NORTHEAST SNAPSHOT, OCTOBER 2004

Springfield Office Market

Springfield, Massachusetts, is currently experiencing limited activity in the office market. Presently, there is minimal development of new office buildings throughout the area. The problem can be traced to a greater-than-average level of available office space.

According to Doug Macmillan, president of Macmillan and Son, a Springfield-area brokerage firm, continuing availability of office product has destabilized the Springfield marketplace and caused developers to limit new construction in the area.

The majority of interest in office space has been from local and regional users seeking to establish or relocate their businesses within the city or nearby suburbs and Macmillan sees no change in that trend in the near future.

The substantial availability of sublet space is negatively affecting the office market, leading many tenants to consider sublet alternatives. The vacancy rate for Class A office product is approximately 12 percent and the rate for Class B space is around 18 percent.

“Springfield’s office market continues to experience minimal absorption of existing office product,” notes Macmillan. “Additionally, the market continues to experience a measurable level of sublet Class A office space, which has begun to destabilize the marketplace.”

Prospective tenants are attracted by the affordability offered through sublet space, where Class A rental rates stand between $13 and $14, as opposed to the $16 to $18 Class A market offering rate.

With scarce demand for new space, developers that are active in the area are targeting specific occupants with specific needs. According to Macmillan, “New development is principally build-to-suit construction for credit-rated tenants with specific locational or physical needs not available in the marketplace.” Tenants that do not have special needs are finding an abundance of available sublet space that has become more affordable and more attractive. This has enabled many traditional Class B tenants to trade up to Class A space.

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