Office Boom Absorbs Rough 2008 Start

BOSTON-Many view it as a mere setback, but the runaway train that was the city’s office market last year came to a screeching halt in the first quarter, at least according to data compiled by industry watchers. DTZ FHO Partners reports an alarming negative net absorption exceeding 400,000 sf in Boston, and nearly all of the reviews indicate a sluggish beginning for the market.

“People are just being more cautious,” relays CB Richard Ellis broker David Fitzgerald. CBRE’s Q1 data was less severe than DTZ FHO’s, posting slight positive net absorption of 41,000 sf. Still, there was minus-147,000 sf of absorption in Boston’s Financial District, and Fitzgerald acknowledges a chilling of demand that he backdates to the fourth quarter of 2007. Leasing is a lagging indicator, says Fitzgerald, and he maintains Boston could finally feel the impact of the national economic malaise.

After a record run-up of rents last year, recessionary drumbeats are impacting Boston in two ways, the veteran broker explains. Not only are businesses less likely to expand in a difficult climate, tenants are holding out for better terms. “There’s no urgency because they know there’s no one behind them.”