Since 2000, the topography of greater Boston’s commercial tenant landscape has shifted significantly. Back then, corporate campuses were king and rapidly expanding tech companies leased space in 128 Central faster than they could fill it.   

Deals customarily went over 100,000 square feet especially in the suburbs where availability rates in 128 Central, 495 West and 495 North were under 5 percent.  Employees wanted to work close to where they lived – in the suburbs.  Suburban rents reflected this demand – 13 years ago they were, on average, 30 percent higher than they are today.

In little more than a decade, 128 Central has slipped into third place in the tech market race. East Cambridge and the Seaport have pulled ahead, particularly in the past year.  Looking at the numbers, 2012 was a flat year in greater Boston’s commercial leasing market. Numbers may not lie, but statistics can be deceptive. Behind these numbers is a colorful story about shifting market composition. A recap of the themes of 2012 will help us understand how we’ve gotten here and what we can expect in the next 12 months.

Cambridge’s Innovative Solutions   

On paper, Cambridge’s office and lab market will end the year with negative absorption.  Commonly interpreted as an indicator of poor market performance, these numbers are actually reflective of white-hot market conditions. Limited availability and skyrocketing rents are compelling firms to trade in Cambridge addresses for other markets. Companies like Zipcar, Finnegan Henderson, Jumptap, Pyramid Research and Elysium Digital all sought space outside of Cambridge this year – contributing to overall negative absorption.  

Yet some companies remain tied to Cambridge, and these firms are using innovative solutions to contend with market conditions. Modeled on the Cambridge Innovation Center (currently in the market for 50,000 square feet of expansion space), venture capital-backed firms are doing off-market deals for the ancillary space of some larger counterparts to avoid investing in long-term leases. The phenomenon has even become a business model for Intrepid Labs – an offshoot of Intrepid Pursuits – which took 10,500 square feet at 222 Third St. during the second quarter.

While Cambridge’s sizzling market may be prompting tenants to explore outside addresses, it is also spelling success for other markets in the region – particularly the city of Boston.

Financial District: New Tech District?

While Cambridge will always be the original innovation district, Boston’s Seaport has become the region’s second hottest tech market in the past year. Brightcove and Communispace blazed the trail in 2011. In 2012, EnerNOC, LogMeIn and Zipcar joined them. Perhaps a victim of its own success, rents in the Seaport continue to climb. At $54  per square foot for class A space, they are now on par with class A asking rents in Back Bay.

While tech companies and start-ups are primarily responsible for South Boston’s renaissance, we are watching to see what happens when their leases are up for renewal. Progressive, collaborative and growing quickly, most of these firms must be centrally located to attract and retain the best talent. They also typically seek out economically priced real estate, and the Seaport may no longer be the affordable option it was just 18 months ago.  

So, in the coming year, we will be watching to see if Paypal, with its move into the 5th and 6th floors of One International Place, will be a trendsetter for other technology firms.  Conducive to the office-less collaborative spaces sought by tech companies, asking rents on low rise space in the Financial District are currently more than 45 percent lower than on higher floors and 20 percent lower than current rents in the Seaport.

Shrinking Parking Options?

While the focus in 2012 was on urban start-ups and technology firms, suburban professional service firms had their own story to tell. Increasingly focused on managing real estate costs, many of these service providers are working to drive down the average number of square feet per employee. As these companies come up with ways to stack more people into less space, suburban parking needs are increasing. 2012 brought a handful of instances where suburban space became unleasable (because all associated parking has been allotted to other tenants in the building). In 2013, it will be interesting to see if efficiency on paper leads to inefficiency in the parking lot.

On the surface, year-end numbers won’t tell the most dramatic story. But trends are emerging behind these statistics. The New Year will likely bring a continuation of these trends as tenants continue to respond to shifting market conditions.

Ashley Lane is director of research for Cassidy Turley FHO in Boston.