The Boston Office Market is One of the Most Robust in the United States
Real estate analysts are heaping praise on the Boston office market for good reason. The local market has low vacancy rates, an influx of new tech companies and one of the most talented work forces in the country. Let’s take a look at some office market statistics for the nation and compare them to figures for the Boston office market to give readers a sense of how our area is making strides during the wide scale economic bounce-back.
A Look at the National Office Market Picture
The nationwide office vacancy rate is currently approaching levels that have not been seen in seven years. The country’s overall office vacancy rate in the second quarter of 2016 was 16 percent. This is a decrease from the 16.5 percent vacancy rate from the second quarter of 2015. However, it must be pointed out that an unanticipated lag in new construction as well as the total amount of space absorbed is an indication that the next couple of months will prove to be critically important.
Nationwide total absorption and total construction have decreased to 2014 levels. Office space net absorption has reached a two-year low. Over 5.4 million square feet worth of office space was absorbed in the second quarter of 2016. Nearly 7 million square feet of brand new office space was constructed in the same time period. This represents a decrease of over 11.55 million from last quarter. These declines caught industry analysts by surprise. There is no doubt that the vacancy compression cycle exists yet the fact that net absorption amounted to less than new supply has raised more than a few eyebrows.
Industry insiders believe that new construction levels will soon reach those seen during previous periods of economic recovery. This year represents the nation’s seventh consecutive year of economic recovery. If new construction levels spike as anticipated, a surge in tenant demand will be necessary to keep the ball rolling on the macro-scale office market rebound. The nature of our country’s economic recovery is a stark contrast to those of the post-war era. Previous economic recoveries would most likely have ended by the seventh year and slipped right back into yet another recession. The fact that the majority of key metrics like rent growth, demand, vacancy compression and construction are fairly weak should not be construed in an ominous manner. Office market gurus view these slightly underwhelming statistics as mere “hiccups” in the grand scheme of things.
How the Boston Office Market is Faring
The Boston office market has a 12 percent vacancy rate. In a year-over-year context, our local office market experienced just over a one percent dip. All in all, the Boston office market is the sixth tightest in the entire country. The only office markets that are tighter are Washington D.C. And New York. Those cities had a 9.1 percent vacancy rate in the second quarter of this year. San Francisco trailed just behind with a 10.2 percent vacancy rate. Seattle came in fourth with an office vacancy rate of just under 11 percent.
Part of the reason why the Boston office market has experienced such gains can be attributed to the fact that the area prides itself on being technology-oriented. Tech businesses like Salesforce have made the news in recent months as they have searched for operating space in the Boston office market. There should be little doubt that Boston has one of the strongest office markets in the United States.
If you would like more information regarding office buildings available in the greater Boston market, contact Jeremy Cyrier at [email protected] or by phone at 617-340-8520.