BOSTON—In its forecast for the next 12 months for the Greater Boston office market, Newmark Grubb Knight Frank predicts all categories that indicate a continued strong market are pointing skyward.

The brokerage firm states in its second quarter office market report that Greater Boston's total office inventory of 176 million square feet will go higher as will its quarterly net absorption of 967,661 square feet and its second quarter average asking rent of $35.41-per-square-foot.

NGKF research director David Tackeff states in his report that the 3.5 million square feet of space under construction will also rise in the next year. The only market indicator predicated to go down is also indicative of a very strong office market—NGKF predicts the second quarter 2015 vacancy rate of 11.2% will go lower in the next 12 months. The second quarter vacancy rate is down from the 11.6% posted three months earlier and the 12.3% rate posted at the end of the second quarter of 2014.

The nearly 1 million square feet of positive absorption brings total absorption in Greater Boston to a positive 1.5 million square feet by the half-way point of this year. The Central Business District led the way as tenants continued to seek space in downtown office towers. The CBD posted 902,000 square feet of positive absorption. The Back Bay and Financial District posted a combined 425,278 square feet of positive absorption. The only market in Greater Boston to suffer negative absorption in the second quarter was South Station (-13,640 square feet).

Asking rents in Greater Boston and the surrounding suburbs are also on the rise. At the end of the second quarter, average asking office rents in Greater Boston hit $35.41-a-square-foot, the highest rate in 10 years, according to NGKF. The report notes that overall asking rents have increased 5.8% in the past year, 22.1% in the past five years and 43.3% in the past 10 years. In Boston's CBD, the average asking rental rate at the end of the second quarter of this year stood at $53.91-a-square-foot. For a Back Bay office tower building, the average asking rent was $72.21-a-square-foot and in a tower building in the Financial District the rate stood at $58.53-a-square-foot at the end of the second quarter of this year. Rents in red-hot Cambridge continued to skyrocket, reaching a $58.95-a-square-foot average at the end of the second quarter of this year.

Michael Edward, executive vice president and managing director of NGKF's Boston office tells Globest.com that office demand is pretty strong and the majority of the new construction is being built on a build-to-suit basis. He says, “I think the real meat of the market as we move forward here in the second half of 2015 isn't the vacancy absorption as the new tenants move into the new buildings that will be built for them, but rather how quickly the space they leave behind gets absorbed.”

He adds that current demand for space in the Central Business District will likely foot the bill. "All indications are that the demand that we have coming from the downtown market as well as some of the suburban markets, including Cambridge, who are looking downtown because particularly Cambridge is so tight (for space), we should continue to have a positive direction in terms of absorption and decreasing vacancy.”

Other trends pointed out by NGKF in its market report include that skyscrapers and build-to-suit projects are dominating the construction sector. Particularly, the Seaport District has become a mecca for build-to-suit deals, such as the PricewaterhouseCooper LLP's new Boston headquarters at 101 Seaport, which is scheduled to be completed in the third quarter of this year, and Goodwin Proctor's building at 101 Northern Ave., which is currently under construction.

Earlier this month, Skanska USA Commercial Development broke ground on a $281-million office tower in the Seaport District. The speculative office project is the third major development the New York-City based firm is building in Boston.

The 121 Seaport building, when completed in early 2018, will be a 17-story, 400,000-square-foot building that will also feature two floors of retail and two below grade parking levels.

NGKF's Tackeff ended the second quarter report on a rather upbeat note for building owners anyway. “Even though construction is at an all-time high, it is unlikely that new construction will alleviate the pressure on rental rates and vacancy,” he states. “Asking rates for new construction typically come in above the average rate for the market at the time, and most of the new space has been pre-leased in build-to-suit opportunities or to anchor tenants.”

He continues, “New opportunities for tenants will open up once construction begins on the new downtown skyscrapers. But at the moment, space is dwindling, rents are increasing and landlords are providing fewer concessions in leases. Expect the market to continue to tighten and asking rents to climb higher in the next few months.”