Tenant Report


Cresa Boston

200 State Street

Boston, MA 02109

617.758.6000 main

www.cresa.com

 

 

 

 

At Cresa, we represent tenants, not landlords, so we avoid conflicts of interest. Through our integrated corporate services, we align your real estate with your business plan, cutting costs and increasing productivity.

 

 

 

 

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Volume 8, 2013

As Summer Winds Down,

Boston and Cambridge Markets Grow Hotter

 

While much of the suburbs as well as pockets in Boston and Cambridge continue to have a high inventory of office space, rents keep rising as vacancy keeps dropping in the area's hottest submarkets, the Back Bay, and East and Mid-Cambridge. Class A vacancy in the Back Bay now averages 6% while Class A is even lower in Mid-Cambridge and East Cambridge (1% in Kendall Square and 1.5% in Central Square).

  

Average rents for Class A office space in the Back Bay are over $57/SF and almost $78/SF for high-rise space. In Cambridge, average Class A office and lab space rents are in the high $50s.

 

Other Boston Trends 

  • With demand increasing in the Seaport and even in the low-rise tower space, many tenants from Cambridge are looking in other submarkets. In fact, Downtown Crossing has become the new Seaport, and North Station is seeing an uptick of activity as well. Average Class A rents in the Seaport are up to $52/SF, with much better value available in Downtown Crossing and North Station, where rents are in the mid-$30's/SF range.
     
  • Demand for Class B space has also increased, with many companies seeking second-generation, rehabilitated "creative space." An example is Arnold Worldwide's commitment to lease 120,000 SF at the Burnham Building, former site of Filene's Basement in Downtown Crossing.
     
  • Another ongoing trend is rising investment sales, with many buildings changing hands, including about one-third of the buildings in the Seaport. Overall Boston sales activity increased approximately 50% over the same period last year.
     
  • In addition, new construction continues to attract large corporate tenants, especially in the Seaport, with PriceWaterhouseCoopers' recent lease to build new offices and Goodwin Procter's commitment to lease space in a new hotel and office building at Fan Pier. More than 90% of the space under construction is pre-leased.
     
  • Overall, perhaps the strongest indicator of the health of Boston's market is the fact that unemployment is down to 5.2%, as the city has regained all the jobs it lost during the economic downturn.

Other Cambridge Trends

  • Beyond the sizzling markets in East and Mid-Cambridge, where very few large blocks of space are available, even West Cambridge and Alewife are showing more velocity.
     
  • Fueling the boom in Cambridge are the technology giants. In addition to Google, Microsoft, and Amazon.com, Twitter has recently joined the tech parade. These companies are growing and looking to recruit and maintain top talent. For this reason, space near MIT and Harvard is at a premium.
     
  • This area's workforce includes the country's largest concentration of people aged 18-34. Many young professionals are seeking alternative means of transportation in their commutes, utilizing public transportation, with many commuters walking and biking to work as well.
     
  • While parking in downtown Boston can eclipse $500 per month, the parting ratio in Kendall Square is one space per 1,000 SF leased. It's all about proximity, not only to the universities but also to the MBTA.
     
  • Overall, many big companies in Cambridge are buying smaller startups, and they're willing to pay the price to land their choice space and location. 

Takeaway for Tenants

What is our advice to companies that want to be in Greater Boston's hottest markets? They should understand that the landlord is now in the driver's seat in the prime locations. On the other hand, markets like South Station and Lechmere are recording high vacancy and more value opportunities.

 

Whatever the market conditions, tenants need to protect their interests when negotiating with landlords. Tenants should be nimble and prepared to strike...because while the temperatures may be cooling, the forecast is for the office market in Greater Boston to remain hot.

 

For more information on these markets,

contact Brandon Leitner for Boston

and John Coakley for Cambridge.

You can also check our Boston Tenant's Guide here.

 


About Cresa
Cresa is an international corporate real estate advisory firm that exclusively represents tenants and specializes in the delivery of fully integrated real estate services, including: Transaction Management, Project Management, Corporate Solutions, Portfolio Strategies, Location Planning, Lease Administration, Capital Markets, Mission Critical Solutions, and Facilities Services. With more than 58 offices, Cresa is the largest tenant representation firm in North America. Through its partnership with Savills, one of the world's largest commercial real estate services firms; Cresa covers more than 173 locations in 40 countries. For more information, visit www.cresa.com.