Research

BOSTON
1Q15 OFFICE MARKET

The first Quarter

continues positive
trends seen in 2014
All indicators for the Great Boston office market remained positive
through the first quarter of 2015. Close to 500,000 square feet of positive
absorption was posted, making this the 16th consecutive quarter of
positive absorption, when these quarters are combined they total more
than 9.0 million square feet. Quarter-over-quarter, vacancy dropped
another 30 basis points to 11.6%, the lowest vacancy rate in 20 years.
As a result of this low vacancy, asking rental rates increased
dramatically, up 20.0% on average during the same time frame.

Current Conditions
Class A vacancy now 11.1%, a new 10-year low
More than 3.2 million SF is slated for delivery in the next
12 to 18 months
Four straight years of positive absorption
Occupancy in Class A product exceeds 90%
1.4 million SF of leases were signed during the quarter

Market Analysis
Asking Rent and Vacancy

Overall Positive Absorption Across Greater Boston

Absorption in the Central Business District (CBD) remained positive,
netting 93,503 square feet. While this total represents only 1.0% of the
CBD inventory, activity has increased considerably in tower properties,
i.e., buildings with 20 or more stories, in the Financial District and Back
Bay. During the first quarter, tower properties accounted for 473,203
square feet of positive absorption, compared with 421,255 square feet of
negative absorption from low-rise buildings.
The Back Bay experienced positive momentum, as Blue Cross Blue
Shield and Wayfair occupied space at 101 Huntington Avenue and 500
Boylston Street, respectively. However, much of this positive movement
was negated as State Street and Liberty Mutual vacated large blocks
totaling more than 220,000 square feet at Copley Place and the John
Hancock Tower. As the quarter closed, the Back Bay netted just 4,363
square feet of positive absorption.
Absorption in the Financial District was similar to that in the Back Bay,
netting 47,585 square feet after all first-quarter movements. CDM Smith
took occupancy of six floors totaling 123,000 square feet at 75 State
Street. Cambridge Innovation Center and SS&C Technologies occupied
nearly 90,000 square feet at 50 Milk Street, while Acquia and Aetna Life
Insurance leased space at 53 State Street. UMass left a large block of
space at 225 Franklin Street, while Sunstein, Kann, Murphy & Timbers
renewed but also downsized at 125 Summer Street.
Absorption in the suburbs was healthier, posting 366,204 square feet.
The Route 128 submarkets led the first quarter, bolstered by several
notable movements: Osram Sylvania occupied 125,000 square feet at
200 Ballardvale Street in Wilmington; Shire Pharmaceuticals took full
occupancy of 235 Wyman Street, a 104,429-square-foot Class B building
in Waltham; and Bit9 moved from 266 Second Avenue and expanded at
1100 Winter Street in Waltham. In the largest movement within the Route
495 submarkets, Genzyme took occupancy of 114,000 square feet at 1
Research Drive in Westborough.

$40

20%

$36

16%

$32

12%

$28

8%

$24

4%

$20
0%
1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15
Average Asking Rent (Price/SF)

Vacancy (%)

Net Absorption
Square Feet, Millions
3
2
1
0
-1
-2
1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15

Market Summary
Current
Quarter

Prior
Quarter

Total Inventory

176MSF

177MSF

177MSF

Vacancy Rate

11.6%

11.9%

12.5%

Quarterly Net Absorption

491,967

632,414

877,426

Average Asking Rent

$34.88

$33.94

$34.22

Under Construction

3.2MSF

3.2MSF

3.0MSF

185,000

1,170,000

Deliveries

Year Ago 12 Month

Period Forecast

Research
BOSTON
1Q15 OFFICE MARKET

Vacancy Hits New Lows for Many Submarkets

The Cambridge market has been one of the tightest markets with
vacancy in the single-digits and dropping since 2010. At the end of the
first quarter, overall vacancy stood at 6.2%. The CBD submarkets total
almost 65.0 million square feet of rentable space. At the end of the first
quarter, overall vacancy stood at 9.6%, representing a decline of 140
basis points year-over-year. Vacancies are in the single digits in all CBD
submarkets, with the exception of the Financial District, where the rate is
10.4%, and Midtown, where it is 19.9%.

1.9 Million SF Delivered

Development Since 2013,
Another 3.2 Million SF
Underway

At 13.5%, suburban vacancies are much higher. Only a handful of

submarkets have single-digit vacancies: Inner South at 4.0%, WestRoute 128 at 9.0% and South-Route 495 at 9.1%. On the other side of
the spectrum, several submarkets have vacancies of more than 15%.
These include South-Route 128 at 17.2%, North-Route 495 at 19.6% and
West-Route 495 at 20.7%, the highest vacancy in Greater Boston.

