Boston starts the year slowly, but has plenty in store

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Short on time? Here are the highlights of our first quarter Downtown Boston Office MarketView. To request the full report, fill out the form at the bottom of this post.

iStock-614436122.jpgIt was a relatively quiet quarter for the Downtown Boston Office market, echoing a theme seen across many of the Greater Boston submarkets—but with an unemployment rate of only 3.7% as of February, Boston’s positioning remains strong.

Vacancy was up to 8.6%, the highest it has been in three years, but asking rents continued to edge upwards.

Bifurcation of Class A and B rental growth has slowed: while in the past year Class B properties had seen much greater gains in comparison to Class A, in Q1 2017, both saw only modest gains.

Most of the activity in the quarter was seen in value low-rise Class A space in the Back Bay. This type of space can be particularly appealing to Cambridge tenants who want to remain in the urban core, but are being priced out of the options on the other side of the Charles River.

Lowest Vacancy, Highest Ranked: Cambridge Leads the Nation

netherwood-schwesig_evianne_e2By Évianne A. Netherwood-Schwesig, Senior Research Analyst | Creative & Analytics

For anyone familiar with the world of commercial real estate in Boston, it’s well known that Cambridge has been the hottest office market in the last few years. Demand for space, particularly around Kendall Square, has driven rents into the stratosphere and left only small scraps of availability in its wake.

Dramatic descriptions? Maybe not. According to new national rankings by CBRE Research, Cambridge’s metrics aren’t just impressive at a local level. The city boasts the lowest office vacancy rate nationwide, at just 3.8%. This is head and shoulders above runner-up Nashville, which landed at 4.7%. At $65.26 per sq. ft., asking rents in Cambridge were the fifth highest in the country, bested only by a pair each of New York and San Francisco markets. It’s worth mentioning that Boston proper also did itself proud: among all urban markets, its 7.3% vacancy rate and $55.71 per sq. ft. asking rent put it in seventh and eighth place, respectively.

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Lowest Office Vacancy Rates:

Rank All Markets Rate (%)
1. Cambridge 3.8
2. Nashville (Suburban) 4.7
3. Oakland (Downtown) 5.1
4. San Francisco, (Downtown) 6.3
5. Manhattan, Midtown South 6.5
6. San Jose (Suburban) 7.2
7. Boston (Downtown) 7.3
8. Walnut Creek/I-680 Corridor 7.8
9. Manhattan, Midtown 7.9
10. San Francisco, (Suburban) 7.9

Source: CBRE Research, Q4 2016

Highest Office Asking Rents:

Rank All Markets Rent
1. Manhattan, Midtown $83.54
2. San Francisco, CBD $72.77
3. Manhattan, Midtown South $71.37
4. San Francisco, (Suburban) $68.28
5. Cambridge $65.26
6. Manhattan, Downtown $59.16
7. San Jose (Suburban) $58.34
8. Boston (Downtown) $55.71
9. Washington, D.C. (Downtown) $53.61
10. Oakland (Downtown) $52.56

Source: CBRE Research, Q4 2016