Short on time? Here are the highlights of our third quarter Cambridge Office & Lab MarketView. To request the full report, fill out the form at the bottom of this post.
- Cambridge is not most markets. With vacant space so scarce, existing tenants that want to grow and remain in Cambridge are having difficulty accommodating a growing workforce. As a result, some landlords have taken the unprecedented step of encouraging smaller tenants to leave, so that their larger neighbors can expand within the building.
- Asking rents for Cambridge office space continued to tick upwards, continuing their habit of setting a new historic mark each quarter.
- Despite the lack of available office space, companies with a Cambridge presence are loath to look outside their current locations for additional space as evidenced by the largest two leases of the quarter which were both expansions by in-market tenants.
- While lab rents dipped slightly this quarter for the first time in two years, that doesn’t mean it’s getting any easier to find space – rather, it’s indicative of the fact that the only spaces left are smaller and of lower quality.
- The vacancy rate for lab remains low, at 3.0%, and more than a third of that empty space has already been committed.
- The negative quarterly absorption of 92,600 sq. ft. in the lab market was almost entirely due to a single sublease space that hit the market in the form of the ARIAD availability at 125 Binney Street. That trend can be seen market-wide, with sublease spaces being much more common to come across than direct, driven by existing tenants’ reconfigurations.
- As the Cambridge lab market continues raising the ceiling, everyone outside the city is waiting with open arms for those tenants who either can’t afford to be in Cambridge, or can’t find the space they need.
Short on time? Here are the highlights of our third quarter Downtown Boston marketview. To request the full report, fill out the form at the bottom of this post.
The Downtown Boston Office market sustained consistent activity through the summer, with overall market conditions continuing to put Boston in the top-performing markets across the country.
Overall Class B rents continue to reach historical highs, ending the quarter at $45.51 per sq. ft, as companies are using real estate to impact culture change more than ever.
The modernized amenity offerings that have been created in Class A buildings in order to compete with creative Class B space have now become the norm. Will we start to see Class B assets creating similar amenities to maintain competitiveness?
In the CBD, traditional professional services firms continue to shrink office footprints to increase efficiency. Availability increased by 10 basis points (bps) while vacancy increased by 30 bps, ending Q3 2016 at 7.7%.
Boston Properties delivered 888 Boylston Street, the newest high-rise building to the Back Bay submarket since 2001. Setting a new benchmark in sustainable buildings, the project was 77% pre-leased upon delivery.
The Seaport continues to attract out-of-market companies. Red Hat announced a 40,000 sq. ft. urban office at 300 A Street. America’s Test Kitchen leased 52,000 sq. ft. at the IDB at 21-25 Drydock Avenue.
To request the full report, please submit this form:
The Suburban Office market held steady in Q3 2016 as new deals coupled with companies continuing to expand outpaced renewals across the various submarkets. While demand felt spotty through the summer months, there are more than 4.3 million sq. ft. of active requirements currently in the market. Not surprising is that demand continues to be driven by TAMI (Technology, Advertising, Media and Information), life science and healthcare companies and less by traditional professional services firms.
3 Batterymarch Park – Quincy, MA
The Greater Boston Suburban Office market recorded 30,600 sq. ft. of positive absorption in Q3 2016 and saw vacancy decline by 20 basis points (bps) to 17.4% quarter-over-quarter. The sublease market continued to tick upward, rising another 20 bps quarter-over-quarter, a direct result of several large availabilities (50,000 sq. ft. +) coming to market as firms look at ways to operate more efficiently.
A few highlights from Q3 2016 include:
- In the Metro North, after a rocky start to 2016 with a number of large blocks of space brought to the market, the Route 3 North submarket rebounded for the second straight quarter with more than 58,000 sq. ft. of growth in Q3 2016. ConforMIS will lease 45,000 sq. ft. at 600 Technology Park Drive in Billerica and CaseNet will renew and expand by 11,000 sq. ft., occupying 40,000 sq. ft. at 36 Crosby Drive. The vacancy rate in the submarket is down more than 250 bps since the beginning of the year, ending the quarter at 25.1%.
- Along Route 128 West, Waltham saw a steady stream of sizable activity in Q3 2016 and recorded more than 180,000 sq. ft. of positive absorption. Tesaro finalized plans to renew and will expand while life science companies continue to be active in the Route 128 West region with Biogen leasing 112,000 sq. ft. at 225 Second Avenue in Waltham.
- The Route 495/Mass Pike West submarket was hit the hardest this quarter with three sizeable subleases (Bose – 250,000 sq. ft.; IBM – 88,000 sq. ft.; Clearsult – 52,000 sq. ft.). As a result, sublease availability in the submarket jumped 300 bps quarter-over-quarter to 5.0%.
- The Metro South submarket was relatively level statistically in Q3 2016, recording 25,000 sq. ft. of negative absorption. Batterymarch Park in Quincy continued its strong leasing efforts in 2016 with the announcement that Sentient Jet will relocate its headquarters to 3 Batterymarch Park from their current headquarters at 100 Grossman Drive in Braintree. Steady demand in Quincy over the past year has driven down the vacancy rate 300 bps year-over-year to 13.9%.
If you would like a more in-depth look at the Greater Boston Suburban Office market, please contact Suzanne Duca to receive our Q3 2016 MarketView.
CBRE/New England recently hosted a panel discussing General Electric’s decision-making process behind its relocation to Boston. The event was held at The Fallon Company’s newly constructed 100 Northern Avenue and the panelists were GE’s Ann Klee, Vice President, Boston Development and Operations, CBRE’s Brent Woodruff, Executive Vice President within the Global Workplace Solutions group, Gensler’s Doug Gensler, Managing Director, Principal and CBRE/NE’s Andy Hoar as moderator.
Ann Klee discussed the comprehensive decision-making process for the evaluation of a potential headquarters relocation. Her internal team created a set of 85 criteria used to thoroughly evaluate options, in addition to the analysis separately conducted by the CBRE team led by Woodruff, Hoar and Bill Crean. Early in the process, Woodruff brought in CBRE’s Labor Analytics Group, providing data and insight to help narrow the initial list of 40 markets down to eight. Presentations by city officials and market tours helped to further narrow down the selection pool. Meanwhile, Klee and her team always referred back to their original criteria list—a practice Klee stated was critical in making objective evaluations.
Klee also described the impact the company’s recent rebranding had on the process. To truly change perception and reflect GE’s new ‘digital industrial’ moniker, Klee explained that it became clear that a physical move would have the greatest effect on workplace culture. They wanted not only a location that would foster talent recruitment, but also a site that embodied the convergence of old and new, to reflect the new direction of the company. Klee recalled seeing the chosen site for the first time, and how the combination of the existing brick-and-beam warehouses with space for new construction was immediately appealing to her team. With a site chosen, GE is now working with an ambitious timeline for permitting and construction. Klee noted that establishing good working relationships with city and state officials early in the process was pivotal.
I remember our team standing on the top floor of the Federal Reserve, watching people pour out of South Station over the Summer Street bridge. You could feel the energy in the Fort Point neighborhood. – Ann Klee
Next, Doug Gensler went into detail about the thought process behind the design of the site. He described the importance of creating flows that would connect the different functions, as well as building a ground-floor destination for the neighborhood. The campus aims to foster collaboration and innovation throughout the community.
Doug Gensler presented renderings of GE’s new headquarters.
The program concluded with a question and answer period with the audience. CBRE/NE was honored to host such an informative and engaging event, but more importantly we are honored to have had the opportunity to work with the GE team.