The Boston-area office market has almost fully recovered from the economic downturn, with companies filling up large chunks of space and driving a steady uptick in rents.
In the last three months, average asking rents in Boston jumped to $46.26 per square foot, up 16 percent from the depth of the downturn three years ago, according to the real estate firm Jones Lang LaSalle. A number of large companies have recently moved into the downtown core, and several are also building large office complexes.
The influx has pushed the vacancy rate below 10 percent for the first time since the end of 2009 — a threshold that often triggers larger rent hikes and even speculative construction activity.
“Once it breaks 10 percent, developers start to get more aggressive and say, ‘Maybe we can start building again,’ ” said Frank Petz, a managing director for Jones Lang LaSalle. “There are a number of speculative building projects under consideration.”
The market’s recent improvement ends a prolonged period of shakiness in commercial real estate, as businesses slowed hiring activity, shed space, and put aside ambitions to move to better locations.
The office market hit a low point in mid-2010, when average rents dipped below the $40 mark. It then slogged through several slow quarters before springing to life in 2012, when companies took about 1.6 million square feet of space off the market. That’s almost three times the amount of an average year.
Several companies are now building office complexes in Boston and Cambridge. Novartis AG, Biogen Idec, and Ariad Pharmaceuticals will occupy new buildings in Kendall Square; Liberty Mutual is finishing a tower in the Back Bay; and Converse recently committed to move its headquarters to a building to be renovated at Lovejoy Wharf near North Station.
Several real estate specialists said Boston is benefiting from a pronounced trend toward urbanization, with a variety of companies moving into the city to be closer to talented workers who want to live there.
“It’s changing the business landscape,” said Glenn Verrette, a principal of the real estate firm Cassidy Turley. “Boston has always been an intellectual capital, it’s always had companies that wanted to grow here. But we’ve never had so many businesses moving here from other places.”
The city’s reputation as a talent hub is being reinforced by the greater number of residential towers under construction. Those are bringing thousands of new people and helping revitalize outdated commercial districts, making them more attractive places to live, work, and seek out entertainment.
Petz, the head of capital markets for Jones Lang LaSalle, said the lack of available office space is inducing more companies to consider building their own.
For example, the law firm Goodwin Procter examined a number of options before recently deciding to occupy a new office building to be constructed at Fan Pier in the Innovation District.
In addition, the development arm of Skanska USA has also said it is planning construction of another large office building in the Innovation District. No tenants for that building have been named.
“The fact that people are spending money now is a a significant mental shift,” Petz said. “There’s a lot more fortitude now.”