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Cassidy Turley Boston Second Quarter Report on State of Greater Boston Commercial Real Estate Market


Cassidy Turley Second Quarter Report on State of Greater Boston
Commercial Real Estate Market

Boston– June 26, 2013 – Cassidy Turley today released its Q2 Marketwatch research that tracks the performance of the commercial real estate market in Boston, Cambridge and the suburbs.   Second quarter figures indicate that that while Boston and Cambridge were quiet, the suburban office market posted its strongest first half since 2006. 

In downtown Boston, tech companies continue to seek space, but the rightsizing and consolidation of professional service firms is what’s driving absorption– at (181,166) SF year-to-date (YTD), it was negative for the second consecutive quarter.

In Cambridge, it’s been the same story for more than two years – East Cambridge is a battleground for office space and asking rents continue to rise.  While office space in Kendall Square is scarce, there are still larger blocks available in Lechmere (at Canal Park and 141 Portland).  In the lab sector, Vertex put the last of its space on the market (in anticipation of its relocation to Fan Pier).  As a result, asking rents plateaued quarter-over-quarter – a trend we expect to continue – at least in the near term.

In the suburbs, large users are beginning to stir and construction activity is giving the market a psychological boost – particularly in 128 Central. Increased sales activity means that new landlords are making upgrades and repositioning assets – leading to an uptick in asking rents. Particularly noteworthy are Wellesley office rents - which have increased 16.0% in the past 12 months to $35.46 PSF.

Show me the Talent – Millennial Preferences Drive Corporate Real Estate Decisions

  • Despite negative absorption of (181,166) SF YTD, availability rates are declining – most notably in Seaport classes A and B which, in the past 12 months, declined 9.5 and 4.5 percentage points respectfully.
  • As Seaports rents continue to climb (class A up 8.5% and class B up 7.0% in the past year) more tech and start-up tenants are turning to the Financial District and Downtown Crossing for economical options and smaller floorplates.
  • At $32.10 PSF, asking rent growth in class B Financial District space has been essentially flat in the past year – which makes this space appealing to tech and start-up companies.
  • As we observe these companies moving into the Financial District, it’s important to note that, given the smaller size of these tenants, even a flurry of activity won’t produce a conspicuous change in market fundamentals.  But this doesn’t mean that a trend isn’t emerging.
  • Several larger tech companies are currently touring the market and considering their options downtown.  However, the expense of parking could deter them from fully relocating to the city.
  • Because of the parking obstacle, we are beginning to see a trend of large, suburban-based companies opening smaller satellite offices in Boston to attract young talent.

Vertex Space Hits the Market, Lab Rents Plateau

  • Overall lab availability has increased 3.7 percentage points in the past year – largely due to the addition of Vertex’s space to the market.
  • As a result of increased supply, asking rents for lab space have leveled off in the past quarter – at $58.06 PSF NNN.
  • Conversely, asking rents for class A office space in East Cambridge are still rising.  However, at 6.1% in the past year, the increase is far less dramatic than this time last year when the year-over-year jump was 14.9%.
  • Consequently, Cambridge tenants are still seeking space in other markets – their migration to Boston’s Seaport District has been happening for some time, but a newfound interest in Downtown Crossing (for its smaller floorplates) could be the beginning of a trend.
  • As tenants vacate Cambridge for other markets, overall office vacancy has ticked up 1.8 percentage points in the past year.  However, none of Cambridge’s submarkets have office vacancy rates over 10% - which means conditions remain tight.

Suburban Fundamentals At Pre-Recession Levels

  • With overall absorption totaling 1,317,377 SF year-to-date (YTD) -- this is the strongest first half of the year we’ve seen since 2006.
  • The majority of activity was focused in the office sector which absorbed over a million square feet YTD.
  • Office rents remain stable at $21.42 - up slightly from $21.11 last year. 
  • 128 Central was the most active submarket in the second quarter. Small and mid-size users experiencing organic growth are taking a disciplined approach to occupancy and expanding slowly into vacant space.
  • However, as large users (100,000 SF+) begin to tour the market, aging inventory, rising rents, and the lack of large block availability is evident along 128 Central creating the potential for increased build-to-suit activity in the near term.
  • An uptick in investment activity may push up rents
  • In the last 18 months, approximately 20% of the 128 Central inventory has traded or is currently being marketed for sale.
  • Historically, high sales volume leads to rent growth - landlords generally reposition newly purchased assets and make improvements to the properties.
  • Some neighborhoods experiencing high trading volume, such as Needham, Newton, and Burlington,  have already seen notable  office rent growth quarter-over-quarter:  Needham up 3.2%; Newton up 4.1%; Burlington up 4.0%

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. 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 for more information about Cassidy Turley.

Press Contact: 
Linda M. McDonough

06/26/2013 - 09:58



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