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Office construction makes a comeback in Boston area

A worker connected a beam at the topping off ceremony at 11 Fan Pier Blvd. in July.David L. Ryan/Globe Staff/file 2012/Globe Staff

The region’s office construction market is making a strong comeback, driven by the expansions of medical and biotechnology companies that are funding new buildings going up in Boston’s Seaport District, East Cambridge, and suburbs along Route 128.

More than 4.7 million square feet of office and laboratory space is under construction in the Boston area, up from just 430,000 square feet in summer 2011, according to the real estate firm Richards Barry Joyce & Partners.

The increase bodes well for the state’s construction industry, which has lost 5,200 jobs this year and has yet to rebound from a recession that halted building activity. Real estate specialists said that is bound to change in coming months as the fundamentals of the market continue to improve, with many companies looking to add space.


“The office market overall is in good shape,” said Joe Fallon, managing principal of the ­Boston office of Cassidy Turley, a national real ­estate services firm. “Vacancy rates are down and rents are increasing. The laws of supply and ­demand are working more favorably now than they were 24 or 36 months ago.”

The construction upturn is largely tied to the growth of biotechnology and medical companies that are building offices because of a lack of existing space in desirable areas such as Cambridge and Boston’s Seaport District, which has been renamed the Innovation District by Mayor Thomas M. Menino.

But construction activity is not limited to those types of firms. Liberty Mutual Life Insurance Co. is building a tower in Boston’s Back Bay, and State Street Corp. is planning a new complex in the Seaport District. Also, Keurig Inc., the ­coffee brewer, is constructing a headquarters in Burlington, and EF Education First, a for-profit provider of travel and academic programs, broke ground this week on an office building in ­Cambridge.


Most of the additional space is already leased to specific companies, with developers still ­unwilling to risk building on a speculative basis in a slowly recovering economy. But one spec building recently got underway in Burlington, the first such project to move forward since 2008.

Bob Richards, a partner with Richards Barry Joyce, said Burlington and other northern suburbs along Route 128 have experienced a growth spurt in recent months. Overall, tenants in that market accounted for 580,000 square feet of additional space in the last quarter.

“That’s the best net absorption we’ve seen in that area in 12 years,” Richards said. “It’s clearly amazing news for that segment of the market.”

Real estate specialists said those communities are landing more companies because of their growing mix of popular restaurants and retailers, as well as new apartments and ownership units to house employees.

It is part of an accelerating trend in which young workers, and businesses recruiting them, are moving to neighborhoods that have easy access to all the stops of daily life. For example, employees can walk or take public transit to work, and in the evening find entertainment near their offices.

“Companies want to be able to offer a full scope of amenities,” said Fallon, adding that ­office projects in urban and suburban locations are incorporating retail and residential components.

Over the last year, Boston’s Seaport District has been one of the markets to benefit most from that trend. The vacancy rate for brick-and-beam office space there has been cut in half over the past two years, to about 9.8 percent, while rents have kept rising.


As a result, some architecture and design firms that have traditionally set up shop in the neighborhood are looking for cheaper options elsewhere. The space shortage has also prompted larger technology companies to begin looking for opportunities in the adjacent Financial District. For example, PayPal, the online payment ­division of eBay Inc., recently committed to lease 65,000 square feet at One International Place.

It remains to be seen whether other technology firms will follow suit. The Financial ­District has shown consistent improvement over the last 18 months, according to Richards Barry Joyce, with tenants eating up about 850,000 square feet of space.

Casey Ross can be reached at cross@globe.com.