“Graduated” Startups Find Downtown Office Space

Dozens of startup companies have found a new destination for affordable office space: Downtown Crossing. The more popular destinations, such as Boston’s Seaport/Innovation District and Kendall Square in Cambridge, have proven too expensive for these emerging companies.

The 1.4 million square foot Downtown Crossing submarket is better known as the hub of department store shopping in Boston. While commercial space is a prized commodity in this area, average asking rents are still significantly lower than the $50 rents in the Seaport District and Kendall Square. This means startups priced out of these regions are forced to look elsewhere for cheaper office space, and many of them have found it in downtown Boston.

In the first quarter of 2013, the availability rate in this submarket dropped to 9%, down from 14.3% for the same period two years ago. As expected, rent prices increase as space dwindles. Average asking rents have increased by nearly 15% to $32.49 in the first quarter, up from $28.30 three years ago.

As we wrote about last week and last month, the Greater Boston Area presents key advantages for successful startups, from a better chance of garnering media attention to attaining greater venture capital investments. Many of these startups have graduated from incubator programs and are looking to expand. “But as they grow, they need more space,” says Jon Frisch, VP of real estate brokerage T3 Advisors.

Some of the companies who have recently moved downtown include Mobee (mystery shopping), Apptopia (app marketplace), and Localytics (mobile app marketing/analytics). (Boston Business Journal)

Downtown Crossing is becoming a destination for startups priced out of Cambridge and the Seaport.