Commercial

Boston Office Rents – March 2020 Update

Demand for Boston office space is still high, and we have seen rent rates continue to rise.  The chart below is based on available data, but in practice we generally are not seeing the large gap in rents between Kendall Square and Harvard Square from Back Bay and the Seaport District that the chart indicates.
 

Office Rent Rates

Source: CoStar

 

With companies' office needs changing, many tenants are seeking to do shorter term leases than the 3-5 year minimum commitments that landlords generally prefer.  Companies looking for a long-term lease may consider one of the neighborhoods that has not seen rents increase as quickly as others, since they can present opportunities to lock in at a lower rate than that area might see.  

As rent rates continue to rise and with interest rates at record lows, it is also a great time for businesses to evaluate options to buy their office space rather than leasing.  Those opportunities can be harder to find, but they are out there - contact us to help you with that search.

 

 

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How Much are Retail Rents in Boston - January 2020 Update

Most retail rents in Boston are quoted in terms of rent per square foot per year.  For example, leasing a 1,000 SF space for $60/SF would mean the annual rent is $60,000 - or $5,000 per month.  Most retail leases in Boston are triple net (or NNN), meaning that the tenant also pays all or a portion of the real estate taxes and common area maintenance (CAM) for the building.
 

Market Rent for Retail Space ($/SF)

Source: CoStar, January 24, 2020


Boston's Back Bay, driven mainly by Newbury and Boylston Streets, is still the priciest neighborhood in Boston.  The average numbers shown above are just that - "averages" - and we see deals close above these levels on Newbury and Boylston Streets.  Overall, neighborhoods/areas have mainly all followed a similar cycle.  As the chart shows, retail rents in most areas are expected to level off and remain steady for the next few years.  

The "best" retail location for a business is not necessarily in the neighborhood offering the lowest rent.  It's great if the rent is lower than in other neighborhoods, but your sales must still be strong enough to support the rent (generally speaking, rents are lower in areas where most businesses expect sales to be lower due to various factors, such as foot traffic and daytime population).  As part of your site selection process, it is important to consider your target consumer(s) and determine whether you will be able to effective reach/serve them at the locations you are considering.  This is something we are happy to help you evaluate and consider - feel free to contact us to discuss.

Are you searching for retail space for lease in Boston?  You can start your search here.

 

 

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Planning for a New Office in the New Year?

The end of the year is a time when many businesses start planning for the year to come. With 2020 almost upon us, here is a quick look at the market conditions in a number of Boston's most popular areas for office space. We organized them in the order that we typically receive questions from businesses that are curious about the Boston office market.
 

"How Much is the Rent?"

Office rent rates within and around Boston can vary quite significantly. Cambridge (particularly from Kendall Square through Harvard Square) and Back Bay continue to be the most expensive areas in Boston. The chart above shows the Financial District as one of the most expensive, but that is also somewhat misleading since it is by-far the largest area in terms of office inventory; there are some good deals that can be found in the Financial District and Midtown.
 

"Should My Company Rent or Buy Our Office Space?"

We do not get this question asked enough, but we do try to encourage businesses to consider whether buying is a viable option for businesses. Particularly when a business is looking for a long-term lease and/or they want to make substantial customizations to their workspace, owning rather than leasing can offer a substantial financial benefit. 
 

For a free consultation to evaluate your current office space and expected needs, please contact us.  

If you are ready to dive right in, you can start your search for office space for lease or your search for office space for sale.

 

 

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A Look at Boston's Most Popular Areas for Office Space

When evaluating “Boston” office space, some of the most popular locations companies consider are: Back Bay, Seaport, Financial District and Kendall Square (which is actually in Cambridge, not Boston).*  How do these areas compare?

 

Market Rent Rate ($/SF)

Source: CoStar
 

Sitting between two of the best educational institutions in the world – Harvard and MIT – Kendall Square is highly sought after by companies looking to source from the highly educated workforce in the neighborhood.  Kendall Square continues to have the highest average office rental rate in the area. 


