Rents that peaked at $65 per sf for class A office buildings in the third quarter of 2000 now average $30 per sf for class A space and $22 per sf for class B space, figures that are holding steady since the fourth quarter of 2003, says Christopher Crooks, Cresa Partners principal and head of the firm's Cambridge market group.
The report indicates that overall vacancy is up one point to 24.5%, and lab space, which was 18% last quarter, has risen to 23%; the lab space jump is largely attributable to the 290,000 sf of sublease space that Vertex Pharmaceuticals has made available.
"We are witnessing the natural maturation of certain companies that no longer believe it's necessary to be in Cambridge and attract a younger workforce," says Dan Sullivan, a Cresa Partners vice president. "The question is whether Cambridge can continue to grow and attract enough new companies to backfill the turnover of those heading for Route 128."
Meanwhile, venture capital continues to be tight, with the onus on startups to produce strong business plans, notes Adam Subber, a Cresa vice president. While there are isolated examples of increased activity, the firm points out that most office transactions are in the 5,000 sf to 10,000 sf size range, and many are lease renewals and restructures.
The one sub-market in Cambridge that remains tight is Harvard Square, where the vacancy is 9%, according to the report, and supply is limited. Employment in Cambridge remains flat, with the one major exception being Novartis, which continues to hire. Cresa reports that 2.3 million sf of direct space is available in the Cambridge office market, with an additional 690,000 sf in sublease space. For lab space, 1.5 million sf is available--635,000 sf direct and 825,000 sf sublease.
"The good news is that tenant improvement allowances have increased, and landlords are typically being very flexible in the negotiating process. For companies seeking concessions such as free rent, this continues to be a great time to be in the market," notes Crooks.
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