A gradual uptick in office leasing activity has been driven primarily by deals under 15,000 square feet, and while the race is far from won through the third quarter, the tortoise’s slow and steady approach is thus far proving successful in the local office market.
Downtown Boston posted positive absorption in Q3 for the third consecutive quarter, while Cambridge experienced negative absorption in the lab sector, but positive absorption in the office market, the result of a flurry of small and mid-sized deals at One Broadway in East Cambridge, according to Cassidy Turley FHO, formerly FHO Partners.
While pockets of activity are emerging, absorption is still less-than-healthy throughout the suburbs. Research and development activity remained essentially flat while office sector
activity began to pick up. Despite significant negative absorption in the first half of 2011, Cassidy said it expects the execution of deals in the suburban pipeline to balance out the negative activity from the first half of the year.
Even so, as the first three quarters of 2011 demonstrated, meaningful employment growth remains elusive and availability remained elevated across most submarkets.
In Boston, net absorption remained positive for the third consecutive quarter, totaling 580,551 square feet absorbed to date. Charlestown, Fenway and Midtown were the only Boston submarkets to post negative absorption at 118,100 square feet, 66,682 square feet and 69,281 square feet, respectively.
But despite positive absorption, overall availability in Boston has remained flat since year-end 2010, increasing 10 basis points to 18 percent. This is due to the first quarter delivery of 170,000 vacant square feet at the 760,000-square-foot Atlantic Wharf development, according to Cassidy.
Overall asking rents in Boston rose 4.1 percent year-over-year in the third quarter, to $41.61 per square foot.
The Cambridge office market closed the third quarter of 2011 with a 14.2 percent availability rate. This represents a decline of 1.3 percentage points quarter-over-quarter. In the lab market, availability also increased 70 basis points over year-end 2010 to 16 percent. This is mainly attributable to Shire’s space coming online at 700 Main St. in East Cambridge in the second quarter.
Overall asking rents for office space averaged $38.83 per square-foot, jumping 8 percent in the past 12 months. At $50.35, asking rents for lab space have increased 7.8 percent in the past year.
The suburban office market posted negative net absorption of 83,817 square feet year-to-date. But that erosion appears to be moderating – just one year ago year-to-date negative absorption totaled 213,569 square feet. While availability in the suburban office market has increased to 23 percent, since year-end 2010 there is still a significant gap between supply and demand, according to Cassidy Turley FHO.
