Supply:
Greater Boston’s office market posted its smallest quarterly vacancy increase in more than a year, ticking up a modest 30 basis points (bps) to 19.0%.
Downtown Boston recorded a more significant 40-bp climb, on-par with the prior quarter’s rise, while vacancy in Suburban assets climbed just 10 bps. Despite the jump, Boston remains one of the nation’s tightest Gateway markets.
Sublease availability continued to decline, dropping for the fourth consecutive quarter to its lowest point since Q4 2022 as multiple large occupiers opted to take their space off market. The 6.5 million square feet (msf) of sublease space currently on the market is down more than 1.2 msf year-over-year (YOY).
Demand:
Leasing activity was robust during the second quarter as new demand reached 1.7 msf, slightly eclipsing the first quarter’s total and boosting year-to-date (YTD) activity to 3.4 msf. Demand was widespread across the market as eight of the 19 submarkets surpassed the 100,000-square-foot (sf) mark of leasing for the first half of the year. The average size of a new lease rose by more than one-third quarter-over-quarter (QOQ), up 34.7% to 10,044 sf, the highest quarterly average since late 2024. The increase was driven by five transactions exceeding 50,000 sf throughout the quarter, a substantial jump over the single transaction of that size recorded during Q1. For the first time since Q2 2025, quarterly demand in the Suburbs outpaced Downtown Boston, comprising 55.0% of total market leasing. Though Boston has lagged many of its peer markets in AI-related leasing activity, Boston Dynamics’ 322,000-sf lease in Waltham — the market’s largest new transaction since 2022 — represented a major investment in the sector. Renewal activity more than doubled QOQ, comprising half of the quarter’s ten largest transactions.
Absorption figures offered encouraging signs with all suburban market clusters posting positive quarterly net absorption during Q2, collectively yielding 111,000 sf of net occupancy gains. Downtown was the sole driver of the market’s 230,000 sf of quarterly negative net absorption, as move-outs continued to outpace move-ins across the Central Business District (CBD).
Pricing:
The market’s direct average asking rent declined 1.4% QOQ to $47.74 per square foot (psf), though this marked a $0.22-psf increase over the same point in 2025. The bifurcation of Greater Boston’s office market continued, with Class A rents rising a modest 0.8% YOY, while rates for Class B assets continued to soften, falling 4.0% over the same period. Lower-tiered assets in Downtown Boston fared worse than in the Suburbs, softening by 4.4% since the midpoint of 2025 to $51.72 psf, marking a three-year low.
Downtown Boston (CBD):
As competition for high-quality space in the CBD continued to increase, demand remained heavily concentrated in Class A assets, which accounted for 72.0% of all new Downtown leasing during the second quarter. The Financial District captured 68.8% of all new leasing activity and four of the quarter’s five largest transactions in the CBD. Meanwhile, twelve renewals 20,000-sf or larger were signed across Downtown Boston during Q2, double the count recorded during the prior quarter. The cluster’s direct average asking rent softened 2.1% QOQ to $65.89 psf, though this marked a milder 0.3% -dip YOY. Class A space in Back Bay remained the tightest Downtown market segment at just 13.8% vacant, a significant 640 bps below the overall Downtown Class A average.
Suburban Boston:
More than 928,000 sf of new leasing activity was recorded across the 128 Belt, the 495 Belt, and the Urban Ring during the second quarter. The 128 and 495 Belts together accounted for all five of the market’s largest transactions of the quarter, led by the aforementioned Boston Dynamics lease in 128 Central, the largest new deal signed outside of the CBD in five years. Meanwhile, IBM’s renewal in 495 North was Greater Boston’s most sizeable renewal YTD. While vacancy in the 128 Belt ticked up 50 bps QOQ to 18.1%, the 495 Belt and Urban Ring each posted vacancy improvements. At 14.6%, the Urban Ring posted the lowest vacancy rate among Greater Boston’s five geographic clusters.
Cambridge:
Office demand remained muted in Cambridge, with just 44,500 sf of leasing recorded YTD, a decrease of 46.8% YOY. The cluster’s only renewal YTD came from healthcare AI company nference, Inc., which recommitted to its 11,700-sf footprint in East Cambridge. Despite subdued activity, Cambridge recorded nearly 17,000 sf of direct net occupancy gains during the second quarter, while vacancy was unchanged QOQ at 20.5%.
