Office Market Creeps to 2007 Finish Line

BOSTON-Spotty activity and tepid fourth quarter absorption meant for an uninspired ending to 2007 in the office leasing sector, but industry professionals at Richards Barry Joyce & Partners say the performance was better than the numbers might suggest. Not only did weaker markets such as Interstate 495 North finish admirably, an RBJ overview provided to GlobeSt.com shows a continued tightening of space in many regions and continued accretion of asking rents.

“There are reasons to be very optimistic,” says RBJ VP Brendan Carroll, whose research team estimates fourth quarter net absorption at 294,000 sf, barely one-third of the average of 824,000 sf recorded over the past nine quarters. Carroll attributes the downturn more to a short-term anomaly than the start of a depressed trend, while RBJ principal Brian McKenzie stresses that “the fundamentals of the market are still doing very well,” and says the fourth quarter was better than he had anticipated given a torpid summer. One of McKenzie’s territories is the I-495 North area that seemingly has recovered from a brutal stretch that began when the technology heavy submarket was crushed by the tech crash of 2001.

According to RBJ, the 14.1 million sf submarket represents just 8% of the Greater Boston inventory, but registered 39% of all the positive absorption recorded in the fourth quarter. “It has been in the dumps for a long time, but there has been a noticeable transition,” says Carroll. The submarket still has a vacancy rate exceeding 25%–the highest on I-495—but McKenzie says rising rental rates in core areas such as Waltham and Burlington are pushing cost-conscious tenants into the northern area. Besides the deals that did land in the quarter, such as Circles taking 39,000 sf at 300 Apollo Dr. in Chelmsford, McKenzie says there are several negotiations that have carried over into the new year.