by Max Saia
After years of trailing behind other major metropolitan markets since 2020, Boston’s commercial real estate sector has emerged as a standout performer in 2024, marking a significant turning point in its post-pandemic recovery. The market has demonstrated robust growth, with active demand surging 18% year-over-year by square footage—the highest increase among all gateway markets.
The renaissance is particularly evident in the technology sector, which has shown consecutive quarterly growth from Q3 2023 through Q3 2024, reaching a post-COVID peak of 612,000sf in the third quarter of 2024. While this figure still sits 23% below pre-pandemic highs, it represents a dramatic 54% increase from the previous quarter. Boston now leads all markets tracked by VTS in year-over-year technology sector demand growth and ranks second only to Austin in overall technology sector performance over the past year.
The Technology, Advertising, Media, and Information (TAMI) sector has been particularly dynamic, with demand already surpassing 2023 levels by 59% in terms of square footage and 32% by number of tenants. This growth has been accompanied by a notable increase in average tenant size, which has risen 18% compared to 2022 lows, validating VTS Research’s July prediction that Boston would benefit substantially from larger space requirements as companies strengthen their return-to-office initiatives.
Geographic preferences within the market show distinct patterns, with technology companies gravitating toward the Seaport and Downtown areas, while financial sector tenants demonstrate a stronger preference for the Back Bay and Fenway districts.
Unlike other major markets experiencing a pronounced flight to quality, Boston presents a more nuanced picture. Tour activity has grown almost equally for both Class A and Class B properties, showing increases of 11% and 12% respectively compared to 2023. However, the proportion of tenants touring Class A assets has reached 81% in 2024, marking a 7-percentage point increase from 2020, while Class B tours have declined by 13 percentage points to 38%.
This shifting dynamic has resulted in a widening rent gap between property classes. Class A properties now command a 58% premium over Class B assets based on active proposals, a substantial increase from the 30% average premium observed in 2018-2019. Class A rents have surpassed pre-pandemic levels by 9%, while Class B rents remain 7% below their pre-COVID benchmarks.
Adding to this disparity, Class B properties are requiring higher relative concessions to attract tenants, with owners offering incentives equivalent to 31% of starting rent, compared to 22% for Class A properties. This trend suggests a growing bifurcation in the market, despite the relatively balanced tour activity across property classes.
The overall trajectory of Boston’s commercial real estate market indicates a robust recovery, with particular strength in the technology sector and a clear advantage for high-quality assets. As the market continues to evolve, the growing rent premium for Class A properties and the increasing importance of concessions in Class B leasing strategies may reshape the competitive landscape for both property owners and tenants.
Max Saia
Max Saia is vice president of investment research at VTS.
