By Aaron Jodka | June 2018
Urbanization has been a defining trend of this real estate cycle, both locally and nationally. Our cities are safer now than at any point in decades, or perhaps ever. Within Boston’s small geography and well-established—if often-criticized—transit system, transit stops are readily available. This amenity hasn’t been lost on developers, and the vast majority of development is within a few blocks of these stations. Residential development has boomed, and the city’s population has soared. In fact, the city has added one new resident per hour on average since the 2010 Census (67,000 in total).
Employers have taken note as well. In a change from the past when they would set up shop and let the workers come to them, they are instead seeking locations either near the best talent or where they can attract it. This is also bringing suburban tenants into the city. Reebok, GE, Alexion Pharmaceuticals, Autodesk, and MassMutual are headline relocations to Boston, while Philips is moving to Cambridge.
But not everyone can do that. In fact, occupancy in the suburbs has never been higher, while we are just starting to see signs of a shift back to the suburbs. Don’t get me wrong: These aren’t big moves offsetting the urban migration. Rather, those moving are small companies priced out by the massive surge in rents—at record highs in nearly all urban submarkets—or they are sick of traffic or have changed their business philosophy. Boutique investment firms, law offices, and management consulting companies are among those moving back to the suburbs.
While not yet a transformative trend, it bears watching. The Millennial generation, which has disrupted the workforce and traditional office models, could do the same for the suburban office market. We are already seeing signs of this generation moving to the ’burbs, especially those marrying and planning for or having children. If the talent leaves the city—Massachusetts has the best public schools in the country, but those ranking highest are in suburbia—it wouldn’t be shocking to see employers follow them. Yes, Generation Z will backfill some of this urban talent void, but more outfits may take the Red Hat approach, with both urban and suburban operations. Small moves back to the ’burbs are starting. More will be on the way.