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Downtown Boston Office Market Q3 2026: Vacancy 18.5%

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The downtown Boston office market ended the third quarter of 2026 with an 18.5% vacancy rate, positive net absorption of 62,741 square feet and a development pipeline with nothing under construction, according to a CBRE report dated Oct. 9. The brokerage described the market as showing “signs of stabilization,” while noting that conditions “remain mixed.” This report pulls together the new quarterly data, a second broker’s October snapshot, and the status of the city’s office-to-residential conversion program, which is scheduled to stop accepting applications at the end of the year.

Part of our Boston News coverage. Browse more in Housing, Development and Business.

Downtown Boston Office Market: The Q3 2026 Numbers

CBRE’s Downtown Boston Office Figures for Q3 2026 reports that vacancy declined to 18.5% and that leasing activity reached 1.27 million square feet for the quarter. New Class A space accounted for nearly 80% of that leasing, which CBRE tied to a “flight to quality” among tenants. Tenant demand held steady at 4.3 million square feet, and the Central Business District led leasing volume.

The same report lists several softer readings. Average asking rents declined to $66.12 per square foot. Net absorption, although positive, trailed year-ago levels. CBRE said continued softness was concentrated in the Seaport. It also reported that Boston’s development pipeline “has effectively paused,” with no office projects currently under construction following major deliveries earlier this year, and that investment activity showed “renewed momentum” as several Class A office buildings changed hands.

A figure of that kind matters to City Hall as well as to landlords. Commercial, industrial and personal property accounted for 54% of Boston’s tax levy in fiscal 2026, according to the city’s property tax page. Our look at the Boston FY27 budget covers how the city is planning around slower growth in new construction.

Neighborhood Readings From Hunneman

Commercial brokerage Hunneman published its October 2026 Boston Office Report on Oct. 7. Its headline figures, which it presents for Boston, Cambridge and the suburbs together, list total vacancy of 18.5% on an inventory of 227.2 million square feet. Hunneman’s report breaks the Boston market into submarkets:

  • Back Bay: availability has fallen while the vacancy rate has stayed stable through 2026 at 14.2%. Hunneman cited law firm Paul Hastings leasing 52,340 square feet at 888 Boylston Street, an expansion of 248% over its footprint at another BXP property.
  • Seaport: availability rose to 27.9% and vacancy to 24.2%. Hunneman attributed the weaker fundamentals mostly to sublease space at 1 Boston Wharf Road, where it said Amazon has listed 375,000 square feet on the upper floors as available for occupancy in January.
  • Fenway: availability dropped to 12.7% from 18.8% at the start of the year, which Hunneman said was largely a function of Fenway Sports Group signing for 100,500 square feet at 1325 Boylston Street.
  • Beacon Street: Hunneman reported that Whoop leased 107,000 square feet at Related Beal’s 660 Beacon Street, nearly doubling the size of its headquarters. Related had previously been marketing the property as a potential lab opportunity.

We covered the Seaport sublease in more detail in Amazon Seaport Sublease: Half of New Tower Put on Market. Hunneman’s note also covers Cambridge, where it reported an availability rate of 27.2%, and the suburbs. This report is limited to the City of Boston.

Office-to-Residential Conversions: Where the Program Stands

The city’s response to high vacancy in older buildings is the Office to Residential Conversion Program. According to a Dec. 12, 2025 announcement posted by the Boston Planning Department, the program formally launched in October 2023 and provides a 75% property tax abatement for 29 years to qualifying conversions, including student and workforce housing. At that time the city said it had received 22 applications for 1.2 million square feet across 27 buildings, which would create 1,517 homes including 284 income-restricted units.

The same announcement extended the program. Applications remain open through Dec. 31, 2026, with approvals on a rolling basis, and applicants must commit to pulling a full building permit and starting construction by Dec. 31, 2027 to benefit. The Planning Department said a streamlined process coordinating city and state agencies had allowed conversion projects to complete review in six months.

