Confidence drives clarity in Boston's downtown market

When measuring sentiment in the commercial real estate market, it’s important to factor in not only transactional data but also the key drivers behind the deals to truly understand where the industry is headed. In downtown Boston, we have moved past simply marking return to office as a measure of momentum to seeing long-term leases being signed, which is a powerful indicator of enduring strength.

In addition, the type of buildings that are being sought-out by occupiers are often rich in features and recently built or renovated, and in prime downtown locations. Recent moves by companies including Hasbro and just announced deals by the likes of JP Morgan as it heads to South Station bolster beliefs that the days of remote work are increasingly in the rear view mirror and not because of overbearing bosses - it’s because optimism has returned and workers are eager to take their seats in a room with a view.

And, as the recent Cresa Q3 market reports show us, the numbers don’t lie when it comes to demonstrating increased activity and lower inventory than in recent years. Will market tightness continue? If confidence continues to increase, all signs point to yes.

Location matters, in buildings and in cities

While there was a tendency to focus on remote work as a harbinger of things to come, the simple fact is that Boston has always been a destination for talent. Despite the commute challenges and some overdue improvements needed to public transit, large employers and universities continue to attract workers to come here from across the globe and right next door. The downturn that occurred post-pandemic was more an issue of unknowns rather than fundamental flaws in the market - and now, as clarity and confidence return, we see the attractiveness of Boston beat out other cities for occupiers.

With continued investment in Class A buildings, both in terms of new construction in the Seaport and extensive renovations at properties like One Lincoln, it stands to reason that Boston’s ideal geography has also played a role. Centrally located between major cities in New England and across the Northeast help Boston win out when it comes to convenience, and that’s in spite of the local commuting challenges. For A market landlords, the tide has shifted slightly in their favor as many are increasingly willing to wait for the right deal to come along than chase every opportunity.

Conversely, B market landlords may not find as many reasons to be optimistic as they’ll continue to compete on price while larger occupiers will pay higher rents to be in a modern and amenity-rich building.

Demand trails in Cambridge, but for how long?

One sector that still has room to grow is the Cambridge office market, which is weathering a shift in VC funding towards more mature companies as it waits for a solid rebound in occupier interest. For now, rents have stabilized but haven’t appreciated; occupiers can still likely drive a fair deal for the foreseeable future, especially as uncertainty surrounds the AI boom and whether it will continue eastwards after significant layoffs announced by Amazon.

It’s important to remember, however, the same questions surrounded Boston’s downtown market not too long ago. As clarity has driven confidence in the future, deal making has softened - so there’s no time like the present to secure space in a market like Cambridge that could begin to shift back to its pre-pandemic demand. And don’t forget, like Boston’s central location, the bedrock of Cambridge are its educational assets, which will not likely soon diminish.

For more insights on Cambridge, southern New Hampshire, and the suburbs, click here to read Cresa’s most recent market reports.