Cushman & Wakefield today released its statistical review of the third quarter of 2011, showing a decline in overall vacancy and a rise in rents in many of Boston's key office submarkets. Boston's commercial real estate market continues a positive trend of improvement from the economic downturn of 2008-2010, seeing a marked year-overyear and quarter-over-quarter improvement in absorption, vacancy and rental rates.
Boston's Central Business District (CBD) showed some of the biggest improvements this quarter. Overall class A vacancies in the CBD ended the quarter at 13.7%, a 1.1 percentage point decline from mid-year 2011. Asking direct class A rental rates rose by nearly two percent to $46.55 per square foot during the quarter and by seven percent year-over-year. Overall year-to-date absorption was nearly 170,000 square feet, driven mostly by new lease transactions in the Financial District and the Seaport.
Cambridge also experienced significant positive absorption during the quarter, with over 500,000 square feet of overall net absorption year-to-date. As a result of the increased leasing activity in Cambridge's office market, overall office vacancy in Cambridge declined by nearly three points to 9.7% as of the end of the third quarter 2011, and by nearly six-and-a-half points year-overyear. Cambridge's laboratory market saw a less positive result in third quarter, with the overall vacancy rate growing to 18.2% in the laboratory market, 0.7 of a percentage point higher than reported last quarter and 1.4 percentage points higher year over year.
Market activity in suburban Boston improved during the third quarter. Driven by the Route 128 submarkets, overall Suburban vacancy rates declined to 22.0%, representing a modest 0.7 percentage point change from this time last year and a 0.2 percentage point decline from second quarter 2011. In total, suburban Boston has seen more than 4.1 million square feet of leasing activity year-to-date, 62% of which occurring in the Route 128 submarkets.
Much of this activity can be attributed to a flight-to-quality among suburban office users chasing falling rents in class A office space. Overall, class A office rents fell nearly one percent yearover- year to $22.97 per square foot. However, there was also some significant growth among office users, particularly in the Route 128 North submarket, which has seen nearly 200,000 square feet of positive overall absorption so far this year.