The second quarter of 2017 saw a softening of office space demand in the Boston Metro, as we reported in a prior blog post. While some of the vacancy rates can be attributed to ongoing construction of Class-A office space, and tenant migration to the Seaport, analysts say that corporate mergers and right-sizing are also having an effect. Here are some examples from Boston Bisnow, along with insights from the team at Jay Nuss Realty Group, LLC!
During the second quarter of 2017, the Boston Metro’s Class-A office space vacancy rate reached 15%, while Back Bay vacancies have reached 16.4%. Office vacancies in downtown Boston reached 8.2%.
While a number of Class-A tenants have relocated from other Boston locations to the Seaport, a flurry of mergers and acquisitions, along with corporate right-sizing, have contributed to tenant attrition and higher vacancy rates. Large law firms and financial service companies in particular are scaling back their brick-and-mortar footprint, with one tenant alone vacating 25,000 square feet of downtown Boston office space.
This trend is not exclusive to Boston. Escalating lease costs amid stubbornly-low interest rate environments have prompted companies like Bank of America to shrink their office space occupancy on a global scale. In the past few years, Bank of America has reduced its real estate footprint by 44 million square feet, representing about 34% of the total office space it once occupied.
As financial companies, insurance conglomerates and law firms realign their office space use, downtown Boston is attracting new tenants in the tech industry. Bisnow reports that CloudHealth Technologies, a fast-growing software startup, is nearly tripling the size of its Boston offices. They will be joined at their new location at 100 Summer Street by recruiting services company Bullhorn. Other tech companies calling downtown Boston home include software company Rapid7, The Abbey Group, VMware, Sonos and Carbonite.
Taken as a whole, the uptick in Boston Metro office vacancies is highly localized, with no single cause behind the reshuffling of tenants. For this reason, it does not appear that we are on the cusp of a stronger downturn. Tenants who are seeking new office space should use professional tenant representation to best leverage their opportunities for a favorable lease!
When you are ready to begin, relocate or expand your business in the Boston Metro, team up with the Jay Nuss Realty Group! Whether you are thinking of buying or leasing Boston Metro commercial real estate, we can help you find the ideal property. We will provide you with professional tenant representation to help you make the best decisions.
Contact us today for expert guidance!