I recently had the pleasure of presenting with colleagues at the ULI Emerging Trends event, where we discussed market conditions and our outlook for 2014. I made a few predictions. Let me know if you think I’m on target.
2014 sees speculative development in Boston
While we all know that many large corporates have committed to build-to-suit projects in the Seaport, we feel 2014 could be the year that speculative development begins. With such limited new supply having hit the market in the last decade, new demand from tenants who are looking to look into the city, and an aging building set with an average age of 33+ years, the appetite for risk is growing. The likelihood for spec office development in Boston is the highest it’s been in years.
Firms begin to “smartsize”
The open office debate is on, as addressed recently by both the The New Yorker and Fast Company, with both point and counterpoint opinions. What we have seen is that stacking people into open offices and cubes for decreased real estate costs is now more of a discussion than a mandate.
Research shows that there could be serious repercussions on employee morale, productivity, retention and even employee health, when the pendulum towards efficiency is swung too far. Companies need to evaluate the happy medium. We predict that 2014 is the year the pendulum starts to swing back while firms strike that balance between collaboration and concentration. This is the year firms begin “smartsizing” instead of “rightsizing.”
Strong rent growth for 2014
We’ve already seen three consecutive years of 6-to-7 percent rent growth in Greater Boston. Given that no new supply is expected to hit the market until 2016, and vacancy levels are at approximately 10 percent, we anticipate another year of healthy rent growth. Our projection for 2014 is 6.9 percent in the city of Boston.