Meredith & Grew Senior VP: Local Market Returning to Speed Limit

BOSTON-At a conference here sponsored by Meredith & Grew Inc., company executives acknowledged that the slowdown in the economy would be felt in the local commercial real estate market but only to bring this overheated market back to earth. “We were traveling at 75 to 80 miles per hour,” says James Elcock, senior vice president at Meredith & Grew. “Now we’ll go back to the speed limit.”

Ronald K. Perry, who spoke about the city market, identified the South Boston waterfront area as a catalyst for growth. While average vacancy rates in the city were at 2.2% for last year, vacancy rates on the waterfront were at 11% last year, due to the new construction there. Perry also noted that while conditions in Boston this past year were unprecedented, tenants are hoping some relief is in sight. Rental rates increased by an average of 18% with class A space going for an average of $65 per sf and the high-end markets soaring to $100 per sf. The volatility in the market is demonstrated by the absorption rate for last year, which was 1.5 million sf of space.

Last year also saw very limited options for tenants, with several tenants often vying for the same space. An early indication of the market settling down is that more options, including sublease space, are opening up. “Last year, if you wanted 25,000 sf of space you had maybe seven options,” noted Perry. “This year you have 14 options.”