Businesses Opt for Quality Space in Boston's Suburban Market

"For the last three or four years, we're seeing class C tenants move into class B buildings and class B tenants move up to class A," he notes. "The rents those properties are demanding are still historically very less than what they were five years ago so people feel they can afford to move."

According to a market study of office and R&D properties conducted by Meredith & Grew, the overall vacancy rate in the Boston suburbs during the first quarter of this year was 16.7%, about 4.6% higher than in the city. But year-to-date absorption rates far surpass those of Boston proper. During the first quarter of 2005, the suburban market absorbed 763,708 sf of space compared to Boston's absorption of 240,548 sf.

The Route 128 Northwest submarket fared the best in filling vacant space during that period, absorbing 325,450 sf, although its 15.8% vacancy rate put that market squarely in the middle for vacancies. The Route 128 Mass Pike submarket came in second in the absorption race with 50,533 sf and a vacancy rate of 15.9% followed by the Route 128 South market, which absorbed 42,150 sf and had a 16% vacancy rate. Only one suburban market, Route 129 North had negative absorption, totaling 140,365 sf, leaving vacancy rates at 20.7%, the highest of all suburban Boston markets.

The high vacancy levels have been a boon to business, however, allowing them to negotiate better lease deals for higher end buildings, Elcock says. "There is still good value for tenants in the marketplace." For owners, however, the rush to higher end accommodations has forced many to make rent concessions and improvements to keep tenants in place.