Boston, MA Cushman & Wakefield released its year-end market research that tracks the performance of the commercial real estate market in Boston, Cambridge and the suburbs.
In downtown Boston, the year ended with just over 1 million s/f of positive absorption. While the delivery of PwC’s new building at 101 Seaport Blvd. this quarter (440,000 s/f) certainly had a positive impact, the majority of space take-up happened in class A Financial District buildings this year.
In Cambridge, 2015 was another year of the same narrative. At 1.8% and 5.1%, respectively, both lab and office vacancies are at historical lows. Office rents are up 10-15% across all submarkets while lab rents have risen 5% across the board this year. This is obviously a story that won’t be changing any time soon.
In the suburbs, mixed-use was the theme for the second year in a row. Between 1265 Main St. and CityPoint in Waltham; Assembly Row, Somerville; Stations Landing, Medford; Market Street, Lynnfield; Northwest Park, Burlington and Arsenal Street in Watertown, the region’s suburbs are now providing urban amenities with suburban access (free parking).
Boston ended 2015 in a strong position. Solid demand and increased sales activity means that rents are rising - the price of class B space has spiked nearly 30% in the past year.
Back Bay is up 32% (to $44.70); Financial District is up 23% (to $41.75); Gov’t Center/North Station is up 30% (to $42.21) and South Station is up 17%.
Noteworthy deals in the Financial District year-to-date include:
• Wells Fargo’s 75,000 s/f expansion at 125 High St.[Q3];
• Houghton Mifflin’s relocation from Back Bay into 160,000 s/f at 125 High St. [Q2];
• Bullhorn’s 78,000 s/f deal at 100 Summer St. [Q4];
• State Street’s 37,000 s/f expansion at 100 Summer St. [Q2];
• Cambridge Innovation Center’s 56,000 s/f expansion at 50 Milk St.[Q3]; and
• Criteo’s 50,000 s/f deal at 60 State St. [Q1].
And finally, demand for shared space shows no signs of abating. WeWork is close to signing a 90,000 s/f deal in Back Bay. This would bring the company’s total Boston footprint to nearly 300,000 s/f.
Cambridge Vacancy rates in both East Cambridge and Mass Ave. Corridor are now under 5% while vacancy in Alewife/West Cambridge ended the year with a 12% vacancy rate.
Only 3 buildings have contiguous blocks of space over 50,000 s/f: 35 Cambridgepark Dr., 50 Hampshire St., and 55 Cambridge Parkway.
It may not be breaking news, but limited availability means that asking rents are still climbing.
In the past year, East Cambridge rents have climbed 7.5% (to $66.00); Alewife/West Cambridge rents are up 11% (to $42.78) and Mass Ave Corridor rents are up 15% (to $43.78)
In the lab sector, vacancy has declined 7 percentage points in the past year. The majority of leasing activity can be attributed to take-up of space previously occupied by Vertex:
Earlier in 2015, Alnylam Pharmaceuticals committed to the entirety of 675 West Kendall Street. (The space, formerly occupied by Vertex is sublet to 3 tenants through April 2018 – Genzyme, Momenta and Mass Innovation Labs).
However, 200 Sidney saw significant leasing activity in the third quarter:
New tenants include Abbvie (43,300 s/f), RaNa Therapeutics (28,000 s/f) and CRISPR Therapeutics (20,000 s/f)
As a result of an historically tight market, availabilities are being backfilled before they are even publically marketed - including blocks at 26 Lansdowne St. and 45 Sidney St.
Suburbs Rents in the suburbs are ticking up - especially in 128 Central. Year-over-year, the office market has seen a 10.1% increase to $31.55.
With 13 properties totaling 1.38 million s/f changing hands in 2015 in Waltham alone—and another 1.25 million s/f built or under construction this year—we expect rents to continue to increase over the next 12 months as tenants flock to the amenities of CityPoint and 1265 Main St.
128 Central continues to attract shoe companies as Rockport has agreed to a 70,000 s/f lease at 1210 Washington S., Newton. They join shoe companies Wolverine and Clarks to plant roots in the submarket.
495 West had a strong year in the office sector – particularly Marlborough. Egenera took 65,000 s/f at 400 Donald Lynch Boulevard and GE Healthcare and Quest Diagnostics both expanded at 200 Forest St.
•Quincy also did notably well this year - with 283,000 s/f in absorption YTD. While a number of tenants signed leases in the close suburb of Boston, the largest of the year was State Street’s 100,000 s/f lease at 1 Heritage Dr.
