Boston’s commercial real estate market continues to progress at a healthy pace, attracting global brands such as Amazon, GE, PwC and Wayfair. We attended a recent multi-panel discussion, organized by Bisnow in Boston, focused on the fundamentals of the sizzling local market and what makes it so attractive.
Boston Holds 68 million Square Feet of Office Space
One trend that remains persistent throughout Boston is the demand for office space. Vacancy in Back Bay is in the single digits, and one of the Seaport’s newest commercial buildings has already been fully leased to major technology and pharmaceutical tenants PTC and Alexion prior to its completion. Despite all of the activity taking place, it is crucial to remember that Boston has not yet reached its ultimate peak. There is still plenty of room to grow in markets beyond Boston proper and Cambridge.
Tenants’ ‘Wants’ Drive Demand
When considering a commercial space, the speed of delivery, flexible lease terms and community building are of upmost importance to prospective tenants. Partly due to the increased popularity of co-working spaces and the flexibility they offer, tenants are increasingly looking for creative and adaptable spaces that can adjust to meet their employees’ needs. Today’s tenants have an increasingly millennial workforce, and their wants are uniquely focused around experiential services such as coffee and food options, fitness classes and collaborative spaces that encourage socializing with colleagues.
Co-working Is the Disrupter
The morning’s panelists – a mix of developers, architects and investors – were in agreement that co-working, a modern, shared work environment with thoughtfully designed collaborative spaces where people who are not employed by the same organization can rent desk space and work alongside one another, has in some way caused a disruption in the traditional office market. Nonetheless, many tenants today are looking for new ways to make their spaces more flexible and are moving away from the traditional office build out – largely in part to the success of co-working environments such as WeWork and others. In addition, prospective tenants are looking beyond a building’s location, security and maintenance, and are focusing on the ratio that is available between communal spaces, private rooms and access to the outdoors. It remains to be seen how the co-working model will evolve in the future, but already the concept is making its mark on Boston’s offices.
Throughout the exciting discussion on the market and progression of CRE trends, a few additional questions arose that remain to be seen:
Will residences integrated within office buildings become a trend in Boston?
Will modular building techniques become utilized for commercial construction?
These elements undoubtedly add a new layer to the CRE landscape as we know it and we can’t wait to see what the future will bring.