Vacancies are low and the construction pipeline is deep this summer in Boston.

Bisnow/Cameron Sperance

Business demand focused on urban Boston continues to fuel a prolonged positive cycle. There was 1.5M SF of net tenant commitments in Q2, launching a combined 3.6M SF of office and lab construction for tenants like Amazon, MassMutual, Sanofi and State Street.

State Street’s future One Congress headquarters, which broke ground in June, is the first more than 1M SF office building to be constructed in Boston in nearly 20 years, according to Perry data.

With nearly 9M SF of construction underway across the Boston market and an additional 1M SF expected to launch by the end of summer, demand for space still seems to be outpacing supply.

Back Bay, which wasn’t as attractive as the Seaport and East Cambridge earlier this cycle, has picked up in the last two years. New leases from tenants like BitSight, DraftKings, Wayfair and Industrious have helped drop the submarket’s vacancy rate from 10% at the end of 2017 to 3.7% in Q2, Perry found. The 14.7M SF submarket experienced nearly 1M SF of positive absorption over the last 18 months.

“Nobody sees a cliff in sight where we’re just going to fall off the edge of the earth tomorrow and not have demand,” Boston Realty Advisors Managing Director and Senior Partner Wil Catlin said.

BPDA/Pelli Clarke Pelli Architects. Rendering of Bulfinch Crossing (One Congress is the tall tower on the right).

Catlin doesn’t anticipate the wave of new leases to spark a Back Bay spec construction rush in future quarters.

Despite the flurry of construction, Boston remains a space-constrained market where developers favor build-to-suit projects over speculative construction without a tenant lined up. The city’s lengthy planning and approval process and high cost of construction together lead landlords and developers to be more risk-averse.

“Despite the market being hot and frothy, it still takes 36 months before they can get going and open the front door,” Catlin said. “In some regard, people may just wait it out until they find the right tenant.”

Rather than Back Bay building up with new towers, there is potential for sprawl into newer development zones like the Fenway, South Boston, Allston and even the suburbs. Route 128’s vacancy rate dropped to 12.1%, its lowest mark since it was referred to as America’s Technology Highway in the late 1990s, according to a report from Colliers International. At the end of 2014, the corridor’s vacancy rate was over 14%.

The suburban stretch has benefited from near-zero vacancies and rents hovering around $100/SF in East Cambridge.

“We are seeing exceptionally strong activity and interest in our Cambridge portfolio, and we anticipate the Route 128 Central Corridor, where Bulfinch is positioning strategic assets in Waltham and Needham, to serve as a relief valve to Cambridge’s high demand and rents,” said Bulfinch Cos. Senior Vice President and Director of Leasing Mike Wilcox, whose firm is building a 283K SF office and lab building at the Cambridge Discovery Park near Alewife.

Courtesy of the BPDA/Gensler. Rendering of Amazon’s future Seaport office at 111 Harbor Way, which is part of Boston’s 9M SF office and lab construction pipeline.

Developers also gobbled up properties in Q2 along the A Street corridor in Fort Point and South Boston, where analysts expect a new life science hub to sprout as a complement to Kendall Square.

Related Beal paid Gillette $218M for a 6.5-acre parking lot along Fort Point Channel. Next door, Alexandria Real Estate Equities and National Development paid $252M for a lot previously slated to house a 12-story component of General Electric’s planned Boston headquarters.

Even if much of the construction in the city moves forward with a tenant lined up, analysts still say the building boom is remarkable.

“A quarter with 3.8M SF of groundbreakings is truly historic for a region that has averaged just 450K SF of office and laboratory completions per quarter over the last 15 years,” Perry Director of Intelligence Brendan Carroll said.

With Boston’s ongoing success, it is still hard not to wonder when it might all end. The current period of economic expansion became the longest in U.S. history on July 1, and most in real estate have been playing the “what inning are we in?” game for years.

For Boston real estate, the extra innings keep coming.

“If you talked to people in November of last year, I don’t think anyone would anticipate things would be just as strong today,” Catlin said.