Boston Rents continue its upward push with four office markets leading that charge: Back Bay, East Cambridge, Financial District and Seaport. The Class A market within Back Bay is clearly leading the way, while some value still exists within the Class B market. A real driver in the increased rents is the cost of tenant improvement dollars going from shell space to fix up space. Not uncommon to see those numbers north of $75 per square foot.
Credit: Boston Business Journal
According to the BBJ, “the Back Bay’s average rents hovered over $60 last year [while]…Midtown New York commanded about $130 per square foot, and both San Francisco and Washington rents topped $75 per square foot.”
With the boost of office rents in East Cambridge, Downtown Crossing has become the new hotbed for Redline creative and tech companies with Class B rents still in the $30’s PSF.
The Boston Globe is reporting “Office rents in Kendall Square have hit an all-time high of almost $67 per square foot, breaking a record last set in 2001, according to the real estate brokerage Transwestern RBJ…Transwestern said the average asking rent on a top-tier office space in East Cambridge set a new record of $66.63 in the final quarter of 2014, edging out the previous record of $65.85 set in 2001. East Cambridge’s vacancy rate of 6.7 percent was lower than many parts of Boston’s central business district, but higher than those of the smaller office markets of South Station, North Station, and Longwood, whose vacancy rates ranged from 2 to 4.4 percent.”
Additional insight on the East Cambridge boom is available on the Boston Globe.
Spec office construction is coming to Boston In 2015 – for who? Well, not for the smaller companies, their footprint would be far smaller than the new construction Class A can accommodate. The recent 4 quarters has seen a tremendous migration to the Financial District from the Seaport and East Cambridge for the value oriented office tenant. Rent within the Class B market still fall within the mid to upper $30’s per square foot.
Banker & Tradesman offers some perspective on the market shift in downtown Boston, noting “the office market continues to recover from the 2008 downturn because of an expanding tech sector and relocations of companies from Cambridge and the suburbs. Recent acquisitions of trophy office towers in Boston and Cambridge reflect the continuing interest of foreign investors seeking higher yields than government bonds, panelists said. In 2015, office investment sales are expected to slow, but overseas investors will continue to put money to work in Greater Boston, said Jessica Hughes, a managing director for JLL.”
East Cambridge lab space continues to be sought over by some heavyweights in the life sciences. The BBJ is reporting that “Bristol-Myers Squibb is on the hunt for up to 200,000 square feet of office and lab space in Cambridge, the latest major life sciences firm to crowd into one of the hottest commercial real estate markets in the country…the New York-based pharmaceutical giant, which already occupies 60,000 square feet of space in Waltham as well as 400,000 square feet in Devens, is targeting new research and administrative space in East Cambridge’s Kendall Square neighborhood, home to some of the biggest drug and technology developers in the world.”
East Cambridge is host to some of the best know pharma and tech companies. Lab space has become a very limited commodity and Amgen is in the hunt for 150k RSF. According to CoStar the lab vacancy rate among the 17 buildings is 7.1 percent on a direct basis or 17.3 percent including sublets.
The BBJ puts the competitive Kendall Square real estate market in perspective:
The East Cambridge office and research market includes only 6.4 million square feet — meaning…three deals alone could lock up about 10 percent of the neighborhood’s entire inventory when all is said and done. The activity, along with strong leasing among major information-technology players, is fueling a pricing surge in East Cambridge that has seen average annual rents surpass $58 per square foot, by far the highest in the region and among the highest for any neighborhood in the country, according to market data provided by Cassidy Turley in Boston.
The full article is available on the Boston Business Journal, here.
Where would you rather work? Google, Microsoft or Amazon. Have a look at the benefits each has in the Kendall office in East Cambridge.
Xconomy.com has provided an office space comparison of Google, Microsoft, and Amazon’s Kendall Square office space. The articles notes, “just about every West Coast tech company worth its salt has established a branch office in the [Kendall Square] neighborhood. But some are larger than others: the Twitter, Facebook, and Apple outposts remain relatively small, while Microsoft, Google, and Amazon have all established large footprints.”
For more specifics on the tech companies Cambridge offices, jump over to coverage on Xconomy.com.
Since Amazon now charges sales tax, it looks like they’re taking on another expense and adding additional office space at 101 Main Street in East Cambridge. East Cambridge no longer caters to the emerging small business; now landlords are focused on large corporate tenants like Google and Microsoft.
An article on Xconomy.com adds some context around Amazon’s expanding footprint in Cambridge:
“Amazon recently added about 11,000 square feet to its existing offices in Cambridge’s Kendall Square neighborhood, right next to the prime recruiting grounds at MIT…It’s a popular spot for West Coast technology giants to set up shop as they race to hire talented employees, especially outside the highly competitive San Francisco Bay Area. Google and Microsoft have significant offices in the same area of Cambridge, and Facebook has added an engineering outpost of its own. Apple also previously established a smaller office, with a focus on speech technology.”
Xconomy’s article on Amazon’s additional space in Cambridge is available, here.