September 2024 Boston Office Report
The condition of the metro Boston office market has notched significant leasing activity over recent months.
However, overall fundamentals remain challenged with space givebacks, downsizing, difficulty in footprint forecasting, and lingering concerns over macroeconomic conditions. Vacancies expanded to 18.4%, and the quarterly net absorption figure as of the issuance of this report was -2.8M SF. Asking rents remained relatively static, averaging approximately $54.45 for office assets metro-wide.
Bain Capital, the Boston based private investment behemoth garnered nationwide news coverage over its renewal and expansion at 200 Clarendon Street (formerly known as the John Hancock Tower) in Back Bay. Decision makers at Bain signed a 378,000 SF lease in early August – representing an almost 20% increase in their footprint at the tallest building in New England. This provided some welcome relief for their landlord, BXP, Inc. (formerly Boston Properties, Inc.) as rumors had swirled regarding their potential relocation to the currently under construction South Station Air Rights project. Term of the lease was not immediately known, although it is believed to be on the shorter side as Bain continues to reevaluate their space requirements. After initial discussions early in 2024, advertising agencies Arnold Worldwide and Havas Media committed to 74,000 SF at 5 Necco Street in the Seaport – the former HQ of General Electric. While both a promising and significant commitment to the Fort Point neighborhood, it follows a similar trend: Havas downsized their footprint by 38% and left entire floorplates vacant at the top floors of the Burnham Building in Downtown Crossing. At the Insurance Exchange Building on 40 Broad Street in the Financial District, state agency DCAMM signed a ten-year deal for just shy of 100,000 SF, reserved for their Health and Human Services Department, as well as a few other agencies. Sage Analysis Group is moving their operations from 101 Arch Street, taking 7,350 SF on a medium-term deal in a spec suite at 125 Summer Street. Further in this report is a detail on the continued rise of spec suites and their importance for smaller footprint based tenants.
In the suburbs, significant news came from Welch Foods Inc. The famous beverage and snack manufacturer signed a new 60,000 SF lease at 1601 Trapelo Road in Waltham. The narrative here follows a continuation of the downsizing theme: Welch’s had been located in Concord, MA for more than 40 years, and in their new move to Waltham, downsized by approximately 10%. This, however, was yet another win for BXP, Inc. as they are the current owner of the 500,000+ SF office asset on Trapelo Road. Other notable suburban office activity: Commonwealth Financial is moving to 275 Wyman Street in Waltham – taking nearly 150,000 SF of office space. This lease signing is quite notable, as back in 2021 ZoomInfo (NASDAQ: ZI) announced to much fanfare they would occupy a little more than 100,000 SF at 275. Just a few short years later, ZoomInfo is moving out of the space entirely. They intend to relocate and downsize to a smaller footprint at a separate building, also in Waltham.
New office development remains limited. 1001 Boylston Street, the CarGurus building delivered recently – their Temporary Certificate of Occupancy was issued on July 25th. In 2019 CarGurus signed on to take 275,000 SF of Boston’s first air rights project in nearly 40 years, and in the summer of 2023 Lego Group announced they would be relocating their corporate headquarters to the building. In East Cambridge, Leggat McCall and Granite Properties received their Temporary Certificate of Occupancy at 40 Thorndike Street on August 26th: a 420,000 SF transformative office property located on the site of the former Sullivan Courthouse. The project has yet to sign a lease commitment. The newest air rights project – the 51 story, 700,000 SF South Station Tower remains on track to deliver in 2025. There has not been any confirmed leasing commitments at the development as of this report, but interest in the project has been picking up with several notable tenants touring and expressing interest in relocating their operations there.
For more information please contact:
Mark Fallon, Director of Research & Strategy | mfallon@hunnemanre.com