Vacancy Rate

Source: CoStar


The vacancy rate in the Kendall Square office market is also the lowest, which is understandable given the high demand for this space.  Projections show that the vacancy rate is expected to increase substantially in the next few years.  That is primarily due to the large amount of space currently being developed (see chart below) – it is expected that this supply will outpace demand.  While the rent chart forecasts steady to slightly lower rent rates for Kendall Square, it is foreseeable that rents will drop even more. For landlords, this means they should consider locking tenants into long term leases now at the current, higher rent rates; for tenants, this means they are motivated to sign shorter term leases and then negotiate more favorable lease/rent terms in a few years.


Under Construction

Source: CoStar


The amount of office space under construction in the Back Bay and Financial District has remained low. Back Bay is predicted to regain its position of having the lowest vacancy rate in 2021 – partly due to this lack of new construction, but also because many companies have a strong desire to be there.  

While the rent chart indicates the Back Bay, Financial District and Seaport will all follow a similar pattern in terms of rent growth/stabilization, based on the office space currently under construction and forecasted vacancy rates, it is likely that Back Bay office rent rates will increase at a greater pace.

Understanding Boston’s office market trends is critical for both landlords and tenants to understand in making leasing decisions.  Please let us know how we can help you complete an evaluation for your company.  Start your search for Boston office space here.
 

* Certainly, there are other areas and neighborhoods that should be considered as well.  If you are planning your Boston office move, please contact us and we can work with you on a complete assessment based on your requirements.

 

 

 

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Boston Retail Market Update - Fall 2019

With Labor Day Weekend upon us, retailers are gearing up for the Fall/Holiday season.  It is a good time to take a look at the forecast for the retail market.  The news highlights trade tensions with China, the low interest rate environment and continued speculation that the U.S. economy is "due" for a recession.  But continued job growth is also in the news (and see chart below).

 

As the chart below shows, retail rents are projected to level off and remain steady.  While this is projected for the market as a whole, different areas and sub-markets are likely to experience drastically different market conditions.  For instance, for many "zombie" malls (those with a large number of vacancies, particularly former large anchor tenants), much remains to be seen - how many of these malls will survive, and what will they need to do to make it.  On the opposite end of the spectrum, many new developments include retail components, which offers opportunities for businesses to take prime positions in the heart of our areas' newest communities.

 

Note that these charts and statistics were compiled with data from CoStar.  If you have questions about the Boston retail market, need help finding tenants for your property or are a business in need of finding a new retail space for your business, don't hesitate to contact us.

 

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How Much are Rents for Retail Space in Boston? (Summer 2019)

Rents for retail space in Boston have generally been increasing over the past 10 years, and the amount of vacant space has decreased.  However, over the past few months, we have started to see a slight pull-back in retail rents.  This has been more evident in some areas than others.  The chart below shows the 10 year trends for the Boston market area as a whole, which stretches well beyond the City.
 


The table below highlights the current market conditions in a few areas in and around the City of Boston.  The average asking rent across these areas is $49.47 per square foot (per year).  While the table presents area averages, it is important to note that there are sections within each of these areas that command higher rents.  For example, asking retail rents on Newbury Street can approach (and exceed) $200 per square foot in some cases; though there are certainly spaces available well below that level.  The reported vacancy rates throughout most of the City remains low - trending below the vacancy rate for the Boston market area as a whole.
 

Note that these charts and statistics were compiled with data from CoStar.  If you have questions about the Boston retail market, need help finding tenants for your property or are a business in need of finding a new retail space for your business, please contact Eric Shabshelowitz.


 

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Micro Housing in Boston

Good news for developers: Boston recently initiated a "Compact Living" pilot.  It's a two-year program that will allow developers to build so-called micro housing units in the City (though the preferred term is "compact unit" instead of "micro unit").  Boston has been considering such a policy for a while, and this two-year experiment will let the City determine how well it works.  

In order to build micro housing units in Boston, developers need to meet a number of standards.  This includes complying with design standards, inclusionary housing requirements and following specific processes and procedures for approval.

