Wednesday, October 3, 2012, 11:38am
While a six-quarter streak of positive absorption in Boston’s Financial District has increased occupancy there by 848,000 square feet, Back Bay rental rates are now at a record 20 percent premium over asking rates in the Financial District, according to Richard Barry Joyce Partners.
Positive quarterly absorption of 1.1 million square feet of office space in the Greater Boston area lowered vacancy to 14.9 percent from 15.5 percent year-over-year. The last 12 months have seen a clear return to positive demand conditions for central Boston’s bellwether Financial District, Back Bay and Seaport District submarkets, according to the brokerage firm.
But the Back Bay’s fortunes could change, as availability there has increased by 631,000 square feet, suggesting more choices available to tenants with requirements to commence within two years. Especially as State Street Corp.’s 358,000 square feet of space within the John Hancock Tower is now on the market, according to Cassidy Turley FHO. State Street’s lease is up in December 2014.
The Financial District and Seaport accounted for virtually all third quarter absorption, measuring 870,000 and 105,000 square feet respectively, reports Lincoln Property Co. (LPC). Brown Brother Harriman’s relocation to 50 Post Office Square, combined with eBay’s 62,000-square-foot relocation to One International Place, as well as Zipcar’s transition into 46,000 square feet at 35 Thomson Place, were the notable market movers, according to LPC.
As a result, the Financial District cut its vacancy rate to 12.7 percent, while the Seaport cracked the 10 percent threshold by ending the quarter at 9.6 percent vacant, LPC reports. If the Seaport continues leasing up, tenants could focus their search to similar brick and beam buildings across Fort Point Channel in the more economical South Station submarket, where $29.40 per square-foot rents are approximately $6 lower than the Seaport.
Looking to the suburbs, Route 128 experienced the most significant quarter of absorption since 2000. The 128 North submarket has accounted for 69 percent of Route 128 absorption in the last 11 quarters, bringing vacancy levels there to 15.6 percent, a 10-year low.