Low-Rise Office Space Becomes Hard to Fill In Boston's High-Rise Towers

"Just about everyone is struggling with low-rise vacancies," Tom Ashe, vice president with Richards Barry Joyce and Partners in Boston, tells GlobeSt.com, explaining that huge chunks of space below the 20th floor has become increasingly difficult to fill because Boston lacks the big-block tenants, such as banks and financial institutions, that gravitate to a building's lower floors.

Yet while vacancy rates for low-rise space is hovering around 15%, office space above the 20th floor is going for a premium. Only 6% of the city's high-rise office space, which offers panoramic views and corporate prestige, is available for lease. In the Financial District alone, more than 1.5 million sf of contiguous low-rise office space is either available or soon to become available, Robert Cleary, a leasing expert with the locally based Codman Co., tells GlobeSt.com. The smaller Back Bay market has about 605,000 sf of contiguous low-rise space up for grabs or awaiting lease expirations.

Ironically, notes Cleary, it's the class A space that has been hardest hit by low-rise vacancies. "The A premier properties comprise more than 70% of the low-rise major blocks of availability," he says. "Take that a step further and of those premier properties, more than 81% are located in the Financial District."

Maryann Gilligan Suydam, senior vice president of Equity Office, tells GlobeSt.com the trend in higher vacancy rates for lower floors began to emerge about five years ago when Massachusetts began losing corporations to other states. As mergers followed, low-rise space flooded the market. "There are just not the 50,000-sf to 80,000-sf users in the market anymore," she says. "The big block user in Boston has been eroded."

To fill those vacancies, Gilligan Suydam says, the state needs to attract large corporations. Until that happens, however, landlords should look for innovative solutions to fill the void. "What you need to do is price it to go or subdivide the space," she notes.

Equity Office took that concept one step further by creating ready-to-rent office suites for the small to mid-size user, which makes up the bulk of the office market. The concept was so successful, in fact, that most of the firm's low-rise office space is rented up. "It's always a better business decision to put your space away and have occupancy than to sit for multiple years and carry debt," she says. Until Boston sees a turn around in big block users, however, vacancies may continue to make low-rise space a bargain.