Boston office gets duration; it still needs a trade

Over twelve months, The Chiofaro Company and PGIM Real Estate produced 32 leases covering more than 500,000 square feet at International Place, an average of about 15,600 square feet per signing, and the number inside that total most likely to move an underwriter is the weighted average lease term, which runs above ten years. Ten years of contracted rent is duration, and duration is what an office owner monetizes when buyers are scarce.

That duration comes from a tenant roll leaning on financial and professional services — TD Bank US, KKR and McCarter & English among the recent commitments, with PNC Bank, Ryan LLC, Alera Group, Callodine Capital and Postman spread across new leases, expansions and renewals — and along the way it picks up a global tax firm, a national insurance and financial services company, an asset manager and a software company, a wider demand base than one industry's leasing would produce. More than 250,000 square feet of the year's volume comes from tenants taking additional space in Boston, the figure that cuts hardest against the belief that employers are shrinking their footprints.

Generalize carefully. The figures come from Chiofaro's own announcement, as Connect CRE reported, and the reading attached to them — sustained confidence in the workplace, a long-term return-to-office commitment from employers — is the firm's characterization rather than a market index. Donald Chiofaro Jr., a vice president there, described the year as an indicator of the broader Boston office market's trajectory, but nothing in the release speaks to citywide vacancy or absorption; that may prove right, and it still describes one complex, one landlord, one year.

Office is repricing asset by asset, not index by index, and leasing is where that repricing registers first. A rent roll carrying a ten-year weighted term is the raw material of a refinancing, and the refinancing wall is being rolled rather than resolved, with extensions buying sponsors the calendar they need to wait for a bid. What the announcement does not contain is a price. No sale, no cap rate, no appraisal mark: 32 leases establish that the cash flow is durable without establishing what a buyer would pay for it.

A sponsor holding that duration has more to gain from financing against it than from testing a thin Boston bid, and the lease terms are the argument for it. The next trade anywhere downtown, of any size, would give the market a way to price what International Place just signed.