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Relatively, Boston Office Market Fares Better Than Most Major Cities According to CBRE Report

January 10, 2023

BOSTON — According to a Q4 office report released by CBRE, downtown Boston and the suburban office markets experienced a recovery during the first half of the year and fared better than most other major cities due to a diverse tenant base, but economic fears and the adoption of remote work strategies affected the market by year-end.

CBRE’s report sites Boston office has performed better than most cities, ranking in the top three of the largest eleven markets in crucial areas such as leasing activity, tenants-in-market, and sublease availability. Leasing activity in the downtown market during Q4 was 756,000 sq. ft. to end the year with a total of 4.8 million sq. ft. Overall leasing activity in Boston’s suburban market was 727,609 sq. ft. with over half of the total transactions during the quarter coming from new deals, and 30% from renewals.

“Although the year ended on a slower note, deal activity during 2022 was a shining light, increasing 10% from 2021 and over 130% from 2020 levels at the height of the global pandemic,” said Kevin Kennedy, senior vice president, CBRE. “One trend we will continue to see is flight-to-quality, especially in the suburban market which saw 65% of all deals being tenants drawn to Class A office space as employers implemented back-to-office protocols into the new year.”

CBRE Full Boston Market Q4 Report CBRE Full Suburban Market Q4 Report

Financial services, insurance, and real estate companies led the way with 1.9 million sq. ft. or 40% of the total leasing activity in the downtown market during 2022. During Q4 the largest transaction was Medtronic’s 113,000 sq. ft. lease at Seaport’s Channel Center, followed by UBS’ 66,000 sq. ft. renewal and expansion at One Post Office Square in Boston’s CBD. Despite robust activity throughout the year, asking rents declined for three consecutive quarters, equally for Class A and B office space, ending Q4 down $1.25 to $66.60 per sq. ft. Between 2021 and year-end 2022, direct gross rents dropped 4.4% or about $3.00 per sq. ft.