Tech Office Demand Drives Boston's Office Vacancy Rate Lower

BOSTON—Strong office demand among the Boston region's technology and innovation sectors fueled the sixth consecutive quarter of positive absorption and drove occupancies to record levels, according Avison Young.

The brokerage firm in its “Third Quarter 2014 Greater Boston Office Market Report” reports that during the past six quarters, absorption has averaged 712,000 square feet, with tenants demonstrating a strong preference for quality. The region's 13.7 million square feet of five-star trophy-quality inventory has seen its vacancy fall to 7.1% from 11.2% over that period.

“Office occupancy has reached record levels in Boston. In addition to an accelerating urbanization trend, the driver of the vacancy decrease continues to be demand for the economy's key knowledge workers,” comments Brendan Carroll, vice-president, research for Avison Young in Boston. “Low unemployment among these highly educated workers, who have increasingly demonstrated preferences for contemporary, high-quality work settings, has forced employers to offer enhanced work settings. This trend has also fueled an increased level of relocations and build-to-suits as eight major office build-to-suit projects dot the market.”

The report indicates that due to the record occupancy levels and higher utilization of occupied space, regional office-based employment is believe to be more than 30% higher than after the dot-com bubble burst in 2000. Employment levels are estimated to be 50% higher in Boston's urban core as compared to 14 years ago.

In its report, Avison Young states that overall office vacancy in urban Boston is about 10% at the end of the third quarter; trophy space is now sporting a vacancy rate of 6.8% down from more than 24% in early 2011.