The Greater Boston office market experienced 560,000 square feet of net absorption in the second quarter, marking the fourth straight quarter of gains in tenant occupancy, according to a new report from Grubb & Ellis.
And things aren’t "only great when you’re downtown" – the suburban market supply has become more constrained, and has pushed the vacancy rate down for the sixth consecutive month, the real estate services firm found.
In the suburbs, Class A average asking rents ticked up for the second straight quarter to $25.47 per square foot. But much like the weather of the past several days, some areas were hot and some were not. The Route 128 North submarket experienced its seventh consecutive quarter of occupancy gains. As the supply of premium office space wanes along Route 128, rents in those properties are expected to increase as less space is available, encouraging new construction. But the MetroWest Interstate 495 submarket’s struggles continued, as 3Com vacated 125,000 square feet in Marlborough.
Overall, Class A rents inched up an average of 0.8 percent to $34.46 per square foot, while Class B rents hovered steadily at $23.88 per square foot. In Cambridge, the vacancy rate stayed flat at 9.5 percent, while rents increased $0.26 to $41.93 per square foot.
On the investment sales side, volume finished the second quarter at $793 million, on par with the first quarter level and already at 80 percent of the 2010 sales volume level.
The region’s industrial market saw tenant demand surge to its highest level since 2008. Every submarket and all product types posted positive absorption, resulting in 875,000 square feet of new occupancy. Vacancy slipped for the fifth straight quarter to 13.7 percent.
Asking rents edged up for the fourth consecutive quarter, increasing 5 cents to $7.28 per square foot. R&D/flex product experienced the largest quarterly increase, rising 1.2 percent to $10.04 per square foot.
The industrial investment sales market also took a step in the right direction. Notable transactions included Horizon Beverage’s $20.6 million purchase of a former GM building in Norton; Peterson Party Center’s $7 million acquisition of a 232,000-square-foot building in Woburn; and Analog Devices’ $4.5 million acquisition of 177,000 square feet in Wilmington. Low interest rates, together with loosening credit markets and record corporate profits, will continue to fuel user/buyer activity, according to the report.
Despite the overall positive rent increases, rates for general industrial and warehouse/ distribution space decreased slightly to $7.20 and $5.57 per square foot, respectively. Unexpectedly, available sublease space rose 352,000 square feet to 4.2 million, indicating volatility still looms and shadow space may still be hitting the market.
