"I don't see it ending in 2002," Dan Cordeau, a vice president at Spaulding & Slye Colliers tells GlobeSt.com, referring to the current state of the market here. According to fourth quarter figures compiled by Spaulding & Slye, the vacancy rate in the suburbs of Boston is at 11.1%. Last year at this time the vacancy rate was 3.6%. The availability rate, which includes both direct and sublease space, has shot up to 21.7% this quarter, as compared with 6.7% for fourth quarter of last year. Last year saw a positive absorption of 1.9 million sf of space for the fourth quarter while fourth quarter of this year saw a negative absorption of 1.4 million sf of space.
"The availability rates rose very dramatically over the last year," notes Cordeau, who adds that the vacancy rates are likely to increase further as the five year leases which were signed in 1997 and 1998--when there was a great deal of activity in the market--start to expire. This is especially true because many corporate users, says Cordeau, have room to accommodate additional staff. "People ensured growth that never came," he says.
The situation is exacerbated by the fact that the suburbs added five million sf of new space this year, at the same time that all this space was given back. Some of that space was pre-leased but some of that just wasn't needed. Last year this area had four million sf vacant while this year that number is 14 million sf. In addition, the market here was fueled at one time by the fact that the market downtown and in Cambridge was so tight. "But those markets are not so tight so there will be less migration to the suburbs," points out Cordeau.
Rents, predictably, have fallen along with the area's fortunes. Cordeau says that the area is at 50% of the highest rents once achieved. An example is in Burlington, where the highest deal was at $48 per sf. That space is now leasing for $28 per sf. In Waltham he says, people achieved $55 to $60 per sf and now those same spaces would go for $30 to $35 per sf. "We are probably back at 1999 rates," notes Cordeau. "Essentially the gains that were made in the last two years are lost." Still, Cordeau emphasizes that he does not think that even at these rents owners are in danger of losing their buildings. "From the owners' perspective, the market is still supportive of the fundamentals," he says.
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