Office construction makes a comeback in Boston area

The regions office construction market is making a strong comeback, driven by the expansions of medical and biotechnology companies that are funding new buildings going up in Bostons Seaport District, East Cambridge, and suburbs along Route 128.

More than 4.7 million square feet of office and laboratory space is under construction in the Boston area, up from just 430,000 square feet in summer 2011, according to the real estate firm Richards Barry Joyce & Partners.

The increase bodes well for the states construction industry, which has lost 5,200 jobs this year and has yet to rebound from a recession that halted building activity. Real estate specialists said that is bound to change in coming months as the fundamentals of the market continue to improve, with many companies looking to add space.

The office market overall is in good shape, said Joe Fallon, managing principal of the Boston office of Cassidy Turley, a national real estate services firm. Vacancy rates are down and rents are increasing. The laws of supply and demand are working more favorably now than they were 24 or 36 months ago.

The construction upturn is largely tied to the growth of biotechnology and medical companies that are building offices because of a lack of existing space in desirable areas such as Cambridge and Bostons Seaport District, which has been renamed the Innovation District by Mayor Thomas M. Menino.

But construction activity is not limited to those types of firms. Liberty Mutual Life Insurance Co. is building a tower in Bostons Back Bay, and State Street Corp. is planning a new complex in the Seaport District. Also, Keurig Inc., the coffee brewer, is constructing a headquarters in Burlington, and EF Education First, a for-profit provider of travel and academic programs, broke ground this week on an office building in Cambridge.

Most of the additional space is already leased to specific companies, with developers still unwilling to risk building on a speculative basis in a slowly recovering economy. But one spec building recently got underway in Burlington, the first such project to move forward since 2008.

Bob Richards, a partner with Richards Barry Joyce, said Burlington and other northern suburbs along Route 128 have experienced a growth spurt in recent months. Overall, tenants in that market accounted for 580,000 square feet of additional space in the last quarter.

Thats the best net absorption weve seen in that area in 12 years, Richards said. Its clearly amazing news for that segment of the market.

Real estate specialists said those communities are landing more companies because of their growing mix of popular restaurants and retailers, as well as new apartments and ownership units to house employees.

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Office construction makes a comeback in Boston area