Greater Boston currently has some of the most construction activity of

anywhere in the United States. At the close of the first quarter, 3.2 million
square feet of office space was in various stages of construction. The
CBD currently has five properties under construction that total 1.6 million
square feet. 101 Seaport, a 440,000-square-foot Class A building
underway in Seaport, is set for delivery and occupancy by
PricewaterhouseCoopers later this year. Also in the Seaport District, 100
Northern Avenue, a 500,000-square-foot Class A building, is scheduled
for completion in mid-2016, with Goodwin Procter committing to 70%
upon completion. In North Station, the Converse headquarters at 160
Washington Street is nearing completion; Converse will fully occupy the
building. In the Back Bay, 888 Boylston Street will deliver 362,000 square
feet in 2016, although only 162,000 square feet remains available. Only
one non-lab office building is under construction in Cambridge: 114
Mount Auburn Street is set for delivery and full occupancy by Harvard
University this summer. Eight buildings totaling 1.6 million square feet are
under construction in the suburbs. In the Inner Suburbs, three buildings
totaling 561,379 square feet are set to deliver in 2015. These include a
250,000-square-foot building at 150 Guest Street in Brighton, which will
soon be home to New Balance, and the Van Ness at 1325 Boylston
Street, which remains uncommitted as completion draws near. Several
build-to-suits are also nearing completion: TripAdvisor will fully occupy
400 First Avenue in Needham this summer; VistaPrint will occupy 75% of
275 Wyman Street in Waltham in the fall; and Wolverine Worldwide will
occupy 65% of 500 Totten Pond Road in Waltham in 2016.

Asking Rates Continue to Climb

Asking rental rates continued to increase as the Greater Boston area hit
a new high of $34.88/SF. The CBD submarkets also hit a new high,
posting $51.98/SF overall, with $57.40/SF for Class A space. The Back
Bay currently commands the highest rates, with $70/SF for Class A rents
and even higher for upper floors. East Cambridge has seen the sharpest
increase: Rents have climbed 20% in the last two years, and Class A
rents are now averaging in the high $60s to low $70s. Mid and West
Cambridge rents are also increasing, but are 20 to 40% lower than in
East Cambridge.
Increases are occurring in the suburbs, but to a lesser extent. The Inner
Suburb submarkets are demanding the highest rents, with average rates
in the high $20s to low $30s. The lowest asking rates belong to the Route
495 submarkets, which are averaging in the high teens to low $20s.
Rents in the Route 128 submarkets are averaging in the mid-high $20s,
with Class A product closer to $30/SF.

Asking Rents by Class

Office Building Sales

Millions

$40

$10

$400

$36

$8

$320

$32

$6

$240

$28

$4

$160

$24

$2

$80

$20
1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15

$0

$0
1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15
Volume

Source: Real Capital Analytics

Price/SF

Research
BOSTON
1Q15 OFFICE MARKET

In addition to this new development activity, there has been an increase

in full building renovations. Landlords are performing a wide range of
renovations, ranging from lobby improvements to common area
upgrades. Five buildings totaling 820,005 square feet are currently under
renovation. These include 333 Summer Street in the Seaport District,
which LogMeIn has fully committed to upon completion, and four other
buildings that currently have 97% availability.

which sold for $27 million or $407/SF, and 27 School Street in Midtown,
which sold for $21 million or $336/SF. Overall, CBD volume totaled
$428.0 million and averaged $508/SF. Cambridge had the highest
average sales rate per square foot, with sales volume totaling $187.6
million for an average sales rate of $745/SF. In the suburbs, volume
exceeded $270 million and averaged $187/SF. Many of the sales
occurred in the North and Northwest submarkets. Billerica had two sales
in the first quarter: 1-2 Federal Street, which sold in March to US Realty
Advisors for $27 million or $172/SF and 170 Lexington Road which sold
in February to Nashoba Learning Group for $3 million or $89/SF. In
Lowell, 59 Lowes Way sold to KS Partners for $14.6 million or $73/SF. In
the always active Burlington market, 67 South Bedford Street sold to The
Davis Companies for $14.5 million or $294/SF.

