A Market in Transition

Boston’s commercial real estate market is undergoing a significant transformation. As we enter 2025, the industry continues to adjust to structural shifts rather than relying on traditional business cycles. Office vacancies remain high, leasing activity is evolving, and new dynamics in the lab and industrial sectors are reshaping expectations.

The lingering effects of remote work, economic uncertainty, and the growing influence of artificial intelligence (AI) investments have created an unpredictable landscape. While some sectors show signs of stabilization, challenges remain across the board.

Boston Office Market: High Vacancies, Slow Recovery

The Boston office market continues to struggle with high vacancy rates and sluggish absorption. As of Q4 2024:

  • Vacancy Rate: 18.5%
  • Asking Rents: $64.18 per SF
  • Sublease Space: 3.7M SF (a decline from 4.7M SF in Q4 2023)
  • YTD Net Absorption: -315,472 SF

Leasing activity has increased in select trophy-class properties, but overall absorption remains negative. The completion of Amazon’s 700,000 SF Seaport project had a temporary positive impact, but the broader market is still working through the massive amount of space added since 2020.

Looking ahead, elevated office availability means it could take well over a decade to recover to pre-pandemic occupancy levels based on historical absorption trends.

Cambridge Office: Softening Demand

Cambridge, traditionally a stronghold of life sciences and tech firms, is seeing rising vacancies.

  • Vacancy Rate: 16.8%
  • Asking Rents: $78.21 per SF
  • Sublease Space: 1.1M SF
  • YTD Net Absorption: -418,152 SF

Declining rents and increased availability indicate a shift in the market. While demand for high-end spaces remains, companies are hesitant to commit to large footprints. The slowdown in venture capital funding is also affecting growth-oriented tenants, contributing to weaker absorption.

Suburban Office: Mixed Signals

Suburban office markets are experiencing varied trends. Some areas have stabilized, but others continue to see rising vacancies.

  • Vacancy Rate: 19.9%
  • Asking Rents: $27.31 per SF
  • Sublease Space: 5.5M SF
  • YTD Net Absorption: -1.9M SF

The shift toward flexible work models has left many suburban office landlords rethinking their strategies. Some properties are pivoting toward mixed-use developments, while others are focused on attracting medical and life sciences tenants.

Boston skyline at might

Boston Lab Market: A New Reality

The life sciences sector, once the hottest part of Boston’s real estate market, has cooled considerably.

  • Vacancy Rate: 11.2%
  • Asking Rents: $54.49 per SF (steady year-over-year)
  • Sublease Space: 640,147 SF
  • YTD Net Absorption: 262,867 SF

While demand exists, it is no longer the hyper-competitive market it was a few years ago. The lab sector is shifting from rapid expansion to a focus on efficiency, with companies prioritizing sustainable growth over aggressive leasing.

Cambridge Lab: Facing Oversupply

Cambridge lab space, once the gold standard, now faces rising availability and declining rents.

  • Vacancy Rate: 20.5%
  • Asking Rents: $79.59 per SF (down from $83.52 in 2023)
  • Sublease Space: 1.7M SF
  • YTD Net Absorption: -915,082 SF

High costs and oversupply are forcing landlords to get creative with lease structures and incentives. Some developments are being repurposed or delayed to avoid flooding the market with additional space.

Industrial & Warehouse: A Cooling Market

The warehouse sector, once experiencing record-low vacancies, is seeing a shift as new construction catches up with demand.

  • Vacancy Rate: 6.5%
  • Asking Rents: $8.20 per SF
  • Sublease Space: 1.4M SF
  • YTD Net Absorption: -1.8M SF

The surge in e-commerce demand during the pandemic led to rapid development, but demand is now moderating. Looking forward, factors like AI-driven logistics improvements and supply chain realignments could shape future trends.

The Bottom Line

Boston’s commercial real estate market in 2025 is a tale of shifting fundamentals. The office sector continues to struggle, lab space is facing an adjustment period, and the industrial sector is stabilizing.

Investors and tenants navigating this market must adapt to new realities rather than rely on past cycles. With ongoing structural shifts, those who embrace flexibility and innovative approaches will be best positioned for success.