The suburban market had an availability rate of 29%, slightly higher than the 28.5% rate in the second quarter of the year. Tami Thompson, a principal at Spaulding & Slye, tells GlobeSt.com, that while those rates are likely to remain high for the near future, certain markets--such as the northwest and the Central 128 markets--have experienced positive absorption for the first time in three years.
"We're seeing increased activity," says Thompson. "We're not seeing a recovery, but we are seeing a leveling off." Thompson notes that the rates need to get down to at least 16% to start seeing any downward pressure on the rents. "There are still a lot of alternatives," she says, noting that a tenant interested in 15,000 to 20,000 sf has about 80 options in each suburban market.
While much of the available sublease space--especially "plug and play" space which is fully built out and furnished--has been taken, Thompson says that the sublease market is still putting pressure on rents and forcing property owners to offer concessions. The average asking rent in the suburbs is at $19.50 per sf with premium properties going in the low to mid $20s per sf. Thompson says that three years ago that space was going for $40 per sf.
On a positive note, the fourth quarter has seen a great deal of activity and a positive absorption of 578,000 sf. "It's the start of a slow recovery process," says Thompson. "The market recovery starts with movement which demonstrates confidence." Among the recent big deals are two large ones by Raytheon in which the defense company took 126,000 sf in Burlington and 400,000 sf in Woburn. Thompson says that both Pearson and GE Panametrics are looking for large blocks of space in the suburban market and will probably sign on something by the end of the first quarter in 2004.
But there are a number of factors that complicate any forecast for the suburban market. Firstly there is the shadow space, which could be from 5% to 10% of a company's space and which companies will either fill or put on the sublease market. Then there is the fact that much of the market activity are renewals that are happening early because tenants want to take advantage of the current market. "It will take three to six months in 2004 to sort out what is really happening," says Thompson. But, she adds, it is clear that it will be a long recovery process. "We have 22 million sf of office space and 14 million sf of research and development space available. We need a lot of jobs to fill that space."
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.
