Office Absorption Tilts Toward Suburbs In Q3
The third quarter saw a shift in office absorption in greater Boston. Now it's time for the suburbs to shine. We chatted with Colliers International director of research Aaron Jodka about the direction of the office market.
Bisnow: Do the third quarter's numbers point to a strengthening or weakening in any aspect of the Boston market?
Aaron: The quarter was all about the suburbs. The third quarter marked the strongest suburban absorption rate, at 1.5M SF, so far in this real estate cycle. This was led by the inner suburbs, which—with its 1.1M SF of absorption—was the highest figure we have on record. It was a phenomenal quarter for the inner suburbs.
Aaron: The inner suburbs have become a truly competitive submarket within Boston. Apartment developers have zeroed in on this part of the market in recent years, and that has caused the population to grow. Many of these communities have T access, making for easy commutes to the city.
Office tenants have thus begun to look in that direction for office space. Partners is the biggest example. With the new Assembly Orange Line stop, the first new subway station on the MBTA in nearly 30 years, employees can either take public transportation to work, or park in the 2,000-space garage on-site. Partners is in the process of consolidating its numerous offices, bringing 4,200 people under one roof.
Bisnow: How widespread is growth in suburbs?
Aaron: Growth is happening all over, not just in Somerville. Boston Landing in Brighton is an exciting mixed-use development with New Balance’s headquarters, and practice facilities for the Bruins and Celtics. Office tenants have more options at New Boston Landing, now that 80 Guest St has come online. It's projects like these, and conversions of former industrial space in Watertown, that are making tenants think long and hard about the inner suburbs.
Bisnow: Is there any risk of overbuilding?
Aaron: At this point in the real estate cycle, we still see significant build-to-suit, or heavily leased office space upon completion on the office side. Developers and lenders have been disciplined and that has prevented a scenario in which we see overbuilding on the office side.
There are some projects on the horizon, from Boston Properties’ Hub on Causeway, Hines’ South Station development, HYM’s Bulfinch Crossing, Millennium Partners’ Winthrop Square project and Don Chiofaro’s Harbor Garage plans, as well as GE’s new headquarters—all in the City of Boston. These developments look to come to market in a staggered timeline, helping to reduce the risk of overbuilding. Also, our hospital system and educational institutions aren't going anywhere and will continue to drive growth.