BOSTON– Cushman and Wakefield, a global real estate services firm, released its third quarter market research tracking performance of the commercial real estate market in Boston, Cambridge and the suburbs.
Limited supply for large users continues to be the prevailing theme in Boston – along with rapidly escalating rents. Vacancy remains at 4.9 percent from the previous quarter and is only 20 basis points higher than the all-time low of 4.7 percent in 2000. Rents have also reached near all-time highs. Asking rents are rising so rapidly that lease comparables no longer reflect the market. Percentage escalations throughout the lease term have all but replaced traditional “dollar bumps,” with 2.5 percent to 3.0 percent per year as the new normal.
Third quarter rents hit historical high-water marks in Boston with many Class-A properties commanding starting rents into the low $80s per square feet (psf). Absorption totaled just under 600,000 square feet (sf) – essentially flat over mid-year 2019, which represents a slight decline over the first quarter but is almost solely attributable to two large new availabilities coming online in the second quarter, 10 Saint James Ave. (200,000 sf.) and One Post Office Square (300,000 sf.).
In Cambridge, the third quarter brought more of the same – continually rising rents and virtually no availability. With over three million sf. of demand, deals are still being executed – predominantly in space that never hits the market. The Cambridge lab market remains the tightest and most expensive in the region. Many high-end office and lab rents are now starting at or above the $100 psf. range. At 0.8 percent, overall lab vacancy remained unchanged over the second quarter. In East Cambridge, lab vacancy is at zero percent, while the Massachusetts. Ave. Corridor is at 0.2 percent.
Life science activity and new construction continue to dominate in the suburbs. At negative 226,000 sf. year-to-date, absorption reflected both large and new availabilities in the second quarter as well as several significant new leases in the third quarter. The third quarter also brought a string of large office leases and several large new life science communities in Watertown.