Cassidy Turley today released its year-end MarketWatch research that tracks the performance of the commercial real estate market in Boston, Cambridge and the suburbs. For the second consecutive year, downtown Boston was stable and balanced. Q4 brought the delivery Vertex’s 1.1 MSF facility at Fan Pier – positive absorption which was offset by the listing of Goodwin Procter’s space (400,000 SF at 53 State Street) and PwC’s space (370,000 SF at 125 High Street) in anticipation of the groundbreaking of their respective build-to-suits in the Seaport District.
2013 brought no surprises in Cambridge – at 7.2%, vacancy remains tight - and Kendall Square is still the neighborhood to beat. Office rents in East Cambridge jumped another 9.3% this year. Twitter committed to space at 141 Portland Street while the proverbial word on the street is that Google may be expanding.
In the suburbs, everything is for sale. Along Route 128, 20% of inventory was sold or put on the market – and risk-averse buyers are setting the tone for the market place. Sellers who are able to secure anchor tenants are selling their assets quickly - and their pricing bids are being met. (Wellesley Office Park, Adobe, 200 Unicorn Park). In Burlington alone, more than 50% of the office inventory traded hands this year – from New England Executive Park to Burlington Woods.
In the west, we continued to see renewals of large, anchor tenants. And, in the north, (a market with exposure to government contracting agencies) leasing activity slowed down in the second half of the year.
- At (290,871) SF YTD, Boston ended 2013 with lower absorption than 12 months ago – but this number is deceptive.
- Behind it lies the delivery of Vertex’s facility at Fan Pier, as well as the listing of multiple large blocks of space (460,000 SF of Lexington Insurance space at 100 Summer Street in addition to PwC, Goodwin Procter)
- As a result, availability (space listed for lease – that may be physically occupied) ticked up 1.6 percentage points in the past year.
- However, vacancy (space that is physically unoccupied) declined 50 basis points – a sign that even though footprints are shrinking, demand for space remains consistent.
- At 22.8%, class A availability in the Financial District is historically high, yet with vacancy at 12.6%, asking rents have risen 2.6% in the past 12 months.
- The Seaport remains the hottest submarket in the city
- At $52.92 PSF, asking rents are only 2.0% lower than class A asking rents in Back Bay.
- East Cambridge office rents are up 9.3%in the past 12 months while vacancy (at 6.4%) has declined 1.9 percentage points in the same time frame.
- East Cambridge vacancy has been below 10% since mid-2006 – and asking rents have skyrocketed 61.3% in the same time.
- Since vacancy has been tight for so long and asking rents continue to rise, why is there not more speculative office construction?
- Currently only one spec office building is under redevelopment - 40 Thorndike Street- scheduled to deliver by the end of 2014. We will be watching to see who leases it.
Burlington on fire
- The 128 Central market continues to heat up
- Office availability dropped 3.5percentage points year-over-year
- This means there are no contiguous class A options for a 100,000+ SF user.
- Functionally obsolete buildings in well-located areas are still performing—some being backfilled while others are prepped for redevelopment (Wyman Street, CityPoint)
- Burlington is particularly hot—198,647SF of positive absorption YTD
- Burlington’s office vacancy is 3.4 percentage points lower than Waltham’s and 1.6 percentage points lower than the overall 128 Central office market
- 2 new construction projects delivered in Burlington this year including the first spec building along 128 Central since 2010 (175-185 Wyman)
- In 2013, we witnessed a steep uptick in investment sales across the suburban market– particularly along route 128 Central, where approximately 50% of the inventory in Burlington traded this year
- Statistics do not represent the psychology of the market – although availability may be high in certain submarkets, there are very limited options in existing Class A buildings.
- Tenants scrambling to find space are looking to secondary markets and are discovering there is no relief valve. For users willing to move further west – Natick and Framingham are also tight with rising rents.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,800 professionals in more than 60 offices nationwide. With headquarters in Washington, DC, the company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2012, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 23,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley. - See more at: http://www.cassidyturley.com/news/press-releases/entry/topic/cassidy_turley_hires_new_associate#sthash.gKnWOUTc.dpuf
Linda M. McDonough