Office Rent Rates Rise 2% as Market Tightens

Direct office vacancy in Downtown Boston fell to 9.8% during first quarter. As a result, since the close of 2005, rental rates among all office building classes in Downtown Boston rose 2% during first quarter to an average of $35.04 per sf. "Rents in the Downtown market are up nearly 10% overall from the low point in the second quarter of 2005," Bob Breslau, director of research, tells GlobeSt.com, "and they have increased between 20% and 25% for some high-rise, class A space to the range of between $50 per sf and $60 per sf gross. With class A options for large requirements dwindling, commitments from tenants looking for at least 100,000 sf will likely lead to a game of tenant musical chairs or start the first new development of this cycle." No new office development is currently under way Downtown.

The market for high quality lab space in Cambridge is also tightening, Breslau says. The vacancy for lab space in the submarket fell to 6.4% during first quarter. As a result, Lyme Properties has begun construction of a 420,000-sf spec lab building at 301 Binney St. Office activity also remained solid in Cambridge during fourth quarter, prompting an increase of approximately 2.8% in the average asking rental rate, which took it to $28.64 per sf, gross. By contrast, direct vacancy of R&D space in the suburbs decreased slightly to 22.2%.

"The overall area's industrial market has been slower to recover," Breslau says, but notes, "there's been some activity in new build-to-suits." During first quarter the suburban industrial market absorbed just 18,146 sf, and the only submarket to experience significant growth was the South submarket. Overall suburban industrial vacancy remained steady at 19.7%.