The financial district submarket experienced 430,000 sf of positive absorption during the first six months of 2004 as the vacancy rate increased slightly to 13.5%. The report notes that the increase in vacancy largely reflects the completion of 100 Cambridge St., a former state office building renovated and repositioned as a multi-use facility with a 565,000 sf office component. The positive absorption reflects the occupancy of 417,000 sf at 100 Cambridge St., as well as other market dynamics.

The report emphasizes that lease commitments at new construction projects--such as 33 Arch St. and 601 Congress--eases the pressure on class A properties that compete with new product. The average class A asking lease rates held at $39 per sf, though rates continue to show large variances and can depend on specific location and the floor.

The Back Bay submarket experienced 219,000 sf of negative absorption during the first six months of 2004, raising vacancy rates nearly 2% to 13%, while class A asking lease rates held firm at $38 per sf. Despite the negative absorption in the period, the report points out that the Back Bay remains one of the strongest submarkets in the region as its relatively high level of conveniences and amenities attracts significant tenant interest. The submarket may also see a decrease in inventory as Beacon Capital Partners mulls a renovation or repositioning of its 575,000-sf 501 Boylston Street property.