An influx of tech companies moving downtown contributed to the strongest first half for the Boston office market in nine years.
The office market had 757,764 square feet of positive absorption in the first six months of 2014, according to Cassidy Turley’s research division. Landlords in the Financial District are updating office towers, keeping up with changing workplace trends to attract tech companies from the suburbs and outside the Greater Boston market.
Blackstone’s Equity Office, owner of 100 Summer St., modernized the lobby of the 32-story office tower built in 1974 and demolished an interior floor for a marketing center to provide a blank slate for prospective tenants to envision office designs. Rapid 7, an IT security and analytics company, occupied 40,000 square feet on two floors in April, and other tech companies have followed.
"It changed the image of the building from being one that typically appealed to institutional users to one that was a legitimate option for young technology companies," said David Martel, an executive director for Cushman & Wakefield.
Online gaming company WorldWinner leased 38,000 square feet at 100 Summer St. and will move from Waltham. InvenSense, which makes motion-tracking sensors, and marketing compliance company Gryphon Networks, leased 21,000 and 16,000 square feet, respectively during the second quarter.
Another downtown building being repositioned to attract tech tenants is Lafayette City Center, which was vacated by State Street Corp. as it moved to its new 500,000-square-foot One Channel Center offices in the Seaport in June. The Abbey Group is updating Lafayette City Center with a futuristic lobby and collaborative office space with flexible floor plans.
Online back-up provider Carbonite signed a lease for 52,000 square feet in the building in May, and sources say Cambridge speaker manufacturer Sonos is negotiating for up to 130,000 square feet of office space.
Average Class A office rents in the Financial District have risen from $47.17 to $48.59 in the last 12 months, according to Cassidy Turley.
Space Tightens In Seaport
Based upon tour activity by prospective tenants, downtown leasing shows little sign of losing momentum, said Tom Ashe, a partner at Transwestern RBJ. Tech tenants tend to prefer brick-and-beam space in the Seaport District, but availabilities are limited. Class A vacancies fell to 4.6 percent, down from 9.3 percent in June 2013.
"That market continues to be very hot," Ashe said. "The core Fort Point brick-and-beam buildings are fairly well leased up. It’s more a question of supply and demand than anything."
Average class A rents in the Seaport were virtually unchanged from the previous year at $52.95. State Street Corp.’s move to One Channel Center was the only new construction completion during the second quarter.
"When you have slow and steady (absorption) in a market where there is relatively little new supply being added, it’s a slow tourniquet on tenant leverage," Cushman & Wakefield’s Martel said. "Every day that goes by and vacancy rates drift downward, the owners get a stronger position at the bargaining table."
Email: sadams@thewarrengroup.com
