Despite mounting fears and headlines about a recession nationally, locally, Boston remains on solid footing. Vacancies held flat, at 7.9%, the lowest since early 2001. Rents keep rising, and developers are showing their confidence in the market by announcing more speculative construction.
Boston could very well buck the national slowdown narrative, but it appears that demand has peaked for this cycle — the total SF of active tenant requirements has come off its peak — while development has picked up. It remains a landlords’ market today. Time will tell if the Federal Reserve is able to steer the economy into a soft landing/avoid a recession, but for now, Boston is humming.
Cambridge has posted back-to-back quarters of negative absorption for the first time since the end of 2016/beginning of 2017. Overall, vacancies ticked up 0.6 percentage points during the quarter and are up 0.9 percentage points in the last year. What this doesn’t show is the continued strength in the market. Life science continues to grow, expanding both inside and outside of Cambridge. MIT’s 238 Main Street and 314 Main Street projects are nearly fully committed, while Cambridge Crossing continues to attract new lease deals. The market remains strong, although vacancies have ticked up from incredible lows.
Boston’s suburban market hit a bump last quarter caused by increasing vacancies and negative absorption. The Route 128 Mass Pike led in absorption, as it has throughout the year, boosted by the completion of 10 CityPoint. The biggest hit to vacancy in the third quarter was the addition of 100 Crosby Drive in Bedford as Oracle is moving out, creating another large block of suburban vacancy. Despite that, vacancies ended the quarter at 16.4% — among the lowest they have been in nearly 20 years. Rents continue to increase.