Mon. Jul 22nd, 2024

Boston’s office line leads the country

By meerna Jul11,2024
Boston’s office line leads the country

WS Development celebrates opening of 400 Summer St. in Boston
In May, WS Development opened a 65,000-square-foot life sciences building at 400 Summer St. in the Seaport Innovation District. Photo by photographer Eric Levin, courtesy of Boston Seaport by WS

Boston’s office sector stood out in the first five months of the year, ranking first nationally in project count and second and third in completions and sales. Additionally, the metro area had the lowest vacancy rate among top markets, at 12.1 percent in May.

Boston’s office space was more than 13.6 million square feet, or 5.4 percent of the total, more than four times the national average. In the same month, the U.S. saw just 83.8 million square feet of construction

Boston’s office count was the best performer in terms of metrics

Boston offices led the nation in May, with more than 13.6 million square feet under construction — 5.4 percent of the total, well above the national average of 1.2 percent. The metropolis was followed by San Francisco (3.2 percent), Austin (4.7 percent) and San Diego (4.2 percent).

Additionally, three properties began construction in the first five months of the year, totaling approximately 676,350 square feet. This represents nearly 6.4 percent of all projects that started construction in the same period across the United States.

Office building at 600 Federal St. in Boston.
Celera Properties and True North Management Group have completed the first phase of the redevelopment of Andover Technology Park. Photo courtesy of CBRE

Taking into account projects in the planning stages, Boston’s office stock accounted for 11.6 percent of the inventory, nearly three times the national average. Markets like Austin (15.2 percent) and Dallas (12.2 percent) outpaced Boston, while Seattle (7.7 percent) and Washington (4.0 percent) lagged far behind.

BioMed Realty is one of the most active developers in the market. One of its projects, 585 Kendall, is set to include 600,000 square feet of office and life sciences space. Construction on the project began in 2022 and is expected to be completed in 2026. The development will include a 16-story building that is already fully leased to Takeda Pharmaceutical Co.

More properties will be available online

Eight office properties have launched this year through May, totaling 1.8 million square feet — 0.6 percent of total inventory. That represents a 5.1 percent increase in deliveries year-on-year, at a time when national completions were down 20.4 percent.

BXP has completed the sale of a 45 percent interest in 290 Binney St., a life sciences development in Kendall Square in Cambridge, Massachusetts.
In March, BXP completed the sale of a 45 percent stake in 290 Binney St. Photo courtesy of BXP

Seattle (2.5 million square feet) is the only metropolis with more space being built than Boston, while Philadelphia (647,303 square feet), the Bay Area (308,543 square feet) and Los Angeles (303,175 square feet) were at the opposite end of the spectrum. Boston’s office pipeline will continue to support growth as deliveries continue.

In May, WS Development completed One Boston Wharf, a 707,000-square-foot life sciences building in the Seaport Innovation District. The LEED Platinum-certified property is fully leased to Foundation, a subsidiary of pharmaceutical company Roche.

Earlier this year, a partnership between Celera Properties and True North Management Group completed the first phase of the 250,000-square-foot Andover Technology Park in Andover, Mass. The life sciences and innovation project involves the reuse of two buildings that were completed in 1996 and 1998. The second and final phase is already underway and is expected to be completed in the coming months.

Strong trading activity defies trend

In terms of sales, Boston ranked third nationally, with $761 million recorded year-to-date through May. Washington, D.C., took the lead with nearly $1 billion, followed by the Bay Area ($795 million).

Office building at 101 Arch St. in Boston.
Synergy Investments has acquired 101 Arch Street in downtown Boston for $78 million. Photo courtesy of Yardi Matrix

Office assets in the metropolitan area traded for an average of $262 per square foot, significantly higher than the national price of $165. Austin ($433 per square foot) topped the list, followed by San Diego ($422 per square foot) and Los Angeles ($368 per square foot), while Philadelphia ($90 per square foot) and New Jersey ($112 per square foot) were at the other end of the spectrum.

In March, BXP sold a 45 percent stake in 290 Binney St., a 570,000-square-foot life sciences project in Kendall Square in Cambridge, Mass. The buyer was Norges Bank Investment Management. The deal will reduce BXP’s share of the project’s estimated development costs over time by about $533.5 million, according to a statement.

The building is scheduled to open in 2026 and is fully leased to AstraZeneca. That same month, Synergy Investments acquired nearly 474,000 square feet of 101 Arch Street, an office building in downtown Boston. Clarion Partners sold the asset for $78 million — or $164.59 per square foot.

The lowest vacancy rate among the best markets

Benefiting from the growth of high-quality life sciences real estate, Boston’s vacancy rate in May was 12.1 percent, well below the national average of 17.8 percent. Although that represents a 180-basis-point increase year over year, the metro area still outperformed peer markets such as Seattle (up 350 basis points), Dallas (up 450 basis points) and San Diego (up 310 basis points).

Property at 35 Crosby Drive, Bedford, Mass.
Persimmon Technologies has committed to leasing 130,000 square feet of space in the WP Carey building in Bedford, Massachusetts. Photo courtesy of Newmark

Additionally, Boston had the lowest vacancy rate among the target markets, while San Francisco (25.2%) recorded the highest vacancy rate.

Last month, Persimmon Technologies, a subsidiary of Sumitomo Heavy Industries, committed to 142,224 square feet in the W.P. Carey Building in Bedford, Mass. The building, located at 35 Crosby Drive, is currently being redeveloped into a 160,000-square-foot research and development facility. Completion is scheduled for later this year.

In March, Takeda Pharmaceutical Co. signed a 10-year lease extension at 75/125 Binney St., owned by Alexandria Real Estate Equities Inc. The company will continue to occupy 222,925 square feet of the 339,082-square-foot life sciences property.

The metro’s average asking rate in May was $46.71, up 12.1% year over year. The national average was $37.72, down 170 basis points from the same period in 2023.

Boston’s coworking sector remains stable

Office building at 75/125 Binney Street, Boston.
75/125 Binney St. on the Alexandria Center campus in Kendall Square. Photo courtesy of Alexandria Real Estate Equities Inc.

Boston’s coworking sector accounted for just under 4.6 million square feet in May. The metropolis outpaced Miami (2.9 million square feet) and San Francisco (3.2 million square feet) but trailed Washington (6 million square feet) and Chicago (6.3 million square feet). Manhattan led the nation with 11.5 million square feet.

The metro’s volume of shared space accounted for 1.7 percent of all rentable office space, slightly below the national average of 1.8 percent. Among peer markets, Miami had the largest share of shared space outside of total inventory, at 3.7 percent.

By meerna

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