Despite Activity Surge, Boston Office Market Hits New Nadir

Total leasing activity in Boston’s office market doubled this quarter when compared to the previous period. If demand is so high, how did the market hit its highest availability rate in the third quarter?

Office availability rose to a record 21.3 percent last year, according to a report from Savills. That’s a jump of 260 basis points year-over-year and a slight gain from the previous quarter.

Yet at the same time, the Savills report shows a major surge in leasing activity: In the third quarter, tenants signed 3.4 million square feet of leases, doubling the volume from the second quarter. It also represented a jump year-over-year from 2.6 million square feet and the highest quarterly leasing volume since the beginning of 2022.

Boston’s office picture is muddier than that activity gain suggests, though. The top two leases of the quarter, both belonging to Vertex Pharmaceuticals, were renewals. Those two renewals alone accounted for more than 1.1 million square feet of deals.

After Vertex, Bain Capital’s 378,000 square feet lease in the Back Bay neighborhood was the quarter’s next-largest, but that too was a renewal, though with an expansion. Then, there was Commonwealth Expansion’s move to 152,000 square feet on Wyman Street — a sublease.

When all four of those leases are put aside, the Massachusetts Division of Capital Asset Management and Maintenance takes the top spot in terms of new leases in the third quarter, signing on for 106,000 square feet in the Financial District. It was the only new lease of the quarter of at least 100,000 square feet; the next largest new lease didn’t even exceed 75,000 square feet.

One positive takeaway for Boston office landlords is the rise in asking rents. The average asking rent reached a peak of $49.07 per square foot in the third quarter, up 2.3 percent from the second quarter and 8.6 percent year-over-year. Class A landlords are able to command even more, averaging an asking rent of $56.79 per square foot.

With leasing and employment trending in positive directions in the city, the fourth quarter could prove to be a critical moment in terms of office vacancies, according to the report’s authors. The report also noted a more competitive leasing environment may be ahead, as more expirations and deliveries near.