Greater Boston MarketView – Fourth Quarter 2013

Market Reportsby Suzanne Duca

Our quarterly market reports were released this week for the fourth quarter of 2013. Click the headers below to download each MarketView.

Boston Office:
Smaller real estate footprints continued to be the trend, however in most cases this was a result of workplace innovation rather than decreasing headcount. The Boston economy remains resilient, as the unemployment rate has dropped by 10 basis points to 7.1% as of November 2013, and the education and healthcare sectors continue to boom, accounting for 36% of the workforce in Boston.

Cambridge Office/Lab:
Despite slight negative absorption of 47,000 square feet in the fourth quarter, the Cambridge Office market ended 2013 with 155,000 square feet of positive absorption. Further indication of a key Cambridge trend, four of the eight biggest office deals involved tenants in the pharmaceutical and biotech industries who either expanded existing operations or opened a business development office. The Cambridge Lab market fundamentals in the fourth quarter provided relief for tenants limited by the historical lack of supply of lab space.

Suburban Boston Office:
The Suburban Office market finished 2013 strong, with 426,000 square feet of positive absorption in the fourth quarter. Significant positive absorption of 1.3 million square feet in 2013, coupled with the continually growing trend of new construction and strong fundamentals, suggest that the Suburban Office market is still in growth mode.

Suburban Boston Industrial:
Demand for industrial space in Greater Boston continued to strengthen through the end of 2013, with decreases in overall vacancy and availability, and an increase in average asking rates. Completed deals led to almost 1.2 million square feet of positive absorption—the thirteenth consecutive quarter of positive traction.


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2014 Outlook, From Both Sides

Tenant Perspective
By Peter Conlin

There are many factors to consider when choosing real estate, but at the end of the day, many lead back to recruiting and retaining top talent.

Clustering: CEOs and top talent are increasingly focused on the corporate ecosystem, looking for places to meet and share ideas with like-minded companies. The life sciences industry has exhibited this trend for years, clustering in areas such as Kendall Square. Today, tenants of all industries should be cognizant of where relevant clusters may be forming.

Workplace Innovation: Workplace innovation is not just for startups. PricewaterhouseCoopers and State Street have proven this with their collaborative build-to-suits, among countless other firms making similar decisions. Tenants need to examine their space utilization so they can maximize efficiency and adapt to the evolving workforce.

Opportunistic: Timing is everything. Stay up to speed on upcoming vacancies and remain proactive, not reactive. Taking an objective approach can open up many creative opportunities in today’s market.

Flexibility: Make sure to enter into an agreement that accommodates the various life cycles of your company. Stay flexible.


Landlord Perspective
By Ogden White

Be creative. Tenants are looking for new reasons to move, so make sure your product is enticing. It needs to be functional for traditional users, but also compelling to the innovators.

Keep existing buildings relevant. Focus on both aesthetics and functionality. Workplace innovation is not just for tenants. Evolve with today’s workforce, because your competitors will.

Follow demand closely. Without real tenant growth (net absorption) over the next two years, a significant amount of vacancy will hit the market in 2015 and beyond. As you look at deals, consider the possible downside along with your optimistic underwriting.


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CBRE/NE Cliffnotes: 2013 Downtown Office Market

By Andy Hoar

In typical January fashion, the past month has been filled with 2013 retrospection, such as writing Market Outlooks, preparing for Market Overview Events, or writing CBA Nominations. Here is my cheat sheet of 13 things not to forget about 2013 (in no particular order).

Brown Brothers Harriman – 2013 rang in with BBH’s 410,000 square foot lease at the newly renovated 50 Post Office Square, foreshadowing the reemergence of activity in the CBD to come throughout the year.

The Van NessSamuels & Associates broke ground on the mixed-use project at 1325 Boylston Street, becoming the first developer of speculative office space since Joe Fallon completed ONE Marina Park Drive in 2010.

Millennium Madness – The momentum of Millennium Partners’ transformation of Downtown Crossing only grew during 2013. Luxury condo project Millennium Place opened in October, and was nearly 100% sold by year-end.

Arnold/Havas – Long-time Back Bay tenant Arnold Worldwide/Havas signed on in April as the anchor tenant for the Burnham Building, which kicked off Millennium Partners’ historic renovation of the building as well as the new construction of Millennium Tower.

