Rents Soar in Tight Cambridge Office Market

CAMBRIDGE, MA-At the mid-year point of 2007, four trends are defining this city’s office market, according to a new report by Richards Barry Joyce & Partners, and each spells trouble for the tenant camp. Besides a sharp rise in rents, RBJ director of research Brendan Carroll says the sublease outlet has virtually disappeared, and available office space of any ilk will be gone in the East Cambridge submarket by 2009. Meanwhile, the CRE inventory is consolidating, with a half-dozen players owning 50% of the city’s office and laboratory space. Five wield in excess of one million sf.

“There have been dramatic changes,” says Carroll, whose mid-year marketSTATus data shows a sudden gap between average asking rents for office space in Cambridge and those in the core suburban Waltham market. There a 22% difference overall, and the $42.10 per sf average for class A space in East Cambridge is 29% higher than that of Waltham. The two rates were comparable a year ago, and Waltham itself is setting suburban highs into the $40-per-sf range for newer product. Nonetheless, the chasm reflects nearly a $10 difference between Waltham and Cambridge. Carroll tells GlobeSt.com that at least two office buildings in East Cambridge are now quoting asking rents of $60 per sf as of this week, a first in the city since the brutal downturn that began the decade.

The shift reflects an improving economy and continued desire to sport an address carrying international cache, says Carroll, a point underscored by Microsoft Corp.’s new six-figure lease. That pact at One Memorial Dr. was second only to a 194,000-sf agreement by Monitor Corp. at 2 Canal Park, a deal initially reported by GlobeSt.com in May. Net absorption for the city’s 13.1 million sf of office space reached 178,000 sf in the second quarter, and is up 660,000 sf since mid-year 2006. That has dropped the vacancy rate to 8.4%, says RBJ. Presently, there are just four blocks of 50,000 sf or greater in Cambridge, marketSTATus shows, the largest 90,000 sf at One Rogers St.