properties in boston
still in high demand
among investors

Looking forward

Sales of office properties remained brisk in the first quarter, as 27

properties totaling $885.7 million in volume traded hands during the first
quarter. The average price per square foot is trending in the mid-$300/SF
range, much higher than the mid-$200/SF average for the U.S. The cap
rate in the Boston market is in the mid 6.0% range, still lower than the
U.S. average. The largest portfolio sale of the first quarter was an 87property portfolio purchased by Select Income REIT. Two Boston area
properties were part of this sale: 330 Baker Avenue in Concord and 314
Littleton Road in Westford. NTT Urban Development out of Tokyo
entered the Boston market with the purchase of two Class B properties
from Synergy. DivcoWest sold three properties in the Seaport District to
Bentall Kennedy: 300 A Street, 313 Congress Street and 330 Congress
Street. Other sales included 141 Tremont Street in the Financial District,

As vacancy rates in the Greater Boston area continue to fall, many

from record lows, and current demand remains high, vacancy will
continue to trend downward. Although inventory is expected to
increase by 2.0%, with 3.2 million square feet of new development
set to deliver within the next 12 to 18 months, more than 70% of this
new inventory is already committed. In the meantime, large blocks of
Class A space are becoming scarce as landlords continue to raise
prices and tenants see a narrowing of asking versus taking rents.
Tenants are also seeing shrinking free rent and TI dollars. As a result
of limited supply, rates will likely continue to climb, especially for first
class space.

Lease/User Transactions
Tenant

Building

Submarket

Type

Square Feet

General Dynamics

100 Rustcraft Road

South Route 128

Direct

130,000

Harvard Business School Publishing

20 Guest Street

Inner South

Direct

124,000

LogMeIn

333 Summer Street

Seaport District

Direct

117,000

Sokolove Law

1380 Boylston Street

West Route 128

Direct

55,000

GID Investment Advisors

125 High Street

Financial District - Tower

Renewal

50,000

Select Sales Transactions

Building

Submarket

Sale Price

116 Huntington Avenue

Financial District Low Rise

$152,000,000

$567

268,000

126 Newbury Street

Back Bay Low Rise

$54,600,000

$1,092

50,000

314 Littleton Road

North Route 495

$50,400,000

$293

172,000

67 S Bedford Street

Northwest Route 128

$36,700,000

$210

175,000

100 Quannapowitt Parkway

North Route 128

$31,000,000

$185

168,000

Price/SF

Square Feet

Research
BOSTON
1Q15 OFFICE MARKET
www.ngkf.com

Submarket Statistics
Total
Inventory
(SF)

Under
Construction
(SF)

Total
Vacancy
Rate

Qtr
Absorption
(SF)

YTD
Class A
Absorption Asking Rent
(SF)
(Price/SF)

Class B
Asking Rent
(Price/SF)

Total
Asking Rent
(Price/SF)

Back Bay - Tower

7,130,281

6.6%

180,625

180,625

$71.63

N/A

$71.63

Back Bay Low Rise

6,136,339

362,000

13.4%

(176,262)

(176,262)

$51.66

$46.73

$48.68

23,049,854

11.4%

292,578

292,578

$56.18

$38.00

$56.13

Financial District Low Rise

9,818,819

8.1%

(244,993)

(244,993)

$50.19

$38.61

$41.53

Government Center

1,796,457

5.1%

40

40

$52.50

$43.78

$45.06

Midtown

2,354,645

19.9%

22,939

22,939

$51.00

$36.72

$39.38

North Station

2,413,180

253,000

1.9%

9,805

9,805

N/A

$36.98

$36.98

Seaport District

8,704,663

940,000

9.2%

(506)

(506)

$56.95

$40.87

$44.05

South Station

2,972,546

1.6%

9,277

9,277

N/A

$40.88

$36.64

64,376,784

1,555,000

9.6%

93,503

93,503

$57.40

$41.27

$51.98

East Cambridge

6,202,666

7.3%

10,052

10,052

$69.15

$44.30

$67.59

Mid Cambridge

2,296,601

66,463

1.8%

(3,300)

(3,300)

$45.84

$45.10

$44.87

West Cambridge

1,600,348

7.8%

25,508

25,508

$45.10

$41.04

$41.83

Cambridge Total

10,099,615

66,463

6.2%

32,260

32,260

$64.92

$44.22

$60.80

Framingham/Natick

5,006,316

14.3%

(94,636)

(94,636)

$25.88

$19.39

$24.44

Inner North

6,051,395

74,000

11.1%

65,471

65,471

$31.23

$30.74

$30.80

Inner South

5,803,863

487,379

4.0%

(93,941)

(93,941)

