BOSTON-New office product is finally on the way here, but it may not do too much good for tenants over the near term, or so it would seem from the latest market survey by Jones Lang LaSalle. After percolating upwards for most of the year, rental rates blasted off in the third quarter, according to the report, with the Back Bay's average asking level now topping $60 per sf, and the Financial District over $57 per sf after just hitting the $50 level at mid-year.

“The growth is pretty aggressive,” acknowledges JLL broker Ben Heller, who cites a dearth of supply as the main catalyst, coupled with robust leasing activity, especially among small- and mid-sized tenants. JLL says tenant requirements are up 26% from mid-year even after several larger deals have now been completed.

According to the review, 225,000 sf of net absorption was recorded in Boston's 58.1-million-sf office market in the third quarter, bringing the total for 2007 to 502,000 sf and dropping the city's overall vacancy rate to 7.1%. “The fundamentals are very strong right now,” says Heller, as exemplified by a super-tight 3.5% vacancy in the Back Bay. That mark was ratcheted down substantially by the departure of law firm Ropes & Gray from the Financial District to the Prudential Center in the Back Bay. Net absorption for the quarter there was 413,000 sf, compared to negative 206,000 `sf in the Financial District.