By Aaron Jodka | FEBRUARY 2020
At the Colliers In Focus Live “Main Stage” event held at Big Night Live, Executive Vice President Chris Cuddy, sharing his insights into Boston’s real estate drivers, noted that WeWork has been front and center for years now, with 33% of total absorption over the past three years and more than half of 2019’s total.
This growth, coupled with WeWork paying above-market rents, has sent rents soaring. But with this major space taker no longer leasing space, what would backfill that hole?
Three major drivers can take up Boston’s leasing mantle: tech, out-of-market demand, and satellite offices. Tech has been a key part of this cycle’s market, growing across submarkets. Venture capital funding, $2.8 billion in 2017, is on pace for $8.5 billion in 2020 (it topped $7.5 billion each of the past two years). With funding like this, the next Wayfair, Toast, DraftKings, or CarGurus is out there.
Out-of-market demand will be crucial to future growth in Boston, and it is changing. For example, life science will be front and center going forward as firms from Cambridge migrate across the river to the Seaport’s converted, under-construction, or future lab space.
Satellite offices, driven by tenants in the suburbs, Cuddy noted, would round out the tenant demand, as companies need to access talent to be successful. At the end of the day talent is king, and Boston offers talent in spades.
Cuddy concluded by focusing on the conversion of office space to lab, which creates a double benefit in the market: less office space and no backfill space as a result of this growth, since these firms come from outside of Boston in the first place. He predicted signed rents in Downtown would hit $115/SF on select spaces and expects an anchor tenant announcement at one of the new high rises going up in Downtown Boston.