The concept of value in the downtown Boston office markets has changed over the past few years. As discussed in NAI Hunneman’s Q4 2015 Office Market Report, market fundamentals are currently favoring Boston landlords, resulting in limited space options and rising rents. Downtown asking rents are averaging almost $52 per square foot, with rates in what have traditionally been secondary and tertiary submarkets reaching new heights.
Once providing reprieve from escalating rents, these areas have grown into well-established, desirable office markets in their own right. The Seaport has attracted firms like PwC, Autodesk and General Electric. Arnold Worldwide and Primark recently opened shop in Downtown Crossing and the Leather District is now home to dozens of young startup companies. Boston Properties is currently underway on a landmark, mixed-use development at the Garden in North Station.
The result of these trends is two-fold.
- Tenants that want to be downtown are paying premium rents, as they measure value in terms of amenities, access to labor, etc.
- Price-sensitive firms are seeking alternative locations outside of the core downtown markets — particularly along public transit routes. Companies have been able to find relief in submarkets like Somerville and Charlestown, but even these areas are tightening quickly.
So, what is the next frontier for price-sensitive firms in Boston? Activity will push out of the core along the subway lines:
- South along the Red Line toward UMass and Quincy.
- South along the Orange and Silver lines into Roxbury and Dorchester.
- North toward Chelsea and Everett (future home of Wynn’s casino).
- North along the Blue Line to East Boston, where new residential developments are popping up.
As these areas heat up, we’re sure to see a change in rents downtown, stretching out along the subway lines. What will be the new value areas? Only time will tell.