A September 2026 Planning Department presentation on the program updates those totals. It lists 28 applications covering 35 buildings and 2.1 million square feet of Class B and C office space, with 2,420 units proposed, including 463 on-site affordable units. The presentation shows seven projects under construction and one completed, and projects 321 units delivered by the end of 2026. It cites downtown office vacancy of about 20% and average office occupancy of about 60% as the reasons it sees a continued need for the program.

Totals differ slightly across sources because of timing. Bisnow reported on Aug. 20, citing the Planning Department, that developers had proposed 29 conversion projects totaling 2,331 units, of which 431 units had started or completed construction. Bisnow said only one project, the 15-unit 281 Franklin St., had been completed, with seven others under construction totaling 416 units and 21 more in planning totaling 1,389 units. A Planning Department spokesperson told Bisnow the number of units under construction has “far exceeded expectations.”

Our earlier coverage of individual projects includes 31 Milk Street and 133 Federal Street.

The Financing Question

Bisnow’s reporting records a range of views from people who work on these deals. Marvin Lahoud, a partner at construction firm Tocci, said the 31 Milk Street team assembled a city tax abatement, a federal historic tax credit and a $4 million state grant, and that “they barely got the deal financed.” Nixon Peabody partner Jennifer Schultz said she did not see “any indication” the program was at the start of “a deluge” and argued the abatement was not enough to overcome other costs and requirements. Lahoud said that temporarily exempting conversions from the city’s inclusionary development policy, which requires at least 20% affordability in multifamily projects of seven or more units, would be the biggest lever on financial returns “besides just direct subsidies.”

Boston Realty Advisors managing director Wil Catlin told Bisnow that construction costs for these projects could have jumped 20% between 2024 and 2026, and that investors weighing Boston against New York could see better returns there. The article notes that New York’s program offers abatements of up to 35 years. Lahoud estimated that roughly 75% of conversion proposals in the pipeline would result in new housing, adding that those projects would take longer than expected. Planning Department officials, for their part, point to the number of projects in construction and review as evidence the program is working.

The largest proposal in the pipeline is at 31 St. James Ave. in Back Bay. The Boston Globe reported on Aug. 11 that New York-based Vanbarton Group applied to create up to 490 apartments in the 11-story, 540,000-square-foot Park Square Building at a cost of up to $410 million, which would make it the city’s largest office-to-residential conversion. Banker & Tradesman later reported a project notification form describing 476 apartments, a 24-month construction period, the vacating of the building’s office space in 2027 and the need for three zoning variances. BLDUP described the plan as up to 478 apartments with about 80% market-rate units and roughly 30,000 square feet of retained ground-floor retail. A separate Banker & Tradesman report said a lender submitted a $95 million high bid for the property at a spring foreclosure auction and that developers say they are not relying on federal or state subsidy for the project.

What to Watch Through Year-End

  • Dec. 31, 2026: the application deadline for the conversion program, unless it is extended again. It has been extended twice, according to Bisnow.
  • Seaport leasing: whether the Amazon space listed for January occupancy is taken by subtenants, as both CBRE and Hunneman flag the neighborhood as the weak point.
  • Permitting at 31 St. James Ave.: Vanbarton needs Boston Planning Department approval and zoning variances before its proposed construction start.
  • New construction: CBRE reports nothing under construction; any new office start would be a notable change.

Our Take

This section is The Boston Report’s analysis and is separate from the reporting above.

The data supports a measured reading. An 18.5% vacancy rate with positive absorption and strong Class A leasing points to a market that is sorting itself by quality rather than recovering evenly. Back Bay and Fenway look healthier on the brokers’ numbers, while the Seaport carries a visible overhang. For building owners, the practical message in the quarter’s data is that newer, amenity-rich space is leasing and older space is the problem the conversion program was built to address.

The conversion program’s results so far are real but modest next to the vacancy figures. Hundreds of units are under construction, yet the Bisnow interviews show developers still describe the financing as thin. The year-end deadline will test whether the city extends the program again, adjusts the abatement or the affordability requirement, or lets it lapse. Readers who own or lease downtown space should expect that decision to matter for both property values and the future mix of residents and workers in the Financial District and Back Bay.

Sources

Further Reading

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