Metropolitan Boston has seen employment rebound by 30,800 jobs positive in the past 12 months, the largest increase since 2000 and just the third time since then the rate has finished on the plus side. Unfortunately, the increase should tail off, says Delta, which anticipates an average rate of 20,800 jobs gained annually through the end of the decade. That would be approximately one-third the average annual amount of new jobs created in the area between 1983 and 1989, while the yearly average between 1993 to 2000 exceeded 53,000 positions.

As a result, Delta anticipates that absorption of office space will recede locally after two solid years. The firm puts absorption at 2.7 million sf for 2007, which will require an acceleration following 670,000 sf of absorption through mid-year. Because of concerns over the job growth, absorption should continue to average 2.7 million sf until 2010, Delta projects, not enough to keep the vacancy rate from tracking up to double digits at 10.0% from the current mark of 9.6%. Space under construction is estimated at 3.9 million sf, representing just 1.4% of standing inventory. Of that, 36% is pre-leased.

If Boston is ebbing, it is not alone. In the review of 15 major metropolitan areas, Delta suggests that the national office market is also easing after a rebound that brought the vacancy rate back to 10.5% at mid-year 2007. Net absorption in the 15 markets had fallen to 19.0 million sf at mid-year after 61.7 million sf was recorded in 2006. As with Boston, Delta blames the housing problem for dropping absorption levels nationally, and says the sub-prime mortgage difficulties are having a direct impact on job growth in certain areas. The situation, says Delta, is most acute in California's Orange County where the office vacancy mark is expected to rise from 7.3% to 8.0% by year's end. Orange County is one of the leading hubs of the mortgage industry, although Texas and Florida are also expected to be impacted by layoffs in that sector.

At least one Boston-area broker concurs with the local findings, The industry professional cites a dearth of "mega-leases" involving tenants needing 400,000 to 500,000 sf or more, maintaining that it requires such velocity to make a substantial difference in momentum. Mergers and acquisitions lead to excess space, notes the broker. "I think the growth will be steady, but I don't see any major jumps," says the broker, who requested anonymity. On the flip side, Boston's office fundamentals have been listed as the major catalyst driving capital into the area clamoring for opportunities, both in downtown Boston and the suburbs. At a market overview last week, for example, Lisa Campoli of Meredith & Grew called the fundamentals in Boston "extraordinary," helping drive record prices for even class B assets.