Change on the Horizon for Cambridge's Office Market
Over the last decade, Cambridge has seen significant shifts in its commercial identity. Following the Kendall Square office space boom of the 1980s, the Boston neighbor was a hotbed of early stage, venture-backed technology companies that earned Cambridge a global reputation as a beacon of innovation. By 2019, Cambridge was the proud home of more than 300 life sciences and technology companies. While the city is still a renowned technology hub, Cambridge’s office market has been shrinking in recent years, a trend that was accelerated by the onset of the pandemic. Here’s a look at how we got here, where the market is headed, and what it means for office occupiers in Cambridge.
From 2005-2015, many large, publicly traded tech companies staked their claim in Cambridge and gradually expanded their office space to accommodate their significant growth. Groups like Facebook, Microsoft, Google, Akamai and Hubspot have long been major players in Cambridge’s office market. This substantial presence has minimized options for smaller, earlier stage tech companies and driven rent prices up. While the large tech companies are relatively insensitive to rent growth, smaller and midsized groups were forced to consider more economical leases in the suburbs and across the river in downtown Boston.
Life Sciences BoomMuch of the space not occupied by tech giants has become part of the life sciences explosion that dominated Greater Boston’s commercial real estate market for the last three years. Growing life sciences operations required more office space for support and administrative services, and many office building landlords converted existing office inventory into lab-ready space to meet the overwhelming demand. As a result, the Cambridge office market continues to see low vacancy and high rents even with tepid demand from true office users.
Despite these dynamics, there is some relief on the horizon for office occupiers eyeing Cambridge. Many large tech organizations are poised to release space due to a combination of layoffs and post-pandemic hybrid or remote work policies. Large life sciences companies are experiencing a similar trend, creating sublease options for midsized companies that have been unable to compete for space in recent years. This wave of new vacancies will give occupiers some long-desired leverage in the Cambridge office market. Organizations looking to secure space here should do their due diligence: it is critical to understand your company’s workstyles, target utilization and long-term headcount projections in order to secure the right space with optimal lease terms.
For more insights into the Cambridge office market or recommendations around real estate decisions, reach out to one of Cresa’s advisors.