Class A Vacancy Dips to Almost 4%

BOSTON-When it comes to the Boston office leasing market, there is no place to go but up–but there is also very little up to go to. Class A inventory continued to erode in 2007, according to year-end data provided by Jones Lang LaSalle that shows a minuscule amount of tower space remaining in Boston’s Financial District and core markets such as the Back Bay.

The scant 3.8% vacancy rate for class A product is sending rents into the stratosphere, finishing 2007 at an average asking rate of $67.23 per sf—a whopping 50% spike for the year. The overall asking rent jumped to $54.80 per sf for Boston’s 58.1 million sf office market, a 47% hike for that figure.

“It was a good year,” says JLL managing director William Barrack, a Boston leasing specialist who had anticipated absorption for 2007 would run in the 750,000-sf to 800,000-sf range versus the 991,000-sf achieved. A combination of reduced class A inventory and price sensitivity led to an especially solid result in Boston’s class B sector. The stock of 20.6 million sf accounted for 72% of the net positive absorption registered in the city last year, boosting the class B average asking rent to $40.11 per sf after posting a mid-year mark of $34.47 per sf. The brisk leasing put the class B vacancy rate at 8.5% by year’s end after reaching 11.0% at mid-year. “That will be the value play going forward,” predicts Barrack, who adds that small-sized tenants accounted for most of the leasing in 2007, with the average deal just 7,000 sf.