From Lisa Strope
New England Research Manager
As the world recovers from the recent news of Britain’s departure from the E.U., now is a good time to focus on long-term fundamentals like tenant demand and growth prospects. To that end, fundamentals remain strong across Boston’s submarkets. Employment is expanding at a faster pace than the U.S. and unemployment, at 4 percent, is at its lowest point since the tech boom in 2001. Job growth has been broad based across industries. Finance employment has fully recovered to pre-recession levels, while high tech jobs, which accounted for over 10 percent of job gains last year, will continue to fuel growth in professional and business services. Knowledge intensive job growth is expected to continue to boost our economy driven by Boston’s innovation ecosystem.
In Q2, Greater Boston fundamentals held steady with direct average asking rents continuing to reach above 10-year highs this quarter at $33.73 per square foot growing 4.6 percent year-over-year. Total vacancy continues to hover close to the 2007 record lows at 13.8%. The market as a whole reported its sixth straight quarter of positive occupancy gains continuing the momentum from last year’s record breaking absorption. Overall, this proves steady growth for the Boston market despite the volatility beyond our region.
Boston’s strong economic foundation was reflected in Q2 office leasing activity with over 65 percent coming from growing tenants looking to expand their footprint. Lab tenants continue to creep into office spaces, even in the tightest submarkets, including Ginkgo Bioworks quadrupling their footprint at IDB with a 70,000 square foot lease. This quarter’s largest leases highlight the diversity of Boston’s tenant base including leases by: Demandware, Acacia, Cambridge College, the Boston Globe and McCarter & English.
This quarter, build-to-suit deliveries such as Goodwin Proctor’s new home at 100 Northern Ave in the Seaport or Partners HealthCare’s new 850,000 square-foot HQ in Somerville provided little relief to Boston’s tightest submarkets. Across the Greater Boston market, the 3.9 million square feet of office space under construction is 47.6 percent pre-leased.