The Quiet Movers: Limited Class A Space Heats Up in 'Burbs'

There’s been a fair amount of chatter about the moves many downtown Boston firms are making into Class A high- and mid-rise space as these properties become more attainable due to a few distinct factors. For one, many firms are right-sizing their space and ultimately securing leases with smaller footprints. In addition, landlords are still making the occasional concession to get a deal done, so occupiers are finding some financial incentives to move to a better space beyond the cost savings attributed to a smaller office.

That’s Boston, however - what’s been happening in popular commuter-friendly locations like Burlington and Waltham? Well, Class A space is just as hot if not even more in demand in those neighborhoods due to limited availability for buildings with the right mix of features and layouts. Throw in a few other factors that reflect the unique nuances of these communities and it’s no surprise that finding suitable Class A office space in the ‘burbs is no small feat.

No Slow Down in Downtown

Even with some of the concessions by landlords, Cresa is seeing rents for Class A high-rise space ticking back up to levels last seen around 2010. The numbers become a bit squishier once you factor low- and mid-rise space into the equation, and the opportunity to negotiate becomes more prevalent. However, that all changes when you look to the suburbs.

A key factor in determining where your next office will be is centered around the workforce, even one that is coming in three days out of five. A younger, more flexible employee base - those without families, more or less - may be more inclined to look for opportunities with a company based in the downtown market and all that the city has to offer. But if your teams skew towards the mature side, or otherwise tend to attract workers with families, the suburbs are where you’ll find the talent pool. And if you don’t already have office space there, you could be in for an extended search.

The Lingering Life Sciences Effect

Of the limited Class A properties available in places like Waltham, Newton, Needham, Burlington, and others, it’s important to recall that several of these properties underwent renovations to make them more attractive for life sciences tenants before the pandemic took hold. This shrunk existing office inventory even further, and coupled with the glut of new life sciences stock (including those construction properties still in the pipeline), landlords sitting on Class A space that doesn’t reflect the current tenant mix will find it challenging to make the necessary changes to market the property to more traditional occupiers, like law firms and accountants. Some landlords that performed life science conversions are likely now having conversations about how to convert those properties back to their original configuration.

However, for landlords like National Development and Boston Properties that manage desirable and modern Class A buildings - and even some older properties that haven’t undergone recent renovations - the current landscape allows them to collect rent that rivals, and sometimes exceeds, the going rate for similar properties in Boston.

Keep in mind, this is not to suggest every Class A space in the suburbs is bursting at the seams: if a property is significantly outdated, or otherwise not suited to what current workplace layouts are in demand, those properties will remain vacant with landlords unlikely to have sufficient budgets to make the necessary renovations to attract new tenants - especially if they overpaid for the building when prices spiked pre-pandemic. But for those buildings with the right configurations and locations for suburban workers that are unlikely to ever commute to Boston, expect to see demand stay strong for quite some time, regardless of whether they’re in the office three days a week or five.

For the latest Greater Boston market insight, check out Cresa’s detailed market reports.