Matt Daniels, who leads JLL’s New England brokerage team, said:
These effects are spilling over into the city’s office market. In just his first three months of the year, companies in Greater Boston have vacated more than 1.5 million square feet of his office space. This is roughly the value of Hancock Tower. And experts predict more pain lies ahead.
The pressure is not felt evenly. While newer Class A towers such as One Congress and One Post Office Square continue to attract prime tenants, older Class B and Class C spaces are becoming increasingly unattractive. Of the 560,000-square-foot leases signed in Boston’s central business district in the first quarter, nearly 95 percent were Class A buildings, according to a study by real estate firm CBRE.
“Many tenants are saying, ‘If we want our employees to come back, we want them to come to the best available space, best in class, best amenities, even in hybrid capacity. ‘,’ said Liz Berthelette. Research Director at Newmark, a brokerage firm.
And while this trend has been underway downtown for some time, these pressures are also building in the suburbs, where there are now about 4.5 million square feet of subleased space (leased by businesses but offered to other tenants). space). On the market, Colliers data shows. Many suburban businesses do not require their employees to return to the office. Newmark research shows that more and more businesses are looking to shrink their footprint within existing buildings.
stall too More and more spread to the once profitable building buying and selling business, which has been sluggish since the start of COVID. Less than $900 million of office and lab buildings were sold in Greater Boston in the first quarter of this year, according to Newmark research.
And some buildings for sale face a tough market, plagued by both declining demand and rising interest rates, making critical financing more expensive.
A division of private equity giant Blackstone has purchased the five-story brick-and-beam building at 179 Lincoln Street. Purchased an office building near South Station in January 2020 for just under $156 million. Now they are putting it up for sale again. There’s no official list price, but industry sources tell Globe that it could sell between $80 million and his $90 million.
According to a spokesperson, Blackstone has long reduced its office holdings and invested in “sectors with very strong fundamentals such as industrial, rental housing, hotels, lab offices and data centers.”
Another looming risk is loan default.Wang Back Bay Office Building 116 Huntington Avenue is part of a portfolio of seven buildings owned by Columbia Property Trust, which failed to repay a $1.7 billion loan in February, according to multiple media reports. rice field. Industry watchers warn that more building loans are due by the end of the year, making it harder to sell or refinance amid local bank challenges, ballooning vacancies and sharply higher interest rates doing.
All of this can have a significant impact on Boston’s tax base, which has surged over the past two decades under the force of the city’s hot commercial real estate market.
The city’s chief financial officer, Ashley Groffenberger, said this week that he’s keeping an eye on the office and commercial real estate markets.I have Good reason for that. About 72.4% of the city’s $4.28 billion budget revenue will come from property taxGrofenberger touted the strength of Boston’s property tax base at a breakfast meeting announcing the city’s budget this week, saying Boston maintains a triple-A bond rating from two credit agencies. And it’s what allows Boston to borrow at lower interest rates than if it had a lower rating.
“The property tax structure here in Boston and Massachusetts is stable and we don’t expect revenues to fall off a cliff in a dramatic way,” Groffenberger told reporters last week. Recession Possible for Businesses Who Found Downtown Too Expensive Before COVID She said it will give them some opportunity. Sky. “
And there were some bright spots. The Lego Group announced in January that it would move its headquarters from Enfield, Connecticut, to Boston, and law firm Goulston & Storrs plans to lease his 100,000 square feet in One Post’s office square next year. . Portal Innovations, a biotech venture capital firm, has leased his 22,000-square-foot wet lab and office space at Globe’s former headquarters in Dorchester (now Southline Boston), and by next year, he’ll have 58,000 square feet. There are plans to expand to ft.
Colliers Research Director Jeffrey Myers said: “These are also the things that keep the market moving forward.”
In fact, Boston’s talented workforce has long been the foundation of Boston’s economic success, says JLL’s Daniels. Both city and state level officials are focused on maintaining its competitiveness.
“When the economy goes down, people tend to go back to places where they can do well and get good employees,” says Daniels. “We’re certainly in a different time than we were a couple of years ago and it’s not all rainbows and lollipops, but there’s reason to be optimistic.”
Catherine Carlock can be reached at catherine.carlock@globe.com. follow her on her twitter @bycatcarlock.
