Boston Office Market Remains Competitive

According to a study of the area's office market by Richards Barry Joyce & Partners, the 0.1% increase in vacancy rates, which put overall office vacancy at 18%, was offset by strong economic indicators, including an increase in the state's workforce. "The long-term trend is still optimistic," researcher Brendan Carroll, who compiled the report, tells GlobeSt.com. "We're heading in the direction of a reasonably paced recovery."

Overall absorption for the year totals 3.9 million sf for Greater Boston, with the peak absorption of 2.1 million sf occurring in Boston's northern inner suburbs followed by 1.9 million sf of positive absorption in the Route 128 and Route 495 submarket. Boston proper experienced just under 1.2 million sf of positive absorption during the last 12 months.

There were 95,000 new jobs added to the state between February and August and those numbers should increase even more, Carroll says. "Granted, there's a significant amount of this state that falls outside of Greater Boston, but 95,000 people would suggest that there is an astounding 19 million sf of absorption in the pipeline. The message is that we should see continued demand for office space in greater Boston."

Companies vying for office space also can expect to find a much more competitive market in many sections of the region as prime office properties lease up, he notes."All central Boston markets are becoming more competitive," Carroll says, adding that the Back Bay market, long dominated by the insurance industry and to a lesser extent, by marketing and advertising firms, has seen a diversification in its tenant mix in the last five years.

The Financial District, the North Station area and the newly developing Seaport District, are also showing strong demand. Boston's Downtown market, however, remains sluggish. That could all change with the increased demand for housing in the city, however, as developers eye underutilized office space for potential condominium conversion.