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.