Cambridge has, however, seen less than $150 million of properties change hands thus far in 2008, most of it in a deal brokered by CM&G when the Massachusetts Institute of Technology paid $90.5 million for a 148,000-sf portfolio of buildings in CambridgePort, a sale reported by GlobeSt.com. The next highest transaction was 39 JFK St., an aging 25,000-sf building that fetched more than $1,000 per sf ($25.7 million), due largely to its proximity in Harvard Square. The New Boston Fund paid $24.5 million for the Abt Associates headquarters in Cambridge's Alewife market, a 10-year sale/leaseback viewed by many, including Campoli, as a long-term development play in one of the city's most promising districts.

For office space, Alewife still has the highest vacancy rate among Cambridge submarkets at 10.1%, but that is a substantial drop from the peak of 21.9% reached in 2003. That was the same year Cambridge overall hit its peak of 23% for office and laboratory space combined, a figure that has now fallen to 11.6%. Encompassing just over 10 million sf, Cambridge's office market has posted YTD positive net absorption of 53,000 sf, tepid yet still better than the negative net absorption of 70,000 sf for the lab sector. Even so, Flaherty concurs that office leasing has tailed off sharply since last summer, with Cambridge absorbing more than one million sf between 2004 and 2006 before dropping to 143,000 sf in 2007 when nearly all of the velocity occurred in the first six months.

CM&G says the 12 office leases done YTD account for just over 210,000 sf, the largest being just Cambridge Interactive's 54,000 sf pact at 150 Cambridge Park Dr. in Alewife That was followed by leases of 22,000 sf each by Next Jump at One Kendall Sq. and JumpTap at 10 Canal Pk. There were three sizeable renewals that totaled 234,000 sf, headlined by a key victory for the city when CDM opted to remain at 205 Broadway in an 11th hour reversal of plans to relocate to suburban Boston, as detailed by GlobeSt.com. According to Flaherty, landlord MetLife "got religion" and struck a deal when CDM called its bluff on a bid to push rents aggressively. Also, CambridgeSoft renewed for 33,000 sf at 100 CambridgePark Dr., and KingStubbins is remaining in 21,000 sf at 1030 Massachusetts Ave.

Laboratory leasing has also been unremarkable this year, as the negative beginning has driven vacancy rates up to 14.9% from 13.8% at year-end 2007. Completed deals were even more modest than on the office side, with Acceleron Pharmaceuticals leading the activity in its 38,000-sf lease at 128 Sidney St., one of the buildings acquired by MIT. Ascent Therapeutics secured 24,000 sf at 65-75 Rogers St., and Ore Pharmaceuticals renewed for 19,000 at 38 Sidney St.

Flaherty commented that a major block of existing laboratory space is showing its age, including some 320,000 sf so obsolete that he considers it unusable, suggesting instead that the owners "blow it up" and start over. Concentrated in two buildings at 301 Binney St. and 200 Tech Sq., there is less than 600,000 sf of shell or existing class A laboratory space, said Flaherty, keeping the owners of that inventory pushing rents as high as $80 per sf. The rate and Cambridge's reputation, is spurring national life sciences developers--such as Alexandria Real Estate and BioMed--to propose major new construction. On Binney Street, for example, Alexandria has assembled a 16-acre parcel covering seven and a half city blocks through eight separate purchases totaling nearly $400 million. "It bodes well on the supply side," Flaherty said.

In concluding his discussion, Flaherty said he is generally upbeat about Cambridge, noting that givebacks of space have been limited and observing that another "big pharma", such as Novartis AG, could be looming on the horizon with dreams of taking the city by storm. Since its arrival out of the blue earlier this decade, Novartis has taken down 1.3 million sf in Cambridge, and Flaherty maintains the city's global allure could make for a repeat. Even if that does not occur, "I'm very positive," said Flaherty. "We've been in lulls before, and this time, the fundamentals have held together great."