The vacancy rate for Class A office space in East Cambridge has plummeted, dropping to a mere 4.9 percent vacancy in the third quarter, according to a report from Lincoln Property Co. (LPC).
Just a year ago, East Cambridge’s market was 12 percent vacant, a healthy number by almost anyone’s standards. But now, the market is saturated to the point of overflowing.
Mid-Cambridge also helped lead the charge with Class A vacancies dropping to 6 percent. With space tightening in East and Mid-Cambridge, rental rates are following them, moving aggressively upward.
In East Cambridge, average asking rents in the third quarter jumped to $42.50 per square foot, up from last quarter’s $40.88 per square foot. Mid-Cambridge also exhibited a strong surge in rents this past quarter, with the average climbing to $40.87 per square foot from $38.18. The average asking rate overall for Cambridge office space was $37.56 per square-foot, an increase of more than $2 from the second quarter of 2011.
The drop in vacancy in East Cambridge Class A product has been attributed to strong growth by technology tenants, conversions of office buildings into lab space and a large lease signed by Pega Systems at One Rogers St. for 163,000 square feet in the second quarter. However, office absorption in the third quarter was primarily focused at One Broadway, where more than a handful of deals were signed that contributed upwards of 50,000 square feet of net absorption this quarter. Those deals include the Cambridge Innovation Center expanding by 25,000 square feet, Opera Solutions’ relocation of 8,900 square feet and Charles River Ventures’ relocation to One Broadway for 8,000 square feet.
Yet something is still rotten in the city of Cambridge.
Year-over-year, West Cambridge has experienced more than 23,000 square feet of negative net absorption and a Class A vacancy rate of 33.1 percent. Although much of the vacancy was tracked to two struggling assets, 125 and 150 Cambridgepark Drive, the more difficult problem lies in the fact that East Cambridge tenants have begun to favor relocating to the Seaport District over West Cambridge, according to LPC.
Fortunately for the city, technology tenants from the Route 128 market are expected to aid West Cambridge, but that will likely take a year or so.
