Shifting Tower Dynamics
by Aaron Jodka | Feruary 2017
This has been a very different cycle than is typical for Boston. Thanks to a resurgent TAMI sector (technology, advertising, media, and information), and the competition the newly built product in the Seaport presents to the Financial District, typical vacancy relationships are changing. This is particularly apparent for tower vacancies in high-rise spaces (those above the 20th floor) and low-rise spaces in those buildings. The chart below compares those vacancies in the Financial District (red lines) with the Back Bay's (yellow lines).
Three records have recently been set. Vacancies have never been higher in Financial District high-rise space, while they are near record lows in the low-rise spaces. The Back Bay is the opposite, with record levels of vacancy in the lower floors of their towers.
We do not expect a massive shift in the high-rise statistics in the Financial District in the near term, as tenants continue to consolidate space upon lease expirations/relocations, while larger tenants in the market, particularly those coming from outside of the city of Boston skew to low-rise, or non-tower users. However, we have never tracked more tenants in the market, and the five million SF of space they are seeking is well above the norm. Fundamentals look to improve in 2017 in the aggregate.