$34.44

$26.35

$29.43

North Route 128

6,178,530

14.6%

45,411

45,411

$22.16

$17.76

$19.75

Northwest Route 128

16,920,354

102,000

10.8%

51,217

51,217

$31.86

$22.10

$28.68

South Route 128

14,175,274

17.2%

49,156

49,156

$23.63

$21.99

$22.53

West Route 128

20,183,646

945,000

9.0%

129,443

129,443

$36.38

$26.01

$31.34

North Route 495

12,056,493

19.6%

31,925

31,925

$20.68

$18.36

$19.32

South Route 495

3,807,706

9.1%

84,350

84,350

$21.13

$20.02

$20.54

West Route 495

11,516,175

20.7%

97,808

97,808

$21.45

$18.45

$20.08

Suburban Total

101,699,752

1,608,379

13.5%

366,204

366,204

$25.91

$21.29

$23.71

Market

176,176,151

3,229,842

11.6%

491,967

491,967

$39.90

$27.62

$34.88

Financial District - Tower

CBD Total

Research
BOSTON
1Q15 OFFICE MARKET

Economic Conditions

Employment By Industry

The Massachusetts unemployment rate ticked downward to 5.1%, as

nearly 98,000 additional workers have found employment since the
beginning of 2014. The Boston-Cambridge-Quincy,MA-NH NECTA rate
increased to 4.9% after dropping late in 2014 to the lowest level since
2007. This decline occurred as nearly 75,000 more workers were posted
year-over-year. They both remain well below the U.S. average.

Not Seasonally Adjusted, Annual 2014

Information

2.9%
3.7%

20.8%

3.9%

Construction
Other Services

6.7%

Financial Activities
7.4%
Manufacturing

As we look back to 2014, the information sector had the strongest job
growth of any sector for both Massachusetts and Metro Boston.
Massachusetts gained 5,800 information jobs in a one-year period, while
4,700 jobs were added to the Metro Boston area. The education and
health sectors, which are the largest sectors with a combined 756,100
jobs statewide, added 19,300 and 20,700 jobs, respectively. The only
sector to lose jobs during the year was manufacturing. Statewide, there
are 200 less jobs in manufacturing, despite 700 more manufacturing jobs
added to the Metro Boston area.

17.1%

Leisure/Hospitality

9.6%

Government
12.0%

Trade/Transportation/Utilities

15.9%
Business & Professional
Health/Education
Source: U.S. Bureau of Labor Statistics, Boston-Cambridge-Quincy, MA-NH

Unemployment Rate

Payroll Employment

Seasonally Adjusted

Total Nonfarm, Not Seasonally Adjusted, 12-Month % Change

13%
3%
10%
2%
8%

1%

5%

-1%

3%
0%
Jan-10

-2%
Jan-11

Jan-12

Jan-13

United States

Jan-14

-3%
Jan-10

Jan-15

Jan-11

Jan-12

Jan-13

United States

Massachusetts

Jan-14

Jan-15

Boston

Source: U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics New
England

Source: U.S. Bureau of Labor Statistics, Boston-Cambridge-Quincy, MA-NH

Consumer Price Index (CPI)

Employment Growth by Industry

All Items, 12-Month % Change, Not Seasonally Adjusted, 1982-84=100

12-Month % Change, Not Seasonally Adjusted

4%

Total
Construction
Other Services
Health/Education
Business & Professional
Trade/Transportation/Utilities
Information
Government
Financial Activities
Leisure/Hospitality
Manufacturing

3%
2%
1%
0%
-1%
Jan-10

Jan-11

Jan-12

United States

Jan-13

Jan-14

Jan-15

Boston

-1.0%

Source: U.S. Bureau of Labor Statistics, Boston-Brockton-Nashua, MA-NH-ME-CT

0.0%

1.0%

2.0%

3.0%

4.0%

Source: U.S. Bureau of Labor Statistics, Boston-Cambridge-Quincy, MA-NH

Research

Boston

Newmark Grubb Knight Frank United States Office Locations

470 Atlantic Avenue

11th Floor
Boston, MA 02210
617.772.7200
Donna D. Groves
Research Manager
617 772 7275
dgroves@ngkf.com
David Tackeff
Research Coordinator
617 772 7283
dtackeff@ngkf.com

Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has
been revised. With this expansion and refinement in our data, there may be adjustments in historical
statistics including availability, asking rents, absorption and effective rents.
Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research
All information contained in this publication is derived from sources that are deemed to be reliable. However,
Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the
statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should
independently verify such information and all other information that may be material to any decision that recipient
may make in response to this publication, and should consult with professionals of the recipients choice with regard
to all aspects of that decision, including its legal, financial, and tax aspects and implications.
Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish,
transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information
it contains.