MidYear Shows Office & Life Sciences Continued Struggles; ‘Retail Rocks’

June 22, 2026 — By Mike Hoban

Derby Street Shops, Hingham (image courtesy WS Development)

Boston — Despite persistent vacancy in the office and life science markets, economic uncertainty, and the ongoing war with Iran, the overall outlook for CRE in Greater Boston remains relatively healthy, according to the panel assembled for NAIOP’s Midyear Market Roundup, held virtually last week on Zoom. Below are the observations of experts in the office, industrial, retail, and multifamily sectors, as well as an overview of the capital markets.

Office: Tucker White, U.S. Office Lead, Market Intelligence, Avison Young

The Boston office market is still struggling to find its way post-COVID, with the overall vacancy rate “hovering in the low 20s.” While Class A trophy space continues to see positive absorption (143,378 SF in Q1), negative absorption persists for non-trophy Class A (-130,947 SF) and B/C (-380,211 SF) properties. Rents for trophy assets are rising, while rents for all other assets are declining. The gap between strike (stipulated) rents and Net Effective Rents (NER) is widening as landlords are offering higher levels of free rent and larger tenant improvement (TI) packages, putting tenants in the driver’s seat. “We expect this to continue to increase as we move throughout the year,” White adds, as landlords try to fill vacant space. (There is one positive note in AY’s Q1 report: the average lease term reached its highest point since Q2 2019 as firms crystallize their RTO policies.)

The Downtown Boston occupancy rate is unlikely to return to equilibrium (15% vacancy) anytime soon. White said the best-case scenario would be 2031, but only if absorption returned to the record levels from 2014 to 2019─2.1 million SF annually. In addition to increased demand, office-to-residential conversions would help bring down vacancy rates, although the process will be slow, as developers convert mostly B&C product into apartments. While the numbers look grim, White ended on a somewhat optimistic note: “We’re only behind Manhattan and San Francisco in terms of leasing velocity recovery. Obviously, there’s a lot more supply to absorb…but we’re outpacing a lot of markets, including the U.S. total market.”

Retail: Lindsey Sandell, Partner, Atlantic Retail

“Overall, Boston retail is extremely strong,” began Sandell, noting that the momentum that began in the suburbs post-pandemic, driven in part by new-to-market retailers who previously ignored the suburbs─has taken hold in the city. Boston retail is historically supply-constrained, and the lack of new development, combined with an affluent, educated consumer base, has caused vacancy to dwindle and rents to skyrocket. The overall vacancy rate for the city is in the low single digits, and rents range from $40 to the mid-$100s, depending on the market. Newbury Street, the eighth-most expensive high street in the country, attracts a range of locals, nationals, and international brands that want to be there. Newbury Street rents range from $125 to $400 a square foot, NNN, but vary block to block, with the Arlington-to-Berkeley “luxury block” commanding the highest rents. Add in the NNN expenses of $30 to $50 psf, and “that can make it challenging for some retailers to plant a flag here. But even with these rents, I’ve never seen such limited vacancy on the street in my 13 years,” said Sandell.

Much of the demand is being driven by fitness, wellness, and athleisure concepts, and there’s been a post-pandemic resurgence in boutique Pilates, mega-gyms, experiential longevity clinics, and performance footwear tenants. In addition to Newbury Street, Back Bay, the Seaport, and Harvard Square are experiencing high demand, driving low vacancy and high rents.

Industrial: Joe Fabiano, Senior Managing Director, JLL

Much has changed in the industrial market since the pandemic-fueled days of record-low vacancies and out-of-control spec construction. “All of a sudden, the conversation has shifted to tenants having more options, landlords rethinking strategy and having to compete again, as well as capital markets having a huge impact on sort of day-to-day decision-making,” said Fabiano.

Absorption topped 1.3 million SF in Q1, but Greater Boston vacancy held at 8.1% due to nearly 1 million SF of spec deliveries. Fortunately, spec construction continues to slow, from a high of 6 million SF in 2022 and 5 million SF in 2024 to the 715,000 SF currently in the pipeline. Demand is also increasing, nearly doubling from Q1 2025, with 143 active requirements totaling 22 million SF in the market. Fabiano also reports a “huge uptick in larger users in the market” with 36 active requirements between 100,000 and 250,000 SF.

Multifamily: Michael Coyne, Managing Partner, Walker & Dunlop

Despite the “elephant in the room” that is the potential passage of some form of rent control, the fundamentals of the Greater Boston multifamily market remain healthy. Boston is one of the few markets in the U.S. where rent growth has remained flat or positive (excluding 2020, when COVID struck), and with the market expected to deliver fewer multifamily housing units than the previous 10 years, limiting supply, “rents should continue to grow at a very strong pace,” said Coyne.

Further bolstering the multifamily market is the elevated cost of homeownership. Coyne states that “it currently costs more than twice as much to own a home per month than it does to rent.” Additionally, Boston has the second-highest percentage of young professionals aged 20 to 39─the primary renter cohort─among the nation’s major metros, ensuring strong market demand.

Capital Markets: Tim Mulhall, Senior Vice President, CBRE

As poorly as the office sector has fared, the life science market has been even more horrific. Like the industrial market, life sciences saw an enormous volume of pandemic-driven spec building. Unlike the industrial market, however, there is no rebound on the immediate horizon. In 2022, there were 56 million square feet of life science space in the market. The building boom added an additional 18 million square feet, a “staggering” 30% increase in market supply, of which 11 million SF─60%-plus─is unleased. “At CBRE, we feel really good about the long-term health of the market in the core sub-markets, but there’s a supply problem,” said Mulhall, who adds that there is also $11 billion in outstanding loan balances in Greater Boston life science, with approximately half of those assets now under lender control.

Mulhall said that the office market is “two-ish years ahead of the life science world…But in general, we feel really good about the office market in Boston right now.” While some assets are “uninvestable,” demand for well-located, amenitized assets is healthy.

On the transaction front, institutional investors account for nearly half of sellers divesting assets, while the remainder of sellers (local banks, insurance companies) are “cutting their losses and moving on.” The current buyer profile is heavily weighted towards private/high-net-worth capital, which accounts for 68% of transactions (mostly in Class B/C assets), with another 20% from institutional capital seeking value-add plays. Industrial is one of the “healthier asset classes,” but it is deeply bifurcated, so there is still a wide bid-ask gap for assets.

Prior to the presentations, Tamara Small, CEO of NAIOP Massachusetts, announced that NAIOP’s rebranding to CREDA (Commercial Real Estate Development Association) will take effect in July of this year.