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BOSTON-The city remains one of the most expensive office markets in the nation, surpassed only by Midtown Manhattan and Washington, DC as the priciest office market in the country. With class A rents in Greater Boston currently averaging $32.68 per sf, the city is among the top three most expensive office markets in the nation. Only New York City, where rents average $50.72 per sf and Washington, DC, where office space is going for about $40 per sf, are more expensive.

Surrounded by water to the east and bordered by long-established neighborhoods that leave little room for new construction, the city has only a minimal amount of land available for development. Combined with a city permitting process that can take as long as 24 months and the high cost of labor and materials in the Boston area, the barriers to entry into the market are severe. “I don’t believe you will see a new [high-rise] building built and delivered in Boston before 2010,” predicts Andrew Hoar, president and co-managing partner with CB Richard Ellis/Whittier Partners.

While the political and geographic barriers have slowed development in the city, they have also made Boston one of the most sought after outlets for investors, Hoar tells GlobeSt.com. “From an investment perspective, Boston is a terrific city that is attracting all kinds of new capital,” he notes. “It’s a good market from a tenant’s perspective as well because the pendulum is still in the tenant’s favor. And it’s an improving market from the landlord’s perspective with one caveat being the low-rise office space, which is a soft portion of the market right now.”

Brendan Carroll, an analyst with Richards Barry Joyce & Partners, tells GlobeSt.com that, unlike other areas of the country where development has been rampant, Boston does not have an oversupply of office space to drive rental and investment prices down. “I’m willing to venture in terms of Boston’s Central Business District, we’re probably one of the least vacant markets in the country,” he notes, adding that even though Greater Boston has an overall vacancy rate for class A office space of 17.9 %, vacancies in the city’s core business districts hover in the 10% to 12% range.

The city’s appeal as an intellectual, financial and educational center has also helped keep rents higher than in other areas of the country, he adds. The strength of the city’s high-tech, biotech and research facilities along with the area’s numerous colleges andfinancial institutions, has also bolstered the area’s desirability both Carroll and Hoar say. “Boston is perceived nationally and globally as a high quality product,” Carroll says. “We do not sell ourselves on economy. We sell ourselves on quality.” And with quality, he notes, comes higher office prices.

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