Gone are the days when tenants would start looking for Boston office space one-to-two years in advance. Prospective tenants now find themselves shopping for immediate occupancy, and are only interested in spec suites that have been prebuilt by the landlord to meet today’s connectivity demands.
Tech has dominated the ongoing positive cycle in Boston’s office market, and the industry’s reputation as a disruptor has extended into how landlords appeal to potential tenants. While law firms and financial firms are known for making space decisions far in advance, the tech community has compressed the time from site tour to move-in…Their growth is more explosive than a bank or insurance company; thus, they wait until the last minute.
As life science firms turned Cambridge into a lab-dominant market, the historically tech-heavy Kendall Square passed its tech reputation across the river into areas like Boston’s Fort Point and Seaport neighborhoods.
Credit: Commercial Cafe
Boston has strong fundamentals and looks for increased rent growth in 2018.
Here’s a 2017 Assessment from Commercial Cafe:
Boston averaged between 11% and 12% office vacancy in 2017. Desirable tech submarkets are priced at a premium here, while emerging submarkets often offer discounts–the overall average asking rent in tech submarkets is priced at a 16% premium in East Cambridge (where inventory has decreased).
The Boston market also retained positive absorption, as vacancy dropped 0.4 percentage points to 12.0 percent last year. Large tenant move-ins have driven the 2017 Boston CBD market, with major shifts including Natixis Global Asset Management’s move into its new 150,000-square-foot headquarters at 888 Boylston St. in the Back Bay.
Mass Innovation Labs; Image Courtesy of Crains.
Small to mid-sized tenants need to seek the value play by looking along the Red Line corridor in Downtown Crossing, with rents ranging from the high $20’s to mid-$40’s PSF.
A recent Crains.com article notes, “Smaller companies, however, are feeling the squeeze. The problem is more acute for Boston’s booming biopharma industry than for tech companies…More than 96 percent of Cambridge’s 10.24 million square feet of lab space is occupied, according to an analysis by commercial real estate investor Transwestern.”
You can read more on Crains.
Credit: Boston Globe
The E. Cambridge office market will continue to grow with a 454,000 square-foot project from Boston Properties. Currently that market is just under 12M Square-feet of Class A project with vacancy under 5%.
According to the Boston Globe, “the Cambridge Planning Board next month will consider Boston Properties’ designs for a 454,000 square-foot, 19-story, office building at 145 Broadway. It’s the first phase of nearly 1 million square feet of new development that Boston Properties is planning on land it owns along Broadway and Binney Street in the booming biotech district. Later phases include more office space and a large apartment and condo building that would reach as high as 34 stories.”
Additional details are available on the Boston Globe website.
Credit: Boston Globe
They might be driven in Singapore, but a small start-up at 1 Broadway in East Cambridge, nuTonomy Inc., has designed the control software to facilitates self-driving taxi cabs.
From the Boston Globe:
“This is the world’s first public trial of robo-taxi service,” said nuTonomy cofounder and chief executive Karl Iagnemma. “This is the start of what’s going to be a technology revolution.”
NuTonomy is providing the control software guiding the six taxicabs that debuted in Singapore, modified electric cars from French automaker Renault and Japan’s Mitsubishi. Each vehicle uses lasers and cameras to observe its surroundings and steer through Singapore’s business district. An engineer from nuTonomy was in the front seat, ready to take control if necessary, and a researcher in the rear monitored the cars’ computers.
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.
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.
MIT has presented their update plan for Kendall Square in Cambridge. Kendal Square is currently one of the hottest office markets nationally with record rents for Class A & B office space. Major tenants include Microsoft and Google.
The Kendall Square Initiative aims to create a vibrant mixed-use district featuring six new buildings on what are now MIT-owned parking lots in the East Campus/Kendall Square area, including three buildings for research and development, two for housing, and one for retail and office space. The plan will produce approximately 250 net new housing units for graduate students and approximately 290 new housing units for market use, more than 100,000 square feet of new and repositioned ground-floor retail, and nearly three acres of new and repurposed open spaces — in addition to providing research and development space in support of Kendall Square’s growing innovation district.
The Initiative was developed as a result of approximately seven years of internal and external dialogue. The Cambridge City Council approved new zoning for MIT’s properties in the East Campus/Kendall Square area in 2013, laying the foundation for the advancement of the mixed-use proposal.
Office rents continue to climb in East Cambridge in both Lab and Office with some of $80 per square foot.
A BBJ article reports, “Escalating rents in Cambridge’s Kendall Square are pushing away some young life science and biotech companies, but there’s still incredibly strong demand for Class A office and lab space in the neighborhood, according to Alexandria Real Estate Equities.”
You can read the full article on the Boston Business Journal’s website.