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NORTHEAST SNAPSHOT, AUGUST 2005
Boston Office Market
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David Brunelle
Director of Research
Grubb & Ellis
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The Boston office market is relatively flat, according to David Brunelle, director of research for the Boston office of Grubb & Ellis. Currently, there is only one commercial office building under construction in the central business district (CBD). The utter lack of developable land within the city limits is curbing development, even as the vacancy rates continue to steadily tighten.
Boston-based Davis Companies is developing the CBD’s sole project, Charles River Plaza, on Cambridge Street. The 355,000-square-foot building includes state-of-the-art lab and office space. “Other than this project, the pipeline is empty, with no new office projects or speculative development underway,” Brunelle says.
The new development has also spurred one of the largest leases in Boston in 2005. Massachusetts General Hospital has leased 100 percent of the building. The space will help the hospital alleviate some of the pressure of its expansion in the area. Massachusetts General has expanded into numerous new spaces in the past year, including the $219 million Yawkey Center for Outpatient Care.
The past few years saw Boston emerge as a hub for life sciences and the development of many state-of-the-art laboratory and medical office facilities. Interest from life science companies remains high, though the development activity seems to have died down within the CBD and development has moved further out.
The vast majority of office development is taking place in the many suburbs surrounding Boston due to the lack of available space in Boston’s CBD.
The lack of development has helped the vacancy rates tighten throughout the market. CBD vacancy is currently at 13.7 percent. The greater Boston area’s vacancy is 17.4 percent.
The rental rates are still what you would expect from a major market, with CBD rents ranging from $35 to $55 per square foot and greater Boston properties fetching between $18 and $55 per square foot.
Brunelle feels that central and northwest Highway 128 submarkets are areas to watch for future activity. “These markets are heating up,” he says. “Vacancies are decreasing and transaction volume is increasing. Rents are currently flat but will be increasing within 3 months.”
With a steady economy and continued interest from national and global companies and the life sciences sector, Boston should manage to gradually lower vacancy rates and continue to slowly improve market dynamics.
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