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Demand for downtown workspaces is likely to pay off for developers building speculative office projects in Boston.
Steady absorption in the Financial District, Seaport and Back Bay has left few options for companies with big office space requirements, with only two options over 100,000 square feet available in 2018, said Jonathan Freni, a partner at CBRE/New England. Another four properties in that space range are scheduled for completion in 2019.
“If you have a site in Boston, go ahead and build it,” Freni said at a midyear market briefing sponsored by NAIOP Massachusetts.
The tight market bodes well for the prospects of office projects such as Skanska’s Two Drydock, Nordblom Co.’s The Beat redevelopment in Dorchester and the 321 Harrison being developed by Nordblom and CIM Group.
Additional availabilities are expected to emerge in the longer term as Bank of America and State Street Corp. reevaluate their space needs with possible consolidation of multiple offices.
The region’s booming life science industry continues to influence markets including Boston, Cambridge and the Route 128 suburbs.
Reverse migration by Cambridge companies and hospital groups is driving many of the office requirements on Route 128, where rents in the mid-$40 per square foot range have reached the highest level in 15 years, said Bill Lynch, a senior vice president at Colliers International in Boston.
At the same time, Cambridge’s pricey but tight office market has become a rival to its traditional lab sector strength, with office rents competing with lab rates after trailing significantly in past cycles, said Juliette Reiter, an executive managing director at Newmark Knight Frank.
That has prompted some landlords to pick office tenants for lab-ready space, such as Facebook at Alexandria Real Estate Equities’ 100 Binney St. and Phillips North America at DivcoWest’s 250 North St. at Cambridge Crossing.
Suburban growth is the dominant trend in multifamily development, as the downtown development scene cools off, said Travis D’Amato, managing director at Walker & Dunlop.
Urban Boston multifamily development peaked at 2,400 units in 2015 but has receded to approximately 1,000 units a year, as developers look for better returns in the suburbs out to the Route 495 belt, D’Amato said.
