Boston’s Office Market Among the Most Active in 2023

Boston’s office market has continued to perform well in terms of development throughout 2023, according to CommercialEdge data. The metro boasted a robust pipeline as of January, mainly fueled by life science properties, which represented more than 75 percent of the under-construction office space within the market.

In terms of last year’s transaction activity, Boston was on par with other gateway markets, although investment volume amounted to only a third of the metro’s total in 2022. Consequently, prices also dropped, but Boston remained the second most expensive market nationwide, only surpassed by Manhattan.

Life sciences bolster Boston office development

As of January, Boston had nearly 15 million square feet of office space under construction, accounting for 5.2 percent of total stock—considerably outpacing the national rate of 1.6 percent. Its pipeline was only surpassed by Seattle (5.5 percent), as it outperformed other gateway markets including Miami (4.7 percent), San Francisco (3.7 percent) and Manhattan (1.4 percent). A total of 50 properties were underway in Boston’s office market, of which 38 represent life science buildings encompassing more than 11 million square feet.

One of the largest properties currently underway is WS Development’s One Boston Wharf, a 707,000-square-foot office project that Amazon fully preleased. In July, the developer topped out the 17-story tower that is set to become the city’s largest net-zero carbon office building, with expected completion later this year.

Throughout 2023, construction started on 11 properties totaling some 3.5 million square feet and accounting for 1.2 percent of total stock. Although more than double the national rate of 0.5 percent of stock, the figure represents a considerable decrease from the previous year, when 7 million square feet of office space broke ground across 28 developments.

One of the largest projects to break ground recently is Tishman Speyer and Harvard University’s Enterprise Research Campus, a mixed-use life science development. Backed by a $750 million construction loan from Otera Capital, the property’s first phase will include two laboratory buildings, along with a rental community and a hotel.

In January 2024, two projects came online in Boston’s office market totaling more than 478,000 square feet. In 2023, developers brought 5.8 million square feet online across 17 properties, accounting for 2 percent of stock. Regarding sheer delivered volume, the metro came in second only to Manhattan (6.3 million square feet) and outpaced other peers including Washington, D.C. (4.1 million square feet) and Seattle (2.9 million square feet).

One of the largest properties to recently come online is 10 Prospect St., a 205,000-square-foot life science building developed by US2 and Magellan Development Group, along with other capital partners. It represents the first phase of USQ, a $2 billion master-plan built across 17 acres in Sommerville, Mass.

Investment activity drops

Throughout 2023, more than 6.1 million square feet changed hands across 55 properties in Boston’s office market, for a total investment volume of nearly $1.9 billion, only surpassed by Manhattan ($2.4 billion) and Washington, D.C. ($2 billion) among its peer markets. Investments registered a significant drop from the previous year, when almost 12.5 million square feet traded for more than triple the volume at $6 billion. In January 2024, two properties have sold for a total of $15 million.

The metro’s average price per square foot was $346.8 in 2023—considerably above the $192 national average and representing a 38.4 percent decrease from the previous year. It only lagged Manhattan’s whopping $833.9, while surpassing San Francisco ($314.7), Miami ($330.9), Seattle ($259) and Washington, D.C. ($209).

One of the largest transactions recorded in 2023 was Alloy Properties’ $365 million acquisition of a five-property life science portfolio. Alexandria Real Estate Equities sold the assets located in Cambridge, Mass., and Waltham, Mass., for an average sale price of $852 per rentable square foot. The buildings total 425,000 square feet.

Recently, J. Safra Real Estate announced plans to acquire Faneuil Hall Marketplace, a historic retail and office building in Boston’s downtown. The current owner, Ashkenazy Acquisition Corp., purchased a 63-year ground lease for the property in 2011 in a deal valued at $140 million which involved the assumption of a $98 million CMBS loan.

Coworking on par with national rates

As of January, there were nearly 4.5 million square feet of coworking space in the Boston’s office market, accounting for 1.7 percent of stock, on par with the national share. Among gateway markets, the metro’s proportion of flexible office space only surpassed that of Washington, D.C. (1.6 percent), while lagging others including Los Angeles (2.1 percent), Manhattan (2.5 percent) and Miami (3.7 percent).

The largest flexible office provider in Boston is WeWork with a footprint of 780,770 square feet across nine properties, followed by Regus, which operates 560,391 square feet in 31 locations. Another key player in the market is Workbar which has 11 properties totaling 201,850 square feet.

One of the largest leasing deals in Boston over the past year was health-care and pharmaceutical company Novo Nordisk committing to a long-term lease for a full 165,940-square-foot building at 60 Sylvan Road. Owned by Alexandria Real Estate Equities, the property is currently under redevelopment and expecting completion in 2025.

Recently, Millennium Partners secured a 39,000-square-foot lease agreement at Winthrop Center, a mixed-use development spanning 1.8 million square feet. Tenant M&T Bank plans to move in this fall.