Office availabilities in Boston topped 16 million square feet in late 2023, equivalent to more than 13 Prudential towers. Photo by Steve Adams | Banker & Tradesman Staff
Persistence of the hybrid work model is expected to translate into continuing declines in office occupancy and rents across the U.S.
More than 16 million square feet of office space is currently available in Boston, brokerage Colliers reported, equivalent to 13 Prudential Towers.
“Given the prolonged period of elevated vacancies and increasing number of new building owners who have a lower cost basis, asking rents may get pushed down in 2024,” Colliers researchers reported.
Potential tenants have unprecedented options for their space searches, with 50 buildings now offering more than half of their space available. The city-wide vacancy rate ended 2023 at 23.1 percent, including 28.1 percent in the hardest-hit class B market.
Across Greater Boston, the office vacancy rate hit a record high of 21.7 percent, with 1.9 million square feet of negative absorption in the fourth quarter.
Colliers is tracking approximately 4 million square feet of tenant requirements in the city of Boston’s office market, representing an increase from 2023.
Availabilities in Cambridge’s office market hit their highest levels in two decades at 2.4 million, reflecting more than 900,000 square feet of sublease listings since the onset of COVID in early 2020. The vacancy rate ended 2023 at 19.9 percent for class A buildings and 23.4 percent for class B properties.
Two other reports foresee continuing declines for the U.S. office market in coming years.
Ratings service Fitch this week reported that the national office market will continue to decline through 2024 and 2025.
Since the end of 2019, the national office vacancy rate has risen from 9.5 percent to 13.5 percent. Through the end of 2026, rents will decline by 6.2 percent, Fitch predicted.
The office loan market will decline amid higher interest rates, an expected economic slowdown and pressures on the fundamentals of the office market such as hybrid work.
Within the collateralized mortgage-backed securities market, office delinquencies are projected to rise from 3.3 percent at the end of 2023 to 8.1 percent in 2024 and 9.9 percent in 2025, Fitch projects, amid refinancing challenges.
And in a report released today, researchers Yardi Matrix predicted no substantial uptick in office occupancy in 2024, citing the persistence of the hybrid workplace model.
Nationally, asking rents for office space declined 1.4 percent year-over-year in December, Yardi Matrix reported.
