These two charts illustrate trends in the New England’s office space market—an important indicator of the health of the business sector. The CB Richard Ellis Rent Index is an estimate of average contracted rental price of office space in a metro area’s downtown market. The office vacancy rate measures the fraction of commercial real estate zoned for office space that is currently vacant and available for sale or lease. Typically, these data series move in opposite directions. When vacancy rates rise due to slowing demand or excess supply, downward pressure is exerted on the rent index.

As the charts reveal, during the economic boom of the late 1990s and early 2000s, the demand for office space increased, causing rents to rise rapidly and vacancy rates to fall. The 2001 recession prompted a drop in a historically-high rent index and a sharp spike in the office vacancy rate in New England markets, as company downsizings translated into less need for office space. Further, the long lag time between a building’s conception and its completion meant that buildings that were planned during the economic boom became available after peak demand. Still, the rental price of office space in Boston remained high relative to the nation through the early 2000s. By the mid-2000s rental prices in Boston began to track the nationwide index. This pattern continued through the 2008-2009 recession despite lower office vacancy rates in the Boston area.