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Boston's office vacancy rate maybe worse than we're being told

By adamg on Tue, 07/23/2024 - 12:41pm

Jay Fitzgerald notes John Hancock is giving up some office space and that while what passes for an official Boston office vacancy rate is around 23%, it could actually be closer to 40% if you throw in "shadow" space - space that tenants are still paying rent on, for now, but which is basically empty because of all the workers now logging into work from home.

Neighborhoods: 
Back Bay
Downtown
Topics: 
Business


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Comments

By Rwgfy on Tue, 07/23/2024 - 12:59pm.

Told? Just go for a walk in the Downtown (but avoid The Common)

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By blues_lead on Tue, 07/23/2024 - 1:26pm.

I eat lunch at the Common or the Garden a few times a week, and there's always a bunch of people there just enjoying being outside too.

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By Michael on Tue, 07/23/2024 - 2:00pm.

From having to spend 24 hours a day in the Shit Captains Chair at the Headquarters of Worthles Idiot Troll Inc

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By John Costello on Tue, 07/23/2024 - 1:38pm.

There are people everywhere.

Boston actually has some of the strongest recent gains in back to office work use.

Lines at the lunch places and traffic is the worst it's been in years.

The Hingham Ferry lot Monday to Thursday is near pre-covid levels.

Hancock putting space on the market is because they have too much and it is cheaper to pay employees in Canada than here.

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By Jay on Tue, 07/23/2024 - 2:28pm.

It's way more barren than 2019. It's a huge and noticeable difference.

A "bunch of people" may be compared to a few cities, but in my travels, I have seen cities with significantly better recovery rates than Boston.

For instance, the downtown of Philadelphia seems far more lively than that of Boston nowadays. I think you're looking through rose-colored glasses or favoring the most favorable stats/analysis that there is

By Rwgfy on Tue, 07/23/2024 - 3:51pm.

We don't come here for facts

By g on Tue, 07/23/2024 - 2:41pm.

The Greenbush line never had much before now has much less.

Be interesting to see the impact of the red line shutdown.

By The Snob on Tue, 07/23/2024 - 1:51pm.

"Shadow space" was definitely a thing for me as I had 14K sqft in a class A tower that was 98% unoccupied from 3/6/2020 until our lease ended last year. It got picked up by a large PE fund that last I checked planned to use it as "event space." I didn't hear the rates but pretty sure it was closer to 120/ft than not. The building is a top 5 property and there is always a buyer for "best building in the city."

Beyond that, my big metrics for judging WTF was going on have been street traffic and the lunch rush/after-work bar crowds.

The roads were empty through the end of 2021, in 2022 the rush hour started to return on the highways but city streets were still pretty empty, and in 2023 I started to see heavier street traffic returning though it still seems well below pre-covid levels.

Through late last year a lot of bars and restaurants were closed 3 days a week, but this year I've been seeing many of those reopening on Tues/Weds. Compared to a year or two ago, nighttime foot traffic downtown feels much more normal. Lunch crowds on the other hand feel down, and it seems like we're still seeing longtime standard places close shop, beyond the usual churn.

Transit ridership is another good leading indicator, and last I checked it is still well below 2019 levels though improving. That metric is cloudy in part because service reliability and safety issues pushed a lot of office workers to drive instead, at least in my employees and peer group.

Summing it all up, I think we're landing in a place where some of the big industries (biotech, education, healthcare) are probably back to 100% in office (albeit with a bit more flexibility for admin workers), finance is 50-90% RTO, and law and tech are probably 25-75%.

While a big recession could jar things more, my guess is that current levels are somewhere close to the long-term stable equilibrium. Class A towers will muddle through to the other side of the cycle but the Class B market is going to see a big drop in values.

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By TiminSouthie on Tue, 07/23/2024 - 2:45pm.

I work in Back Bay and I come into the office most days by choice and agree with your observations.

There are more people in the office this summer compared to last summer by a wide margin. I was shocked how many people were in my office on the Monday after the July 4th holiday.

The streets and Copley/Pru are getting very busy; Copley has several new stores opening.

I think this fall will see even higher levels of RTO.

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By Frelmont on Tue, 07/23/2024 - 3:48pm.

Should there even be any development in the Boston area? Do we have the infrastructure capacity to grow in excess of 2019 trajectories? I remember having the Red Line cars being packed too full to get on at Harvard in bound and waiting for one, or two trains to come and go before getting on. The roads only have so much capacity. Sure, we may never recover from Covid, and who knows about AI expunging the remaining white-collar jobs, but we may be painting ourselves into a corner with unbridled development.

By ScottB on Tue, 07/23/2024 - 5:15pm.

Are a much better problem than empty ones. You can solve the full train problem by fixing the transit infrastructure. The Moscow Metro has headways around 90s as do a couple of the Paris Metro lines.

Boston is dense by U.S. standards but not particularly so by global ones. But if you think that Boston in the 1960s and 1970s was doing well, you can certainly try to lobby for policies which would return the region's economy there.