Credit: Bizjournals.com
Boston ranks 6th nationally for office vacancy.
According to a report on the BBJ, “at 12 percent vacancy, Boston’s office market dipped by 1.2 percent year-over-year and was the sixth-tightest in the U.S., the report said. New York and Washington, D.C. ranked as the tightest office markets, each with 9.1 percent vacancy, followed by San Francisco at 10.2 percent and Seattle at 10.9 percent.”
Additional details are available on its website, here.
In short, the Office market in greater Boston has rents continuing to surge upward with fewer available options. Kendall Square and select Cambridge neighborhoods lead the charge, with rents up 76% since 2010.
Credit: The Real Reporter
From The Real Reporter:
Kendall has enjoyed the most dramatic surge in rents during the present economic boom, currently going into its seventh year, as local rents bottomed out in 2010 following the mortgage recession. Other areas benefitting from current dynamics include most urban areas as well as the Western suburbs, including 9 West, buoyed by changes in Needham.
Vacancy remains at very low levels as 49,000 sf of positive absorption was balanced with 66,000 sf of new property completions, resulting in a slight vacancy uptick of 0.1 percent, to 5.5 percent.
Credit: Boston Business Journal
Did you know that Amazon’s Echo came from Cambridge?
From the Boston Globe:
The voice recognition technology in Amazon’s Echo is a key focus of the company’s Cambridge office…The high-tech brains that make it work come from [Rohit] Prasad’s team. He runs Amazon’s speech science efforts from the company’s Kendall Square office, overseeing the scientists, engineers, and data specialists who make the Echo something you can talk to.
The Echo is a critically acclaimed hit for Amazon. The canister-shaped device can turn on a smart TV, play your favorite album, or fetch the weather report, all by listening to your voice. And Amazon plans to add even more functions to its growing list.
Credit: BBJ
Lyft is on the move for a new office in Boston. CIC provided a good foothold to start the operation, but now a permanent home is in the cards according to Tyler George.
From the Boston Business Journal:
“We wanted to start at the CIC where we could integrate ourselves with a lot of really forward-thinking businesses in Kendall Square and Cambridge, but we wanted to have a permanent office to continue to grow our staff and have in-person support for our drivers,” [Lyft’s Boston General Manager Tyler George] said in an interview.
“We want to be able to have a big enough space to hold events and parties for drivers and passengers,” he said. “It’ll be a significant piece of real estate.” Venture-backed Lyft was founded in 2012 and earlier this year landed another $1 billion from investors including General Motors Corp., valuing the company at $5.5 billion.
Credit: Boston.com
Soft phone or tethered is a question that many new employees get on their first day on the job. The notion that today’s employee can operate effectively without defined hard space in the office is foreign to previous generations. The worker today might be employed by a company that exists in co-working space or by a company with an open seating plan.
What is your preferred work space?
From Boston.com:
A new Global Workplace Report by office furniture company Steelcase cited in a Boston.com article, which surveyed over 12,000 office workers in 17 countries, asked employees a variety of questions about how office space design affected their engagement with their work. Steelcase found that when it comes to technology updates and work environments, most companies are a long way off from having the office of the future…86 percent of workers said they had landline phones, and 80 percent had desktop computers.
As for office layout, only 23 percent of employees said their company had an open floor plan. Much more common were workspaces with a combination of open floor plan and individual offices, at 46 percent, while 31 percent of workers said their workplace only had individual offices.
You can read more on the Workplace report on Boston.com.
Available office space in Cambridge and Boston
As Boston marches through a gilded real estate cycle as insatiable growth spills out of Cambridge into submarkets not traditionally known as tech or life science destinations, we take a moment to pause and survey the evolving office landscape. Given the strength of the regional economic growth, the compilation of markets including Boston, its inner core and Cambridge have seen the Class A office sector achieve a vacancy rate of 8.0% in the 4Q15 which is an improvement over the prior cycle’s low of 8.3% set in Q108. The current success of the market is underpinned by positive absorption being posted in 18 of the last 19 quarters. Not surprisingly, the same asset class has effectively reached the high water rent benchmark of $56.42 PSF set at the peak of the last cycle when the Q415 closed with Class A office rents averaging $56.39 PSF.
