B
oston's office market is a paradox - despite a 17.1% vacancy rate, it remains one of the tightest in the US, with year-over-year rent growth surging to $47 per square foot, according to CommercialEdge. This anomaly sets Boston apart from its Northeastern peers, where Philadelphia stands as the most affordable office market at $30.86 per square foot.

    In contrast, Manhattan holds the title of priciest office market, with an average rate of $68.93 per square foot, but saw a 3.6% year-over-year decrease. New Jersey's strong performance has it ranking fourth nationally in total office sales, with $409 million in transactions and properties trading at $179 per square foot.

    Boston's vacancy trend is a mixed bag - while the rate increased by 490 basis points year-over-year, it remains one of the tightest markets in the country. Philadelphia, on the other hand, struggles with excess supply, posting a 20% vacancy rate, exceeding the national average.

    Nationally, the office market faces ongoing challenges, with a 19.7% vacancy rate and a 5.7% year-over-year increase in average listing rates to $33.41 per square foot. Despite these headwinds, developers remain optimistic, with 48.6 million square feet of office space currently under construction nationwide.

    The office construction pipeline has shrunk significantly, with 2024 seeing the lowest deliveries in a decade and 2025 expected to be even slower. Houston is an outlier, with over 1 million square feet of office starts last year, driven by development shifting out of the CBD and into surrounding areas.

    Boston's resilience in the face of rising vacancies and national trends of increased vacancy rates and rent growth highlights its appeal as a prime location for investors. Manhattan, New Jersey, and Boston continue to outperform other regions in terms of sales and rental rates, making them key markets to watch in 2025.