Disruption 2020: Second Quarter Office Update

by | 30 June 2020

The second quarter of 2020 is one of the most important, numbers-wise, in recent memory. The COVID-19 pandemic and related shutdowns occurred at the end of the first quarter, meaning that we weren’t operating with much of any relevant data at the close of Q1. We have now operated in our “new normal” for a quarter now, and the market has reacted, most sharply in Boston. Our quarterly Viewpoint will be published shortly, but in the meantime, here are 10 of the biggest takeaways from across Greater Boston. Stay tuned for summaries on the industrial and lab markets. 

Boston 

  • This was the worst nominal absorption quarter in Boston (negative 1.5 million SF) on record, surpassing Q4 of 2001, in the aftermath of September 11 and the fallout of the dot-com bubble. On a percentage basis, Q4 2001 was worse. 
  • Sublease vacancy increased by nearly 900,000 SF. 
  • Vacancies increased 2.0 percentage points to 10.6%, the largest quarterly increase since Q4 2001. 
  • Rents, however, were flat. 

Cambridge 

  • Absorption was positive across all three submarkets, while vacancies held flat. 
  • The completion of 400500 Cambridge Discovery Park was the largest contributor to absorption. 
  • Bluebird bio wants to sublease its sublease of 50 Binney Street. But the space is not yet available for occupancy, as Sanofi needs its new headquarters at Cambridge Crossing to complete. 

Suburbs 

  • The suburbs posted slightly positive absorption, up 25,000 SFand vacancies ticked down to 15.9%. Sublease space was steady. TripAdvisor’s addition of 100,000 SF of sublease space in Needham was the largest in the second quarter. 
  • It has been a lab-driven story this year, with 74% of suburban demand YTD in lab space. Office has been marginally positive. 
  • The 128 Mass Pike and 128 South submarkets led the suburbs in absorption in Q2. The sale of Reebok’s former headquarters, which is pending, will bring vacancies down another three percentage points in 128 South once it closes. 

*Disclaimer: These statistics for Q2 are accurate as of the time of this post.