Cambridge Market Continues to Tell Two Stories

CAMBRIDGE, MA-Meredith & Grew’s latest third quarter market statistics indicate that this city continues to be comprised of two markets and each has a very different story to tell. While the office market is seeing some activity, the overall results are still mixed. The biotech market appears strong but the report points to signs of potential softening.

The city’s overall vacancy rate is now 19.5%, a slight drop from the first quarter rate of 20.4% and second quarter rate of 20.2%. In the office market, transaction velocity improved, according to the report, but net absorption for the quarter was only 30,000 sf, which is attributed to the continuing “malaise” in the tech industry. The office vacancy rate was 22.6%, slightly down from last quarter’s 22.9% but still higher than the 19.8% reported for the end of last year.

Not surprisingly, office rental rates continue to fall with Class A space in Kendall Square and East Cambridge now in the $24 to $35 per sf range; Alewife rents in the $20 to $28 per sf range. Lack of demand and continued weakness in the tech sector will most likely result in further downward pressure on rents. The report concludes that the slow demand and high vacancy rate in the office market will probably continue for the next year or two.