While the report notes that total direct and sublease levels for office and lab space in the Cambridge area has remained near 20%, the velocity of deals in the area has slowed "substantially" over the past three months. At the same time, the actual vacancy level--counting shadow space--could be another 5% higher.

The report points out that while the average asking rent for class A office space has remained steady at $34, B space dropped to $23 from the fourth quarter's $27.

"The life sciences sector, which has been the primary economic driver of the Cambridge economy, continues to be effected by news of more layoffs and space givebacks on the horizon," notes Christopher Crooks, a Cresa principal who heads the Cambridge market group. But he adds that increased activity is expected, and he says that market indicators suggest a real estate recovery by 2005.

"The good news for corporate tenants is that they will continue to maintain control in real estate lease transactions as landlords and sublandlords try vigorously to maintain occupancy or sublease excess space," says Crooks. "Tenants can negotiate for concessions such as free rent upward of six months, flexible lease terms, and aggressive rental pricing, particularly for deals of two to three years."