record highs. Even amid a challenging market, top-tier space is still performing. Asking rents in the city only lost half a percentage point this quarter, buoyed by increased rates in new Class A product,” the report said.

Delivery of new construction projects in the second half of 2023 will help stabilize the market, and vacancy rate increases should start to decelerate, the report said.

“After zero office trades occurring in the last 18 months in the city, assets are expected to be made available over the next six months, regardless of market receptiveness,” the report said. “This expected dynamic should help reset valuations, which could trickle into the leasing market in the form of lower rents. These are all the ingredients for Boston to start exiting this market slump and to position it to take advantage of any potential improved economic conditions ahead.”

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