Cushman & Wakefield today released its mid-year MarketWatch research that tracks the performance of the commercial real estate market in Boston, Cambridge and the suburbs.

In pockets of Boston (specifically high-rise class A space in the Financial District and Back Bay), asking rents have reached historical highs - we’ve received more than one proposal for trophy class space with asking rents in the low $90s. However, we’ve also begun to see more movement on counterproposals. This means that even though asking rents are still high, actual leases are being executed significantly under ‘sticker price.’

In Cambridge, the second quarter of 2016 was more of the same – continually rising rents and virtually no availability. Though the lab sector saw a few notable blocks of sublease space come online, GSK space at 45 and 75 Sidney Street and bluebird bio space at 150 Second Street, for example, demand continues to outstrip supply.

And in the suburbs, new construction – specifically mixed-use – continues to be the headline story. Rents are significantly lower than in Cambridge and Downtown, and tenants get urban amenities with suburban convenience. As a result of new construction and a flurry of investment sales activity, rents south of Route 2 have risen nearly 15% in the past year. Rents north of Route 2 have begun to follow suit, though without as much demand.

Boston

• At negative 231,199 SF YTD, Boston ended a second consecutive quarter in negative territory, though the large new availability was expected.
  • Driving the numbers was the addition of 185,000 SF of Digitas’ space at 33 Arch Street. Digitas will be relocating to 40 Water Street (Congress Square), a 365,000 SF speculative project scheduled to deliver in 2017.

• The Boston Globe’s 75,000 SF lease at 53 State Street was signed this quarter. The Globe will physically relocate in January 2017.

• After a 12-month run up in asking rents (where some pockets of Boston spiked 30%), rates appear to be leveling off. Across most submarkets, rents were flat for the second consecutive quarter.

• One of Boston’s more notable deals this quarter was bioengineering firm Ginko Bioworks’ commitment to 70,000 SF at 21-25 Drydock Avenue. Ginko Bioworks joins the likes of Vertex, Intarcia and Keryx Pharmaceuticals in representing the life sciences industry in the Seaport.

Cambridge

§At 2.6% and 2.5%, respectively, both lab and office vacancies are at historical lows. This means that when space does come on the market, it’s generally already leased before its availability is made public. Cushman & Wakefield is currently tracking a 5:1 demand-supply ratio. This means that for every 100,000 SF available, there is nearly half a million square feet of pent up demand. As a result of this continuous demand, lab rents are still climbing. Overall, asking rents for lab space are up 20% in the past year – and 10% in the past quarter.

§Construction of Northpoint is going forward on a speculative basis. The project will be lab capable and is expected to deliver in 2019.

Suburbs

Statistically, the suburbs were quiet this quarter. However, it is becoming harder to ignore that tenants’ increasingly sophisticated demands mean older suburban product is rapidly becoming obsolete. Instead, build-to-suits are the desired options, especially for larger tenants.

• Kronos is vacating space at 297, 300, 330 Billerica Road and 4 Omni Way in Chelmsford. The firm will relocate into 438,000 SF at Crosspoint in Lowell, which is undergoing a full gut rehab.

• The Woburn lab market is hot. 19 Presidential Way has seen four lab deals totaling more than 75,000 SF in recent months. As a result, 8 Cabot Road and some properties on Gill Street are planning to convert office space to laboratory.

• Since June 1, 2013, the 128 Central office market has seen 79 properties totaling 11 MSF trade hands – 30% of total office inventory. Average sales prices per SF are up 65% in the past 36 months, from $188 PSF to $312 PSF.

About Cushman & Wakefield

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