The city's overall vacancy rate is now 19.5%, a slight drop from the first quarter rate of 20.4% and second quarter rate of 20.2%. In the office market, transaction velocity improved, according to the report, but net absorption for the quarter was only 30,000 sf, which is attributed to the continuing "malaise" in the tech industry. The office vacancy rate was 22.6%, slightly down from last quarter's 22.9% but still higher than the 19.8% reported for the end of last year.

Not surprisingly, office rental rates continue to fall with Class A space in Kendall Square and East Cambridge now in the $24 to $35 per sf range; Alewife rents in the $20 to $28 per sf range. Lack of demand and continued weakness in the tech sector will most likely result in further downward pressure on rents. The report concludes that the slow demand and high vacancy rate in the office market will probably continue for the next year or two.

The biotech market was dominated by the two Novartis leases which totaled 758,000 sf. According to the report, these leases account for 74% of the total 1.03 million sf of biotech space leased during the first nine months of the year. Another 272,000 sf of biotech space has been leased to other companies. But, the report warns that the current biotech market is characterized by "weaker underlying demand and softening vacancy dynamics" despite a vacancy rate of only 9%.