What We’re Watching in 2023 Office Submarkets
By Elizabeth Holmes
Looking ahead to 2023, there are several trends that we’re keeping an eye on in the Greater Boston suburban office markets. Despite the uncertainty surrounding the US Federal Reserve Bank’s interest rates and its impact on the real estate market, there are still positive developments to note.
Here is an update on what we are watching in each suburban submarket of Greater Boston:
Central 128 (Lexington to Needham)
The slowing demand for lab space has caused many of the planned, but not started, lab developments to be put on hold and office to lab conversions have paused as well. For the first time since the pandemic, Central 128 owners are seeing the true office demand for the market. As tenants are now considering larger geographic areas, and many tenants are downsizing, Central 128 owners are starting to provide office tenants with more rent incentives to compete with the growing number of building options in the market. Average Rent (Class A & B): $38.75/SF
128 North/Rt 3
Meanwhile, in the 128 North/Rt.3 North submarket, the increase in sublease deals in Q1 suggests that users are looking for lower-cost, flexible options that are move-in ready and offer high quality space and amenities. This has led to some landlords in the North market being open to short term direct leases, while still offering a buildout allowance or furniture, to compete with the number of sublease spaces. Average Rent (Class A & B): $27.25/SF
Natick/Framingham has faced difficulty over the past 2-3 years in terms of new, updated space options due to the cost of construction compared to market rent. However, we are seeing some owners “bite the bullet” and offer to buildout new spaces or upgrade common areas to attract tenants, even if it means the Landlord makes no profit on the deal. Several owners on Speen Street have been upgrading their buildings or creating move-in ready spec suites. Average Rent (Class A & B): $25.75/SF
Finally, in the 495 West submarket, we expect to see more underperforming office buildings repurposed for another use as office leasing remains slow. This presents an opportunity for businesses looking for unique spaces to set up shop, who want to own their building, or have a unique space need that cannot be accommodated in other submarkets. For companies who need office space, this market is ripe with rent incentives and discounted rents due to limited demand. Average Rent (Class A & B): $18.00/SF. Overall, while there may be challenges to overcome, the Greater Boston suburban office markets remain vibrant and dynamic. By keeping a close eye on these trends, businesses can position themselves to succeed in the years ahead.