"There is a good amount of space out there," he notes, "but not all of it is available. Much of the space is through sublets or new construction and there is still a good demand here." Begelfer points out that the increase in vacancy is only in the traditional office space--the biotech industry still has a vacancy rate of 3%.
Many companies, Begelfer adds, are avoiding making any decisions now because they are waiting to see if rents will come down. "Tenants sense a swing economy and they don't want to commit to high rents, says Begelfer. "But waiting doesn't mean the rents will come down. This is still a owner's market. The number of transactions has slowed down. At some point they will have to act."
This lack of recent transactions makes it difficult to gauge where rents are going now, but Begelfer emphasizes that the climate now is much different than a decade ago when lenders were pressuring owners to drop their rents. "There is not going to be a race to the bottom like 10 years ago," he says. "Most lenders are well-capitalized and have strong equity in their properties now."
Rents here increased dramatically over the last year with traditional office space starting out 1999 at about $40 per sf and shooting up to $70 per sf by the end of the year. "For the first time, office space was nearly as much as lab space," says Begelfer. "The office space will probably see a little softening but the lab space won't see a softening. It's still very tight."
According to Begelfer, there is an upside to the recent availability of space. "This is the first time companies here can look for room to expand to," says Begelfer. "Until now, they all had to move out of Cambridge."
Begelfer also says that the market here could not afford to grow any more quickly than it is. "The market has been so tight and getting employees was so hard that it was difficult for companies to grow. Cambridge is still a place where people want to be."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
