Research Overview

Lincoln Property Company’s in-house Research and Valuation departments translate real-time data on local market trends into strategic guidance for our clients.

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Despite some indicators of a strengthening economy, the Boston office market continued to struggle in Q2 2023, with a sixth consecutive quarter of negative net absorption recorded. The market shed almost 150,000 SF of occupied space last quarter, which on the bright side, was a significantly smaller drop than was recorded in Q1 2023. Net absorption was negative by about 2.4 million SF over the last 12 months, and total availabilities have increased to about 20%. Asking rents have held up reasonably well considering the market conditions, but effective rents have dropped as tenants hold more leverage to obtain large concession packages. Vacancy rates are highest in Boston and the suburbs, while sublet rates are highest in Cambridge.

Flight-to-quality trends have taken hold throughout the pandemic and this dynamic may continue to create winners and losers in the office market. Several of the largest offices leases across the metro in recent quarters were in new developments. Tenants will continue to have plenty of options in new construction, with more than 2 million SF of under construction space available for lease, in addition to about 400,000 SF in the recently completed Winthrop Center. As this flight-to-quality persists, underperforming properties may continue to be targeted for conversion, which should alleviate some of the pressure on the office market. Nearly as much office space is underway or permitted for conversion as is under construction.


The Boston lab market continued to struggle in Q2 2023, as the high interest rate climate stifles biotech fundraising and space requirements amid a supply boom. The market is still landing some notable leases and net absorption was positive by almost 500,000 SF last quarter, but demand did not keep pace with the scale of supply additions and vacancies expanded to a covid-era high of 5.2%. Roughly 30% of space opened since Q4 2022 is still on the market. New deliveries have also attracted plenty of leasing, and net absorption exceeded 2.5 million SF over the last 12 months. With interest rates still elevated, venture capital money has been tougher to come by and tenant requirements have dropped from more than 6 million SF to roughly 1 million SF over the last two years. Sublet rates also continue to increase, jumping from about 3% at the end of Q1 2023 to closer to 5% at the halfway point of the year.

While a handful of development projects have stalled or been cancelled amidst the market’s recent setbacks, the supply pipeline is still near a peak, with more than 16 million SF under construction and another 20 million SF permitted. The pipeline is spread throughout the metro, with large projects in the market’s historical center of Kendall Square, as well as emerging life sciences hubs like the Seaport, Fenway, and the 128 West submarket. About 14 million SF in the pipeline comes from conversion projects, with investors generally favoring lab over office since the start of Covid. Sales activity has cooled in recent quarters, but increased in Q2 2023, mainly due to Alexandria selling off several assets.


Vacancies expanded slightly for the second consecutive quarter in the Boston Industrial market in Q2 2023. Speculative deliveries pressured occupancies, with large blocks of space still available in several newly delivered properties. Supply pressures will continue in the near term, with the pipeline near record levels. Nearly 14 million SF is under construction across Eastern and Central Massachusetts, including more than 11 million SF of warehouse space. Several of the largest projects underway are built-to-suits, including four future Amazon locations, but about one-third of under construction space is still available for lease. New developments have attracted plenty of leasing volume in recent quarters, including several of the largest deals of Q2 2023.

Vacancies increased last quarter from 4.1% to 4.3% in the warehouse segment and from 5.1% to 5.4% in the flex segment. Demand is on its slowest pace in four years, with net absorption totaling about 200,000 SF last quarter and roughly 375,000 SF in the first half of 2023. The flex segment has underperformed the overall market, recording slight negative absorption last quarter. The sublet rate held mostly steady, increasing from 1.1% to 1.2%, and declined in the flex segment, while increasing in the warehouse market. Despite marginal softening of fundamentals, occupancies and rent growth remain well above historical averages. Rents increased by 5%-6% in both the warehouse and flex segments in the first half of 2023. If this pace is maintained rent growth will exceed 10% for the second straight year in the flex segment and the third straight year in warehouses.