The days of renew-but-contract deals Boston tenants signed in the aftermath of the pandemic have pulled a 180-degree turn with a burst of companies both extending their leases and tacking on additional space.
Financial services giant State Street Corp. is the latest in a string of recommit-and-expand agreements across the area with its move to grow its footprint in Burlington, Massachusetts. As part of a recent renewal agreement, the custodial bank is adding about 15,000 square feet to occupy a total of about 163,000 square feet in The District building on the outskirts of Boston.
The deal, confirmed by landlord National Development, means State Street will anchor the property at 700 District Ave. and take up more than half of its 300,000 square feet.
The expanded office is in addition to the bank's headquarters in the recently completed One Congress tower in downtown Boston, where it leases just shy of 500,000 square feet. State Street also has a more than 700,000-square-foot hub in Quincy, Massachusetts, about a 20-minute drive away.
State Street's new agreement now extends through 2037.
Silver linings emerge
Similar to other markets across the country, Boston struggled in the earlier years of the pandemic as tenants quickly dumped record swaths of space and backed out of lease commitments.
Colliding factors, including flatlined leasing, a surge in recently constructed properties and high-profile move-outs, helped push the Boston market's vacancy rate to a record high of about 15%, according to CoStar data. That is more than double the levels reported in the years before the 2020 pandemic outbreak.
The region's availability rate has already climbed to nearly 19%, according to CoStar, largely because of the more than 13 million square feet of sublet space available. That has weighed down the market and reflects muted demand among tenants that had previously fueled the city's leasing and investment momentum.
A flurry of large deals over the past few months, however, shows that silver linings are beginning to emerge across the city.
Global law firm WilmerHale, for example, recently renewed the lease for its roughly 200,000-square-foot regional hub in downtown Boston's 60 State St. tower. The deal, which encompasses eight full floors of the 38-story high-rise, marked the third largest to be signed so far this year according to CoStar data, another indicator that Boston is on its way to regaining its pre-pandemic momentum.
Other major corporate tenants such as BNY, JPMorgan Chase and Hasbro have signed on for large blocks of space or are on the hunt for prospective options. Renewals have played a significant role in Boston's leasing activity since the beginning of the year, providing landlords with an increasing sense of stability as tenants finalize long-term real estate plans after nearly five years of uncertainty.
Renewals have also helped Boston break away from a pack of other cities such as Philadelphia and St. Louis where tenants continue to use renewals as a means to shrink or altogether cut ties with their office space.
For the record
Cushman & Wakefield's Michael O'Leary and Ross Gaudet represented landlord National Development in the lease.