Lisa Strope

Despite strong market fundamentals in 2016, the central business district recorded four consecutive quarters of relatively flat rent growth. But in Q1 of 2017, historically the coldest and quietest quarter for Boston, the market sprouted back to life. Boston CBD rents grew 2 percent over the quarter, reaching new highs in both the Seaport and the Back Bay.

This jump was due in part to an increase in Class A space hitting the market in the Back Bay. After a strong 2016, when the submarket saw the most occupancy gains in nine years, the first quarter posted nearly 300,000 square feet of negative net absorption as a result of several long anticipated move-outs. Notably, Houghton Mifflin Harcourt’s space at 500 Boylston St. and 222 Berkeley St. became vacant as the firm has completed their relocation to the Downtown submarket. This space caused an uptick in Class A vacancy. In contrast, Back Bay Class B vacancy dropped to an 11-year low.

Changing the demographics of the Back Bay, fast-growing coworking space innovator WeWork opened its third Boston location in 31 St. James this quarter. Also The Yard announced that it will be planting a flag in the Boston market in the former John Hancock Tower.

With access to talent at the top of most location decisions, we continue to see strong demand for the vibrant Seaport and the transportation-rich Downtown submarkets keeping direct vacancy near 8 percent for the CBD as a whole. Q1 also recorded a modest decline in sublease availability.

The CBD will tighten even more next quarter as several midsize to large deals are finalized. With no new construction slated to deliver in the CBD in 2017, JLL Research expects landlords to continue their steady course of moderately raising asking rents.

Lisa Strope is director of research at JLL.