Despite a slow start during the first half of the year, leasing activity picked up the pace as the third quarter closed with a flurry of deals in the Boston CBD. 28 leases over 20,000 square feet closed during Q3, including America’s Test Kitchen 53,000-square-foot lease at the Innovation & Design Building in the Seaport and Red Hat Inc.’s 45,000-square-foot lease at 300 A Street in the Fort Point neighborhood.
Overall, fundamentals were relatively flat for the fifth quarter in a row. Direct average asking rents held steady at $33.67 per square foot, growing 1.2% year-over-year, but still above 10-year highs. Markets across the region reported vacancy declines with total vacancy inching down to 13.5 percent – on par with 2007 lows. In fact, vacancy tightened in 11 of 13 submarkets year-over-year.
The market as a whole reported its seventh straight quarter of positive occupancy gains continuing the momentum from last year’s record breaking absorption. Greater Boston has added 2.88 million square feet of new office space this year. With another 2.86 million square feet under construction and already 48% pre-leased, there is little concern for an uptick in vacancy in the near term. Notably this quarter, the first new high-rise in the Back Bay since 2001 opened at 888 Boylston. The 17-story, 425,000-square-foot building commands some of the highest rents in the city and helped to push Back Bay Class A rents to the highest level since 2008.
Overall, it was a solid quarter for the region. With over 50% percent of our top leases this quarter from growing tenants and recent monthly job gains reaching above 2% percent, Boston is on track for a strong finish to the year.