Boston Office Market

The greater Boston corporate real estate market is showing signs of recovery after being affected by the slow economy. Asking rents have leveled off and are slowly beginning to rise. Net absorption within the market is also increasing, according to John Drew, president of Boston-based Seaport Asset Management.

Though new developments are not occurring in Boston’s Financial District right now, they are taking place in South Boston Seaport District and other areas around Boston Harbor.

“The majority of undeveloped land in Boston is located in the South Boston Seaport and is attracting new mixed-use developments as well as new hotels and condominiums,” says Drew. Other neighborhoods, including Charlestown and the North End, are seeing new housing units and mixed-use developments under construction. Gale, a new developer in the Boston area, has recently completed the development, lease and sale of One Lincoln Street in Boston. State Street Financial Center, in downtown Boston, is a 36-story, 1 million-square-foot Class A office building. The property, designed by Jung|Brannen Associates, spans 465 feet and is comprised of dramatic exterior grey granite, matching pre-cast panels and a striking aluminum and glass curtain-wall.

Even with the good news of recovery, there is the reality that no new office development projects in Boston are immediately ready to move forward.

“In reality, we are not going to see an office tower slated for occupancy in Boston for 5 years, even under the best conditions,” says Robert Fitzgerald Jr., executive vice president/principal of Boston-based NAI Hunneman.

The lack of new developments in the near future is a positive sign for the market because any current growth has to be handled by existing projects. With an office vacancy rate of 17.3 percent in the first quarter of this year, the greater Boston area has room to grow. Down from 19.1 percent at the end of 2003, the vacancy rate has decreased due to new business moving in.

The development projects currently being proposed are uncertain. “‘Uncertainty’ has been and will be the buzz word for a time in the area,” says Fitzgerald. “I believe that we are in a stagnant period for office growth right now and we will remain in this state for at least the next 12 to 18 months.”

Additional major projects that are on the drawing board include Delaware North’s North Station and Fan Pier, the Pritzker site in Boston’s Seaport District. Boston Garden Development Corporation has submitted a proposal to the Boston Redevelopment Authority outlining a plan to build a 37-story, 368-unit residential tower at North Station. The $150 million proposal includes plans for a 415-foot-tall tower on Nashua Street called the Nashua Street Residences.

According to Charlie Jacobs, executive vice president of the FleetCenter and the Boston Bruins, Delaware North also has plans for two additional towers at the site for office, retail and hotel uses. The entire development will total 2 million square feet. The premier 577,000-square-foot tower is planned solely for residential use and will be completed in 2007.

The Pritzker family is selling Fan Pier, a 20-acre waterfront site in Boston. The parcel is fully permitted for 1.1 million square feet of residential development; 1.2 million square feet of office development; 140,000 square feet of ground-floor retail, restaurants and cafés; a 500- to 650-room hotel; and 107,000 square feet of civic and cultural space, including space for the Institute of Contemporary Art.

Class A rental rates range between the low $30s and the upper $40s per square foot; however, the downtown Boston vacancy rate has held steady at approximately 12 percent.

According to Fitzgerald, Boston’s Seaport District is the area to watch for future growth. Because it has become one of the most easily accessible spots from all directions, Boston will see most of its new significant development projects and growth in this area in the coming years.


©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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