Financial and professional service firms will always account for a significant portion of greater Boston’s tenant demand. But startups and biotech firms, despite their traditionally smaller footprints, have rapidly become the key players in our region’s race for space. 

At the corner of MIT and Harvard is East Cambridge’s Kendall Square neighborhood – where, for the past eight quarters, rents have surged. Driven by demand from the entrepreneurial establishments born at this crossroads of intellect, asking rents for Class A office space jumped 12.7 percent – deals are now being executed in the low $60s per square foot – just in the past year. As a result, many of the enterprising firms born in Cambridge are seeking space outside of the neighborhood (but still along the MBTA Red Line) due to tight conditions and soaring rents. 

As a general rule, entrepreneurs are cool people. And where they choose to cluster will inevitably become a hotspot. Exhibit A: 2012’s migration to Boston’s Seaport District. At the beginning of 2012, tenants coming out of Kendall Square could find Class A space in the mid-to-upper $30s – it was scarce, but it was available. By the end of the year, it had become a myth – with deals becoming standard in the low $40s to mid-$50s.

As a victim of its own success, the spiking Seaport rents are forcing entrepreneurial companies to continue their hunt for economical, centrally located space – and it appears Boston’s Financial District will be the next “it” spot. At the end of the first quarter of 2013, low-rise space in the Financial District was still a value play.  With asking rents in the low-to-mid $30s per square foot, it offered more than a 70 percent discount to Class A space in the
Seaport District.  

While there was a time following the Great Recession when it seemed this low-rise space – left empty by the recession’s casualties – might never be filled, last year PayPal and Technip took the plunge and relocated into the Financial District. Cassidy Turley is currently tracking a handful of tech requirements we expect to land here in the second half of the year – and we’re excited to see what happens as one of Boston’s most traditional neighborhoods makes a move to become one of the city’s hippest.  

Did you know:

• Asking rents for Class A office space in East Cambridge’s Kendall Square neighborhood have jumped nearly 13 percent in the past year.
• Asking rents for Class A space in Boston’s Seaport District have climbed into the mid-$50s in the past year.
• Low-rise space in Boston’s Financial District offers a 70 percent discount to Class A space in the Seaport.

Cassidy Turley is a commercial real estate firm for investors and occupiers.