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Office vacancies in Boston rose slightly in the first quarter, and a wave of expiring leases in coming months will provide hints at the future direction of the market.

A pair of brokerage reports released this week tracked additional pullback in occupancy and declining asking rents in early 2024.

Boston’s downtown office vacancy rate ended the first quarter at 16.6 percent, according to CBRE, up from 15.8 percent at the end of 2023. The market had 525,651 square feet of negative absorption, including WeWork’s termination of its lease 1 Lincoln St.

Asking rents declined from $63.39 on a gross basis in the previous quarter to $62.99, and have dropped 10 percent since peaking in early 2022, CBRE reported.

Sublease availabilities declined for the second consecutive quarter, totaling 4.4 million square feet, as companies take advantage of opportunities to upgrade to higher-end offices at below-market rents.

In its report, brokerage Avison Young said landlords are offering additional concessions such as free rent and tenant improvement allowances to fill vacancies.

Tenants willing to commit to 10-year or longer leases for spaces of at least 10,000 square feet can expect to receive 8.4 months of free rent, according to data by Avison Young and CoStar. Average tenant improvement allowances are $118 per square foot.

Avison Young is tracking 4.7 million square feet of office leases set to expire by mid-year in Greater Boston, which will determine the short term direction of the market.

“Given the considerable number of expirations, we expect leasing activity to accelerate in the following quarter. With ample space available in the market, tenants will have a wide range of options to choose from to meet their real estate requirements,” the report stated.

The region-wide vacancy rate was 17.3 percent in the first quarter, according to Avison Young.

Boston Office Rents Drop 10 Percent from Peak

by Steve Adams time to read: 1 min