ConverseConverse signed a 187,000 square foot build-to-suit rehabilitation at Lovejoy Wharf, planning to move their North Andover headquarters to North Station and initiating activity in the submarket.

PricewaterhouseCoopersPwC made a build-to-suit deal at Skanska’s 101 Seaport; the transaction illustrated the growing trend of tenants using workplace innovation to reduce real estate footprint even with increasing headcount.

Goodwin ProcterGoodwin Procter signed a build-to-suit lease at 100 Northern Avenue; this latest tower in the rapidly expanding Fan Pier development is scheduled to break ground this spring.

Twenty Two Liberty – Developer Joe Fallon broke ground on Fan Pier’s first residential project; the luxury condo units are scheduled for fall 2015 delivery.

Vertex – By the end of the year, Vertex Pharmaceuticals completed their two new office/lab towers at Fan Pier, began move-in and hung their logo for all of Boston to see.

Ink Block – Stirring up activity in the South End, National Development broke ground on the Ink Block, promising various residential units, lifestyle amenities, and a reemergence of the neighborhood.

The Block on Congress – On New Year’s Eve, Related Beal closed on the sale of Fidelity Investments’ “Block on Congress,” and announced plans to renovate the 343,000 square feet of office and retail space.

CoWorking – Downtown Boston was flooded with the influx of coworking firms, with no signs of slowing down in 2014. WeWork leased 150,000 square feet between 51 Melcher Street and 745 Atlantic Avenue, while Cambridge Innovation Center has committed to 60,000 square feet at 50 Milk Street.

New Mayor – As Mayor Menino planned his retirement, the real estate community speculated if his legacy of development would retire as well. Mayor Walsh rang in 2014 with the approval of the Landmark Center development, and of course attending CBRE/NE’s Boston Market Overview. We look forward to Mayor Walsh’s leadership in the continued transformation of Boston development.

Thanks to our clients, colleagues and friends for a record-breaking 2013, and here’s to an even better 2014.

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2014 CBRE/New England Boston Market Overview Highlights

From L to R: CBRE/NE's John Butterworth, Mayor of Boston Marty Walsh, Gubernatorial Candidate Charlie Baker & CBRE/NE's Andy Hoar

From L to R: CBRE/NE’s John Butterworth, Mayor of Boston Marty Walsh, Gubernatorial Candidate Charlie Baker & CBRE/NE’s Andy Hoar

Thank you to all those who attended this morning’s CBRE/New England 2014 Real Estate Outlook; we hope that you found the event both informative and entertaining. For those who missed it, below are a few highlights from the event.

CBRE/NE’s John Butterworth welcomed the audience, which included newly elected Mayor of Boston Marty Walsh, shown here with John, Andy Hoar and keynote speaker, Gubernatorial Candidate Charlie Baker. CBRE/NE’s Ogden White and Peter Conlin jointly gave the Downtown Boston Office overview. The duo discussed two major trends they’ve seen in the market, workplace innovation and urbanization, and the possible implications these trends could have on 2014 fundamentals.

Next, CBRE/NE’s Biria St. John gave an overview on the Capital Markets Multifamily market. He compared current market conditions to past cycles, gave highlights of the booming development pipeline, and announced, “Condos are back!” For the Capital Markets Office market overview, CBRE/NE’s Chris Angelone discussed institutional activity in the Class B market, coined the new term ‘a-hab’ (low- to mid-rise buildings rehabilitated into institutional-quality, Class A standards), and declared, “The CBD is back!”

Gubernatorial Candidate Charlie Baker closed the program by discussing his goals for improving the Massachusetts job market and educational program, with inspiring anecdotes from both his political journey as a Republican candidate in a notoriously Democratic state, and his non-political experience in the public and private sectors.

Look out for future posts from today’s featured speakers giving further insight on today’s topics.

A Message from CBRE/NE’s Co-Managing Partners

CBRE/New England is pleased to present you with our 2014 New England Market Outlook. This review seeks to explain the changing dynamics of real estate in the major urban and suburban markets we cover in New England. CBRE/New England continues to invest in the services we offer our clients. Our deep bench strength across all our business lines provides us with opportunities to deliver exceptional results.


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On behalf of the entire CBRE/New England community, we wish you a successful new year.

Best wishes for 2014.



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