Delta Sees Plateau in Boston Office Rebound

BOSTON-Although office building sales are booming here on the strength of rosy outlooks towards the New England economy, at least one assessment is less effusive going forward, with Delta Associates issuing a new report suggesting the region is in for a decent but measured period of growth through the end of the decade. According to the review, consolidation of the financial services industry and difficulties in the mortgage arena will conspire to keep job accretion to a minimum, and lower than the increases of the past 12 months.

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.