Meredith & Grew's numbers for the first quarter of this year indicate that the city's overall vacancy rate increased to what the study calls "a record high" of 20.5%, up from 18.3% at the end of 2001. But it is clear that it is the office market here that is inflating these numbers. The study notes that the vacancy rate for the 10.6 million-sf office market increased from 19.8% at the end of last year to 23.5% at the end of the first quarter of this year. Cambridge's largest submarket, East Cambridge, saw vacancy rates jump from 22.5% at the end of last year to 28.4% for the first quarter of this year.
Furthermore, of the 2.5 million sf of vacant office space, 58% or 1.44 million sf represents direct space while 42% or 1.06 million sf is sublease space. The bad news continues with a negative absorption rate of 397,715 sf.
Inevitably, the situation has pushed rents down. The study points out that recent proposals for class A space in Kendall Square and East Cambridge are in the $28 to $38 per sf range, which is "significantly" below the October 2000 market peak of $70 per sf. Alewife-area rents are in the $23 to $32 per square foot range.
Then there is the biotech market, which, the study says, "continues to show low vacancies, active demand and positive absorption with several lease commitments pending." Vacancies for existing biotech space remain close to 0% and the study says that demand for new shell space is strong.
In fact, the vacancy rate for the biotech market is so low, at around 4.1%, that biotech companies are in danger of a lack of available supply. Moreover, the study points out that the market will probably remain tight because demand is still high and there is not a lot of new space planned for the next two years.
Not surprisingly, biotech rents have remained stable for the first quarter of this year with prices only off about 5% to 10% from the market peak in 2000 of $60 to $62 per sf.
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