Five Year Lookback: The Pandemic's Impact on Boston's CRE Landscape
Five Year Lookback: The Pandemic’s Impact on Boston’s CRE Landscape
2025 marks five years since the global pandemic forever altered various dynamics of modern society. From how government leaders approach disaster response to the multiple ways remote interaction has become ingrained in our culture, the pandemic was a significant agent of change. The commercial real estate industry and corporate workplaces represent two arenas most significantly affected by this global event, and it’s safe to say those reverberations are still being felt. However, more than any time in recent memory, there is cause for optimism for the city’s real estate and development industries, and the companies that call Boston home.
According to several Cresa Boston principals, here are some of the most notable transformations that occurred in the Boston CRE market.
The Seismic Shift to Remote Work
Perhaps no greater change occurred than the one that sent workers into a remote work environment, many of whom still work from home to this day. When workers left the office, it spurred new dialog about priorities, work-life balance and productivity. Many employees felt they were more productive at home and avoided costly and time-wasting commutes. Others countered that collaboration took a hit, and many leaders agreed. Today, a hybrid approach is working for numerous firms that allow employees the flexibility to be remote without making it a full-time policy - and these shifts in workplace culture have changed how companies approach office space requirements.
In the Boston area, firms like CarGurus and Integrated Partners were celebrated in a recent best place to work campaign, with their flexible attendance policy being a key reason for the recognition. While larger organizations like Amazon and Google have begun enforcing return to work requirements, there is little doubt a hybrid environment is here to stay for businesses of every size.
Fewer Bodies Means Less Space
Of course, with this change in fixed headcount, companies around the globe continue to re-evaluate their space needs, and often times, reducing the size of their offices when leases come up for renewal. According to Cresa Boston market research, the average Class A lease signed in the Back Bay and Financial District in 2024 is about half the size it was in 2019; 60% of these deals were under 20K SF from 2019 to Q1 2020. In 2024, over 90% were.
However, with this reduction in space has come an increased emphasis on employee comfort and well-being. Many firms have been able to “level up” to Class A offices that were previously out of reach, and with that comes an array of new features that are proving useful in attracting employees back to their desks. Outdoor spaces, fitness areas, and quiet zones, along with ample conference rooms and phone booths for personal matters all reflect shifts in expectations after workers were able to take phone calls and participate in pilates classes while performing job duties. One data point of note from Cresa Boston’s research team reveals an increased take rate for Class A offices, as the availability of Class A grew slower than Class B: 11.5 percentage points compared to 16.7, respectively.
Utility Space on the Rise
Early on in the COVID pandemic, there was a rapid realization that companies which had to physically be in their real estate to drive business initiatives also drove value to the assets they occupied. Unlike the tech or finance industries, companies involved in warehousing, logistics, manufacturing, production or assembly can’t replicate work in the confines of their own home, which in turn made these businesses “essential.”
With supply chains greatly affected and an influx of capital into utility-type occupiers, demand surged for functional space. In some markets, rental rates appreciated 15-20% year-over-year, and vacancy rates fell to historic lows.
On the ownership side, institutional capital flooded the industrial and flex asset classes as a reaction to the dwindling values of office buildings. To that end, firms which had historically driven their investment strategy based on Class A office space in trophy markets deployed capital and resources towards single-story flex/R&D and industrial spaces in secondary and tertiary markets.
Boston’s Progressive Streak Shapes Workplace Resilience
Boston has long been known for its appeal to free thinkers and technologists alike, and that forward-thinking attitude has shaped Boston’s evolution in a post-pandemic world. Reports from the mayor’s office show that Boston is faring better than other major metropolitan areas, with lower office vacancy, an increasing rate of workers returning to the office, and higher occupancy in retail corridors. In addition, lower crime in popular downtown areas has also fueled the growth in tourism and workers coming back to the city.
Coupled with major sustainability initiatives like the city’s BERDO requirements to reduce greenhouse gas emissions in large buildings - an initiative that benefits the workers who clock in to offices throughout Boston - it becomes clear the commercial real estate and development industries have much to be hopeful for in 2025 as the pandemic impact fades and resiliency takes its place.