Boston Office Rents On The Rise

BOSTON (CBS) - Greater Boston's office landlords are getting more aggressive with rents and overall pricing amid signs that local employment is back to pre-recession levels.

According to a new report by PricewaterhouseCoopers, which surveyed hundreds of real estate clients to gauge their sentiments for the months and years ahead, average rents increased around 1.5 percent in the second quarter, with high-end properties reporting an even stronger 5 percent uptick.

The high-end market's gains were its strongest since early 2009.

Meanwhile, the region's average capitalization rate – a key measure of forecasted income growth and borrowing costs – fell below the 8 percent threshold for the first time in over two years, signaling continued price appreciation for property owners.

Much like bond yields, cap rates run counter to a property's pricing.

"The positive vibe being felt in the Boston office market is reflected in the key cash flow assumptions reported by survey participants this quarter," according to the PWC report.

The report said Greater Boston's employment trends as well as its solid growth in the professional-and-business-services sector are at their strongest since early 2009.

Lisa van der Pool of the Boston Business Journal reports

Among the report's other findings:

• A majority of respondents, some 64 percent, see the national office market in recovery. Another 24 percent say it remains in a recession.
• Greater Boston is expected to slightly outpace the nation as a whole, in terms of the rate of recovery in office occupancy and rental rates. A full-blown recovery is expected to take hold by 2013.
• The retail market remains depressed and is expected to stay that way for years to come. In Boston, a recessionary climate should persist through 2013, slightly worse than the forecast for the nation's retail-property sector as a whole.
• The local industrial sector will contract through the rest of the year, although a recovery is expected to take hold in 2012. Nationally, respondents said a recovery is already underway.
• Greater Boston's multifamily property market remains red-hot and should kick into expansion mode, in terms of supply, starting next year. A similar trend is expected for the national market as well.