BOSTON – Despite experiencing a 17.1% vacancy rate, Boston remains one of the tightest office markets in the U.S. and stands as the only market in the Northeast to report year-over-year rent growth, which surged to $47 per square foot, according to the latest report from CommercialEdge.
In comparison, Manhattan holds the title of the nation’s priciest office market, with an average rate of $68.93 per square foot. However, it saw a slight 3.6% decrease year-over-year. Meanwhile, Philadelphia, with an average in-place rent of $30.86 per square foot, stands as the most affordable office market in the Northeast, significantly below the national average of $33.41.
Key Market Highlights:
-
Northeastern Investment Activity: The Northeastern region continues to demonstrate robust office investment activity. Manhattan leads the region both in sales volume and prices. By the start of 2025, the market had recorded $1.8 billion in office sales year-to-date, marking a substantial increase from just $77 million a year ago.
-
Manhattan’s Sale Prices: Manhattan’s office properties continue to command top-tier prices, with one of the highest nationwide sale prices at $450 per square foot. This reinforces its reputation as a premier office market despite broader market challenges.
-
New Jersey’s Strong Performance: New Jersey ranked fourth nationally in total office sales, with $409 million in transactions year-to-date. Office properties in the state traded at $179 per square foot, slightly above the national average of $177, reflecting continued investor interest.
-
Boston’s Vacancy Trend: While Boston’s vacancy rate increased by 490 basis points year-over-year to 17.1%, it remains one of the tightest markets in the country. The city’s relative strength contrasts with other markets that have seen even higher vacancy rates.
-
Philadelphia’s Vacancy Challenge: Philadelphia was the only market in the Northeast to exceed the national average vacancy rate, posting a 20% vacancy rate, highlighting its struggles with excess office supply in the region.
National Office Market Overview:
-
National Vacancy Rates: The national office vacancy rate stood at 19.7% in February 2025, reflecting an increase of 180 basis points year-over-year. This trend indicates ongoing challenges within the office sector across the U.S.
-
Rent Growth: Nationally, the average listing rate for office space climbed to $33.41 per square foot, marking a 5.7% year-over-year increase. This growth signals continued demand for office space in certain markets, particularly in higher-demand urban areas.
-
Construction and Development: A total of 48.6 million square feet of office space is currently under construction nationwide, representing 0.7% of the total office stock. Planned projects will bring the national development pipeline to 2.6% of total stock, indicating that developers remain optimistic despite broader market headwinds.
Top Listings by Metro Area: February 2025
2025 Set to Be Another Slow Year for Office Construction
The office construction pipeline continued to shrink, with 48.6 million square feet of space currently under construction nationally, representing 0.7% of the total stock.
Office deliveries hit a 10-year low in 2024, with 2025 likely to finish even lower. Construction starts totaled just 11.3 million square last year, and a significant rebound is not expected anytime soon, according to our office real estate outlook. With rising vacancies, an uncertain economic landscape and remote and hybrid work entrenched at many firms, the appetite to build new office space has all but dried up.
Data as of February 2025. Table does not include owner-occupied properties.
Houston was the only office market to eclipse 1 million square feet of office starts in 2024. As the nation’s seventh largest market by office square footage, Houston is seeing development shift out of the CBD and into outlying areas. Although its CBD accounts for 16% of total inventory, no projects are currently underway or in the planning stages there. The largest project started last year in Houston is a 320,000-square-foot building at the mixed-use development City Centre in the Memorial Villages submarket.
Summary
Boston’s office market remains resilient despite the rise in vacancy, with positive rent growth outpacing other Northeastern markets. Meanwhile, national trends reveal a slight increase in vacancy rates and continued rent growth across the U.S., driven by high demand in prime locations. Investors are increasingly focused on key markets like Manhattan, New Jersey, and Boston, which continue to outperform other regions in terms of sales and rental rates.
To read the full CommercialEdge report, please click here.
