Office prices are plummeting amid coronavirus shutdowns as companies ditch their expensive downtown spaces, leaving vacancies in Boston high-rises not seen since the tech bust nearly two decades ago.
“The second quarter saw the worst negative absorption rate in Boston’s history. There were more tenants moving out of office space during that time than we’ve ever seen before,” said Aaron Jodka, managing director of research and client services at Colliers International.
“The only comparable time periods would be during Sept. 11 and the tech bust in the fourth quarter of 2001,” Jodka said.
Rents have taken a nosedive as companies reconfigure or do away with traditional office spaces altogether and as new construction continues to come online amid a stunted economy and waning demand.
Median rents for active, for-lease office listings were up 3.6% in January and 2.9% in February, then dropped 2.8% in March and 9.1% in April after the pandemic hit. In May and June, rents rebounded slightly as economies forged ahead with reopenings, increasing 2% and 2.8%, respectively, but dropped again by 2.8% in both July and August as coronavirus shutdowns endured and cases spiked in some areas of the country, according to Boston-based CoStar Group, which tracks real estate trends.
Greg Vasil, CEO and president of the Greater Boston Real Estate Board, said the market is adjusting as “companies rethink their space needs” but he is confident office culture in Boston isn’t going away anytime soon.
Dozens of companies have put all or a portion of their offices on the market both to better accommodate their needs as employees stay home and to cope with the economic fallout from a pandemic that has decimated many industries.
Tripadvisor closed it’s downtown office and is looking to sublet 100,000 square feet of space at its Needham headquarters, spokesman Brian Hoyt said.
Zipcar in the Seaport District will also offer some of its space for sublet, according to the company. Care.com in Waltham is contemplating keeping employees at home in perpetuity.
Vacancy rates are surging as companies looking to sublease office space surges. Since March 31, an additional 900,000 square feet of sublease space has come online — one of the largest quarterly increases ever tracked, according to CoStar.
“Partly it’s due to the pandemic, and partly it’s due to companies moving in downtown,” said Todd Galvin, a market analyst at CoStar.
State Street, for example, is moving into a 506,000-square-foot space at 1 Congress St., which is still under construction, and putting its roughly 500,000-square-foot space at 1 Lincoln St. on the market.
The city’s most expensive and most heavily corporate neighborhoods are seeing the biggest spikes in available subleases, according to Colliers: the Financial District, Back Bay, the Seaport District, as well as East Cambridge and Kendall Square. Those areas account for nearly half — about 3.5 million square feet — of the region’s sublease space.
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Office prices plummet in Boston amid coronavirus shutdowns as companies rethink traditional spaces - Boston Herald
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