Boston, MA – April 25, 2024 – Cushman & Wakefield, a leading global real estate services firm, today released its first quarter 2024 industrial and office statistics for Greater Boston, showing stagnant leasing activity yet climbing average asking rents for the office and industrial markets and softened activity and average asking rents for life sciences.
“Similar to other major markets, office leasing remained stagnant over the first quarter of 2024,” said Riley McMullan, Senior Research Manager of Boston. “Meanwhile, overall vacancy in Greater Boston’s office market posted its sharpest quarterly increase in more than a year. Softening market fundamentals can be attributed to numerous factors, most overwhelmingly employers continuing to recalibrate space needs as they adjust to the remote work trend and identify what works best for them.”
First quarter leasing activity totaled 814,000 square feet (sf). The Financial District was the only one of Boston’s 19 submarkets to surpass the 100,000-sf mark for new demand, alone accounting for more than one-third of the entire market’s quarterly leasing total. Tenant footprints continued to shrink as the average size of a new lease fell 7.0% in the Downtown submarket and 11.1% in the Suburban submarket compared to 2023 averages.
Overall vacancy in Greater Boston’s office market jumped 100 basis points (bps) quarter-over-quarter (QOQ) to 15.6%. Increases were widespread geographically, with the Downtown and Suburban submarkets climbing 100-bps and 90-bps, respectively. Though the market’s overall average asking rent rate has spiked by more than $3.00 per square foot (psf) year-over-year (YOY), rents in Downtown Boston have begun to soften amidst slowing demand, decreasing for the second consecutive quarter. Meanwhile, Suburban submarkets posted modest QOQ rent growth.
“Following the trend seen with other asset types, quarterly demand for industrial was down significantly over historical averages. However, overall average asking rents continued to rise for the overall industrial market, climbing 25.9% year-over-year, while overall direct average asking rents for warehouse/distribution product remained relatively stable for the third consecutive quarter,” added McMullan.
Quarterly demand for warehouse/distribution in Boston totaled 220,000 sf, with the 495 North submarket accounting for more than half of new leasing activity. The overall industrial vacancy rate was unchanged QOQ at 7.2%, though remained elevated at 180-bps above the current cycle average. Nearly 271,000 sf of new warehouse/development product delivered during the first quarter, all of which is concentrated in the 495 South submarket. Meanwhile, 3.4 msf remains under construction in Greater Boston, 18.1% of which has been preleased.
The Urban North and Urban South submarkets commanded the highest direct average asking rents for warehouse/development space in the market, averaging $27.28 psf and $25.93 psf, respectively. The overall average asking rent continued to rise for the industrial market, climbing 25.9% YOY from $12.34 psf to $15.54 psf NNN.
“While Boston’s life sciences market experienced decreased leasing activity in the first quarter, our confidence in the market remains strong,” said Vice Chair Connor Barnes, who leads the firm’s Boston Science, Technology and Emerging Markets team. “After a few historic years, overall average asking rents will likely continue to soften as market conditions continue to normalize.”
First quarter leasing activity for life sciences experienced a relatively modest 7.0% decrease over Q4 2023. The Urban Ring cluster recorded the highest quarterly total for new demand with 117,000 sf, all of which was concentrated in the Urban North submarket. Overall vacancy climbed to 25.1%, up 260-bps QOQ and nearly double the vacancy rate recorded at the same period in 2023, which can be in part attributed to the delivery of new construction in the market. The Urban Ring recorded the most substantial quarterly increase of all five geographic clusters, spiking more than 1,100-bps during the first quarter, primarily due to an influx of inventory delivering without commitments in place. Meanwhile, Cambridge remained the market’s tightest cluster with 18.1% of inventory currently vacant.
After hitting a recent high at the end of 2023, overall average asking rents decreased modestly, falling to $93.88 psf. Rents were stagnant or softened in all five market clusters as market conditions continue to normalize to account for softened demand.