While the capital markets sector has been on fire given the health and view of Boston as one of the safest markets for investment, the fundamentals have pushed the development community to enter the discussion in a rather pronounced way. In 2012, all of the 2.1M SF of product under construction was preleased. In the 12 month period closing at the end of 2015, only 64% of the 3.2M SF of product under construction had commitments. This telling stat indicates that developers and their capital partners are underwriting significantly more risk as spec office buildings begin to enter the market but with the belief that tight supply will drive rents through the asset’s absorption period.
Taking a deeper look at recent pure spec office deliveries, which include Samuels & Associates’ Van Ness project at 1325 Boylston Street (237,935 SF), FRIT’s delivery of 450 Artisan Way at Assembly Row (99,000 SF) and the first of Skanska’s office deliveries at 101 Seaport Avenue (440,000 SF), lease up velocity has been impressive. Within nine months of delivery, Samuels is almost 72% leased with the recent news of UnitedHealth Group’s lease of 125,000 SF. Skanska is 81% leased with PwC taking 232,938 SF as the anchor tenant and FRIT is100% leased since delivering in 2014. With CoStar showing another 15 projects under construction totaling 2.32M SF with leasing commitments of 56.9%, it is clear that the spec development cycle is ratcheting up in Boston and its surrounding core submarkets.
Additionally there are several large sites that are toeing the line and potentially adding further office inventory to the market including DIVCO’s Northpoint site which has 2M SF in the pipeline, FRIT who sits on 1.6M SF of inventory at Assembly Row, HYM Group with 1M SF at the redevelopment of The Government Center Garage, Boston Properties Hub on Causeway with 700K SF and New Balance which has another 430K SF in Allston to name a few high profile projects. The question on the mind of the real estate community is how long this upcycle will last and which of these projects will be able to survive an inevitable down turn.
Credit: JLL
Office rents continue Northward while vacancy works Southward in Boston’s office Market. We will continue to see rent growth through 2016 as tenants continue to demand more space.
According to Globest, “the strong job market is fueling tenant demand and positive space absorption in Boston and surrounding areas such as Cambridge and the Route 128 markets. The office vacancy rate for Greater Boston ended 2015 at 12.1%, virtually flat as compared to year’s-end 2014. The average vacancy rate for 2015 was 12.2%, the lowest rate since 2002. Class A asking rents in the region rose to $42.06-per-square-foot. Asking rents haven’t been that high since 2002, Transwestern reports.”
You can read the full article on its website.
Credit: Boston Real Estate Times
The region’s office market continued its upward push with rents climbing while vacancy continues to decline.
A Boston Real Estate Times article includes the following highlights to express the market direction:
Credit: Boston Business Journal
Office fit-ups are more in-line to accommodate an employee as a whole person than a worker. The notion that you can bring your dog, grab a beer and play ping-pong doesn’t sound like a workplace or a bar, but rather a gathering at a friend’s house. Architects and landlords have embraced this and are trying to retrofit existing buildings, while incorporating this approach into new construction.
Another illustration of this trend is HubSpot’s new Cambridge office space. According to Bizjournals, “the expansion at 2 Canal is a complement to the company’s existing headquarters at 25 First St. in Cambridge. Dozens of employees are moving into the new office this week, including HubSpot’s product team, business operations and product marketing. That will free up room for renovation and expansion projects at the company’s 118,000-square-foot headquarters at 25 First St., where they recently signed a lease extension to occupy most of the building in the coming years.”
You can read the full article from the BBJ, here.
The Commonwealth of Massachusetts packs a powerful punch when you combined education and innovation. Our state is number one in both of those categories, which is why we are a hotbed of new and expanding business across the state.
According to Bloomberg, “the Boston area’s Route 128 eked out a victory over Silicon Valley, as Bloomberg’s ranking of the most innovative states in the U.S. illustrates how universities can juice local economies…The Massachusetts Institute of Technology, Behravesh’s alma mater, is one such school that’s provided a ripple effect for the local economy…MIT graduates have produced around 400 startup businesses over the past few decades.”
You can read the full Bloomberg article on its website.
Credit: Bloomberg