Then, now, next: A look into the Greater Boston real estate landscape

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From Julia Georgules
New England Research Director

In honor of NAIOP’s 15th Annual Bus Tour and this year’s theme of “Then, Now, and Next,” we thought we’d take a look back at Greater Boston to see how much has changed. Across the country and in Boston specifically, 2003 was still the doldrums of the recession. Unemployment was climbing as tech and other employees fled. Vacancy rates were growing and the deterioration of tenant demand still plagues some suburbs today. Dot-com rents would decline until 2005, leaving Boston and the suburbs yet to reach the same high watermarks today. (Cambridge can boast rates that are 43 percent higher.) Additionally, lackluster demand was incentivizing landlords to offer concessions like free parking and gym memberships in submarkets, like Back Bay.

Development projects were either hangovers from the dot-com boom or entirely non-existent. 888 Boylston, for example, was being discussed in real estate circles, but wouldn’t break ground until 2014. Meanwhile, the South Boston Waterfront wouldn’t have the Boston Convention and Exhibition Center until 2004, and JLL wouldn’t begin calling it Seaport until 2011.

Fast forward to 2018 and the economy and real estate market feels entirely different. The Boston metro is a hotbed for top employers and skilled talent, and from 2016 to 2017 employment grew by more than 51,000 jobs. The booming labor market remains a major attraction for employers, and headlining announcements of major expansions and relocations have become more of a norm than an exception.

By March 2018, Boston’s 1.4-million-square-foot development pipeline was 95 percent pre-leased, the last blocks of space going to Rapid7 at The Hub on Causeway and Cengage at Pier 4. Meanwhile in Cambridge, the 1.3-million-square-foot pipeline is 61 percent preleased, with Phllips’ lease at Cambridge Crossing the latest in urban migration. With the only remaining blocks of new construction concentrated in the suburbs, the market’s 70 percent pre-lease rate is the highest of any primary office market across the country.

Looking ahead, supply constraints combined with recently awarded development approvals have many people thinking that new, speculative developments could kick-off in the near term. Spec development is not the only path of growth, however. With the redevelopment at One Post Office Square just one example, Boston also knows how to transform and evolve in other ways. Here’s to the next 15 years.