A recent article in National Real Estate Investor reports that the U.S. office vacancy rate has dropped below 16%, according to data from REIS, Inc. Nationwide, office vacancies have declined by 10 basis points from the first quarter, and now represent the lowest vacancy rate in 7 years.
Another encouraging sign is that nearly half of the increased leasing activity is being driven by positive tenant growth. According to analysts at JLL, about 46% of leases signed were the result of corporate expansions, with technology companies and financial services leading the trend.
The momentum is expected to carry through the balance of 2016, and according to some analysts, well into 2017. Industry experts point towards an improving job market, with employers expecting to add 2.1 million workers this year. And despite the steady upticks in office building values in recent years, office property prices still remain below their historical peaks.
Altogether, office vacancy rates are expected to drop by 30 basis points before the end of the year. In turn, lower vacancy rates are expected to push office space rents up by 4% during 2016. And while there is plenty of new commercial construction in the pipeline, it is concentrated in a handful of major markets. At the moment, there’s little likelihood of supply exceeding demand.
Yet the rising cost of leasing in the urban core will push some employers to the suburbs. This is good news for Boston Metro commercial landlords in key submarkets. Well-located office buildings in Boston Metro suburbs, with nearby access to public transportation and other amenities, are likely to attract employers who are expanding their corporate footprint and workforce.
The competition for workforce talent is another trend that is working in the favor of Boston Metro commercial landlords. Boston’s young, highly-educated and diverse workforce continues to attract employers to our area. Our startup culture is also bringing entrepreneurs to the area, and in turn, they are discovering Quincy, Braintree and other affordable markets to launch and expand their business. As long as our regional economy continues its momentum, Boston Metro commercial real estate, especially the office sector, should perform well.
Ready to begin, relocate or expand your business? Team up with an experienced commercial real estate broker at Jay Nuss Realty Group, LLC! Whether you are thinking of buying or leasing Boston Metro commercial real estate, we can help you find the ideal property. Please contact us today for expert guidance!