A Slowdown In Corporate Relocations Has Left Boston's Biggest Office Projects Mostly Empty

Boston has a pair of huge office projects slated to finish construction this summer, and both remain mostly empty — threatening to increase the city's already historically high vacancy rate. 

The projects, Hines’ 691-foot-tall South Station Tower and Boston Global Investors' 10 World Trade, broke ground speculatively more than three years ago with more than 900K SF of office space combined. 

Leasing these buildings has taken longer than developers and brokers expected, an illustration of how the city's economy and office market have changed over that time in ways that haven't benefited new office buildings. The projects face competition from other new and renovated buildings, and many of the city's largest tenants have opted to renew leases rather than pay the high costs of building out new space.

And some tenants that signaled plans to relocate have put their searches on pause in recent weeks due to the uncertainty around the Trump administration’s tariff policies. Still, brokers expect the appeal of new buildings will eventually lead these projects to lease up, and the developers say they see some positive signs.

Boston Global Investors Vice President John Hynes IV told Bisnow the 10 World Trade project has seen touring activity pick up in the last six to 12 months, and while it hasn't signed any tenants yet, he is optimistic it will soon.

The project began construction in the first quarter of 2022 and is slated to deliver this spring with 255K SF of office space and more than 300K SF of lab space.  

"It was obviously a painful game of patience, but we're on our way up right now from what was clearly the bottom," Hynes said.

At the end of the first quarter, Boston's office market had a vacancy rate of 22.5%, according to JLL, roughly double the vacancy the market had in 2019. 

While vacancy has fallen the last two quarters amid a pickup in leasing activity, JLL's first-quarter report warned the completion of South Station Tower and 10 World Trade would increase the market's vacancy: "Just how much will depend on the level of increased pre-leasing those projects can attract between now and their delivery, and whether existing buildings can carry over the leasing momentum generated during the first quarter."

If they were to deliver without any additional leases, the projects would add roughly 850K SF of vacant office space to the market — roughly four times the amount of net absorption Boston recorded last quarter. 

The city's leasing market has been dominated by renewals, and there has been a lack of the large corporate relocations that typically help new office projects fill up. 

"It's very important to land anchor tenants for these assets," Cushman & Wakefield Executive Vice Chair John Boyle said. "There are very large users renewing, and that causes a dilemma of who to actually talk to to win."

The market is also seeing tenants pause their search amid the uncertainty on the federal level due to several macroeconomic factors, including the trade war.

Rhode Island-based toymaker Hasbro had reportedly been touring Boston office properties to relocate its headquarters, but executives said April 11 they had delayed its HQ decision until the summer to gain more clarity on the tariff situation. Brokers told Bisnow that other tenants are making similar pauses.

"I've heard of two [tenants] in the last couple of days that were on the 5-yard line on signing a lease or an amendment, and they said, 'Hey, you know what? We just need to see how the next couple of weeks or months play out,'" JLL Managing Director Roger Breslin said. "Although there are going to be companies that hit the pause button, I don't think they're going to be paused for long."

Office development has slowed across the country, but last quarter, Boston was one of the five major markets with the most space office construction, according to Colliers.

The report found the Boston market had 1.5M SF under construction that was 50.5% preleased. In addition to 10 World Trade and South Station Tower, it included a 320K SF suburban project fully committed to FM Global and a 221K SF downtown building mostly preleased to Bain & Co.

As for the two big spec office buildings under construction in Boston, they are feeling the pressure of delivering in a vastly different market than the one they began developing in.

South Station Tower began construction in early 2020, before the pandemic disrupted the office market, and it is expected to open this summer. 

Hines has seen some activity at the project, landing law firm Jones Day at the end of 2024 with a 41K SF lease. A month later, FM Global signed a 50K SF lease at the development, marking just over 90K SF of its 685K SF of office space leased.

Hines declined to comment for this story. 

The 10 World Trade project is undergoing final inspections and landscaping and is set to deliver in late spring, BGI's Hynes said. 

In addition to the increased touring activity, he said he is optimistic because of Boston’s recent momentum in daily office usage. The market saw 10.2% year-over-year growth in March, the largest increase in office traffic across major markets, according to Placer.ai.

"We've seen a huge increase in activity," Hynes said. "It's great to see that. I think the return to work is a reality. Companies are starting to finally settle on their corporate policies."

The new buildings are also fighting against other trophy space that has come on the market in recent years, including MP Boston's Winthrop Center, and projects that have received major renovations, including The Chiofaro Co.'s International Place.

As these projects try to convince anchor tenants to relocate, several have instead opted to renew their leases.

In the first quarter, Klaviyo renewed its 250K SF lease at Oxford Properties' 125 Summer St., and Nutter, McClennen & Fish renewed its 125K SF lease at Seaport West.

Last year, Bain Capital renewed its 350K SF lease at BXP's 200 Clarendon, Ropes & Gray renewed its 413K SF lease at BXP's Prudential Center, and PwC renewed its 335K SF lease at Union Investment Real Estate's 101 Seaport Blvd.

"I know there's only a couple new buildings, but the vast majority of leasing activity on the office side has been renewals," Hynes said. "They're happening at the buildings where the landlords are making the right investments."

Brokers and developers are optimistic that the new space will eventually be gobbled up.

Hynes said big tenants are on the market for space, especially in the finance, law and tech sectors. Additionally, Gillette is looking to move its headquarters in preparation for the redevelopment of its South Boston campus. But time will tell when these tenants put ink to paper.

"I think the reality as it relates to those specific projects — my opinion only — is that they're going to both lease," JLL's Breslin said about 10 World Trade Center and South Station Tower. "It's taking longer than the developers had hoped for, and that's where the overall dynamic of the world plays into things, but as it relates to tenant activity, I know both buildings have activity."