The Boston market posted its worst absorption quarter on record, with negative 1.5 million SF seen in the second quarter. This drove vacancies up to 10.6%, a 2.0 percentage point increase from Q1. While very few transactions are taking place, renewals are one source of leasing. With uncertainty in much of the marketplace about construction timelines and current and future space needs, many tenants are being deliberate and methodical in decision-making. This tends to make a short-term renewal — especially when facing a pending lease expiration — a viable strategy. Sublease space is on the rise, increasing by nearly 900,000 SF since March 31, one of the largest quarterly increases ever tracked.
The Cambridge bioscience community has come together to battle the COVID-19 virus. There are 120-plus companies (and growing) with a Massachusetts presence working on the virus, and Cambridge-based Moderna will start one of the largest drug trials on record for its mRNA technology-based vaccine, a leading candidate. Meanwhile, the efforts put into research today will result in new therapies and discoveries for years to come. We are essentially speeding up our medical research, which should be good news for startups and demand in the Cambridge and broader life science marketplace.
Greater Boston’s suburbs have faced a massive slowdown in activity, similar to that of their urban counterparts. Deals are still getting done, for example in the 128 South market around Dedham Executive Park. Sublease space availability is not surging as it is in Boston; TripAdvisor’s 100,000 SF sublease at its Needham headquarters was the largest addition in the second quarter. The largest block of suburban vacancy, dubbed The Block (Reebok’s former headquarters), in Canton has a sale pending to Harvard Pilgrim/Tufts, in a property swap with Spear Street Capital for its Watertown operations. While this sale has not yet hit our stats, it would move the 128 South vacancy rate down about three percentage points. Overall suburban vacancies ticked down 0.1 percentage point in the second quarter to 15.9%. Office demand has been positive this year, but lab has been the story, accounting for nearly three-quarters of all absorption in 2020.
