Boston Tops US Office Market Absorption Rate in 2012

Cushman & Wakefield today released fourth quarter 2012 statistics for the Greater Boston office market showing Boston‟s CBD absorption rose to1.8 million square feet (msf) in 2012 leading every other major U.S. market for the year. The absorption rate measures the net rate of growth in leasing in a given period. In achieving the number-one ranking, Boston‟s CBD including the Financial District, Back Bay, Government Center/North Station, Midtown, Seaport, and Charlestown was compared against other major U.S. metropolitan areas tracked by the firm.

According to Cushman & Wakefield‟s year-end statistics, investment sales activity in Greater Boston rose in 2012 to approximately 11 million square feet, up from 9 msf in 2011. In addition, the total number of sales increased 22 percent, over the same period, with approximately 6 percent of the total market inventory changing hands. Sales growth was driven mainly by a spike in user/occupier sales which increased nearly 8-fold, ending the year at 2.4 msf, while the number of investor sales saw a slight dip.

“We are seeing very solid leasing and sales activity across all Greater Boston areas and asset classes fueled by increasing occupier and investor demand,” said Robert E. Griffin, Jr., President of Cushman & Wakefield‟s New England region. “What is most noteworthy about the recovery now underway in Boston is its level of consistency across the board. In addition to a significant spike in the Financial District leasing activity, we are also seeing very healthy leasing fundamentals in the suburbs approaching a 10-year rolling average. Robust occupier demand is fueling new construction at a level we have not seen in more than a decade. This is supporting a new trend whereby owner/occupiers are opting for new construction over second generation space in both the CBD and suburbs. Also supporting increased sales activity are favorable financing terms combined with attractive pricing and the continued shift toward the „live-work-play‟ model which is here to stay.”

All of Boston‟s sub-markets including the CBD, Cambridge, and the suburbs experienced robust leasing and sales fundamentals across the board in 2012. Demand in the Financial District drove occupier activity in the CBD to nearly 3.0 msf of leasing activity on a year-over-year basis, up 57 percent over 2011. Financial District leases represented more than half of all CBD leases signed during the year.

Additionally there was a 4.2 percentage point drop in overall vacancy in the Financial District to 11.8 percent during the past 12 months leading to nearly 1.25 msf of net absorption. Low rise overall vacancy in the Financial District saw a dramatic drop as tenants valuing location took advantage of more economical space. Low-rise vacancy (floors 16 and below) registered a vacancy decline of 4.7 percentage points to 12.3 percent year-over-year.

In the Seaport/Innovation District, absorption was nearly 300,000 square feet during the year, nearly doubling from 166,238 sf at year-end 2011, driving overall vacancy down to 11.5 percent, a 5.5 percentage point decline.


Occupier activity in Cambridge also contributed to healthy leasing activity at 2.2 msf which is nearly 40% higher than the ten-year average of 1.6 msf. Laboratory space witnessed more than 11 percent of its inventory absorbed during the year, or 868,000 sf, contributing to a healthy 6.7 percentage point decline in overall vacancy to 10.3 percent.

With some second generation office space coming on-line in Cambridge, overall vacancy rose by 1.8 percentage points to 9.2 percent. Kendall Square/East Cambridge asking office rents continue to possess the highest office rents in Greater Boston at $46.60 psf/annually.


Occupier activity in the suburbs also registered very healthy leasing fundamentals nearly reaching the 10-year average of 6.7 msf, ending the year at 6.4 MSF of leasing volume. This volume represents an increase of 23 percent year-over-year.Overall vacancy rates in the suburbs declined by 2.2 percentage points to 19.3 percent.

Large space users opted for new construction versus relocating into older stock in an effort to provide high quality work environments for employees for retention and recruiting. Several of the largest transactions of 2012, most notably Green Mountain Coffee Roasters, LLC (424,000 sf) and Schneider Electric (233,655 sf) involve new construction.