Micro housing is often a hotly debated topic.  Opponents typically raise concerns about density and displacing families (who need larger units to accommodate all family members).  On the other side, micro units help promote affordability by creating more units and they help fill an underserved area of housing demand (according to Boston, the number of single people and couples is 2/3 of the City's population, but the number of studio and one-bedroom units is only 1/3 of the City's housing stock).

For more details on the pilot specifics, click here for Boston's webpage on the Compact Living Pilot.  If you are a developer looking for micro housing opportunities in Boston, contact Eric Shabshelowitz to help with your search.

 

 

 

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  1. Peter Parkar on

    Hey Eric, Micro Housing a great idea and it will work well definitely. Good post with good idea.

    Boston Office Rents: Back Bay vs. Financial District

    Searching for office space in Boston?  Whether focusing on the Back Bay or the Financial District, businesses considering one of them generally ask us about options in the other.  The Back Bay and the Financial District each have their advantages.  Here is a quick comparison of the rent and vacancy rates of the office markets in each of them:

    Back Bay


    Source: CoStar


    Source: CoStar

     

    Financial District


    Source: CoStar


    Source: CoStar

     

    You can start your search for Boston office space for lease here.  As always, don't hesitate to contact us with questions or for help finding your new office space.

     

     

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    Update on Boston Business Trends

    One economic indicator that many businesses and real estate investors monitor is employment.  The Boston Planning & Development Agency recently published a report titled “Trends in Boston Business Establishments & Payroll Employment”, which provides some useful data.  Here are some highlights:

    • In 2016, Boston’s total payroll and non-payroll jobs increased to 794,038, up from 669,423 in 2010.  Total jobs are forecasted to reach 829,000 by 2030.
       
    • In terms of job density, the commercial core of Boston has the highest density.  Downtown/North End had 163,845 jobs per square mile in 2015; Mattapan, by contrast, had 981 jobs per square mile.
       
    • The “Health Care and Social Assistance” industry has the most payroll jobs in Boston, with over 140,000 in 2016.  The second highest is the “Professional, Scientific and Technical Services” industry at 80,524.

    As it is based on census data, some of the analysis is a little stale (most of the data is from 2015-2016).  However, it does support that Boston continues to add jobs and is expected to do so for the foreseeable future.  Continued job growth is good for real estate investors, as those employees will need places to live.  It is also good for businesses, as those employees could be consumers of their goods and services.

    There are a number of strategies investors can employ when deciding what opportunities they want to pursue.  Contact one of our investment property experts to formulate a plan and begin executing on it. 

    Or, dive right into your search!  Whether you are looking for multifamily or commercial, you can start your search for investment property in Boston here.  

     

     

    Boston Retail Market: Q1 2018 Update

    Boston’s retail market did not experience much change in the first quarter of 2018 and remains strong.  There has been a lot of press around the impending doom of retail, but, in my opinion, that is over-hyped.  The retail environment is constantly changing – clothing stores are seeing a higher percentage of sales online, but “experiential” retailers are expanding.  Here are some highlights of Boston’s retail market:
     

    Boston’s Retail Leasing Market

    • Average Rent Rates Increased: +2.7% over Q4 2017, +9.44% over Q1 2017.
    • Vacancy Rate Increased Slightly: 3.0%. Vacancy rate was 2.9% in second, third and fourth quarters of 2017. 
    • Negative Net Absorption:  Retail net absorption in Boston in Q1 2018 was -297,204 square feet.  This means that more retail space became available than was moved into. The past three quarters all had a positive absorption rates.

     

    Boston’s Retail Sales Market

    • Sale Volume Increased:  Retail sales activity rose during Q4 2017 compared to Q3 2017.
    • Sale Prices Increased:  The average price per square foot in Q4 2017 was $203.81, compared to $145.74 in Q3 2017.
    • One of the largest transactions in the past year was the sale of the retail block at 201 Newbury Street, which consisted of 24,712 square feet for $75 million, or $3,034.96 per square foot.

               

    Are you searching for retail space in the Boston area?  Feel free to browse available retail space for lease and retail space for sale, or contact us for assistance.

     

     

     

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