BOSTON—Boston office market is finally gaining some momentum. The new development of lab buildings, however, is unlikely in 2025, but lab fit outs could be another story.
“Based on the amount of lab vacancies in the market and the new lab buildings that have come to market in 2024 we expect very little construction of new lab buildings in 2025,” says Bryan Northrop, executive vice president and general manager at Skanska USA Building, New England region. “We expect to continue to see lab fit out projects in the market where tenants are moving into spaces or tenants need to make modifications to existing spaces.”
Mr. Northrop added that a fair amount of lab fit out work for Healthcare and Higher Education is expected.
“We do expect to see some opportunities for both clinical and production manufacturing spaces in 2025,” said Mr. Northrop.
Max Saia, vice president of investor research for VTS, said that after materially lagging and being slower to recover compared to other major markets since the pandemic, office demand in Boston finally demonstrated substantial momentum in 2024, an early positive indicator of office leasing momentum to follow in Boston in 2025, and proving that tenants are once again on the move looking for office space in the city.
“On a square footage basis, active demand for office is up 18% year-over-year, the highest of any of the nation’s gateway markets,” said Mr. Saia. “Much of this growth is attributed to the tech sector, which has a significant presence in Boston, with tech demand for office space growing every quarter from Q3 2023 to today, and Boston displaying the strongest year-over-year tech demand growth among all of the nation’s major office markets. Specifically, tech tenants are currently most active in the Seaport and Downtown submarkets.”
Here are some highlights from a recent report on the Boston office market from VTS:
- New demand in the past three months saw a significant increase, with 2.4 million square feet across 178 tenants entering the market, up 45% by square footage and 23% by tenant count compared to the prior quarter, and 21% and 15% higher, respectively, compared to the previous year.
- The finance sector drove the most demand in the past quarter with 0.7 million sf, up 57% from the same period last year, and led overall demand for the past year with 1.6 million sf.
- Starting rents for 2024 leases were flat compared to 2023, while concessions improved, dropping 2% from the same period.
