The little people must look even smaller from the corner-office windows of the Boston corporate elite these days, as space on the upper floors of the Financial District’s tallest towers continues to fill at a rapid clip.
And ongoing jockeying for the priciest views in the city seems to ensure that only those with the fattest checkbooks – and the resolve to wield them – will continue to occupy their penthouse perches.
The high-rise portions of the Class A tower market saw vacancy drop to about 6 percent in the second quarter, the lowest that number has been since 2001, around the time the dot.com bubble burst, according to information provided by CresaPartners in Boston.
Joe Sciolla, CresaPartner’s managing director, said his team is encouraging tenants to lock-in the low rents the market has reached now that it has bottomed out. In the low-rise spaces, those are at about $36 to $40 a foot, and in the high-rise they are between about $58 and $68 a foot on an average seven- to 10-year lease, he offered. In the high-rise portions, rents are likely to climb by as much 5 percent in the next year or two, and the mid-rise, while remaining relatively flat, may see a 2 percent to 3 percent bump in 2012 or 2013, Sciolla said. The low-rise will likely stay flat through 2012 and well into 2013 because that’s the last space that will get leased, he added.
"We’re seeing the high-rise tower market tighten," Benjamin Heller, managing director for Jones Lang LaSalle, told Banker & Tradesman. "It’s significant because it could affect pricing. It creates a little bit of upward pressure to increase rents. In general, whenever there’s a vacancy rate in the single digits you start seeing rents raised."
But that increase won’t be across the board. There is still ample low-rise office space available – about 1.5 million square feet in Downtown Boston alone, said Sciolla. That space will be filled, eventually, by either back-room departments of companies already in Downtown Boston, or by tenants in, say, Cambridge, where rents are pushing mid-$40s to mid-$50s per square foot, Sciolla opined.
"With biotech continuing to grow … and everybody beating themselves for space over there, there’s a potential some tenants could find the low-rise portions a value," Sciolla said. "To me, either it’s going to be tenants like that that will be migrating to downtown, or it’s going to have to be growth internally. I think the likelihood is more migration," because it would take thousands of jobs being created to fill the low-rise space organically, which is unlikely anytime soon.
Some of the more significant leases signed downtown recently were LPL Financial and LEK Consulting that together took about 120,000 square feet at 75 State St.; Duane Morris law firm that took 30,000 square feet at 100 High St.; and Edwards Day that signed for about 40,000 square feet at 100 High St., according to information from Jones Lang LaSalle.
