Sciolla says he doesn't expect rents to rise appreciably for another two years because job growth will likely be slow, and there is an overabundance of space that needs to be absorbed.

"Simple economics dictates that rents will not fall much further below the current level, if at all," he notes. "We have a situation where many landlords bought buildings at inflated prices between 1997 and 2001, and then they watched rents decline by as much as 50%." Sciolla points out that based on property owner's current mortgages and operating expenses, they are at a break-even point, given the current rates. "They can't afford to go below this threshold, or the result would be what we call a 'negative deal.' It is therefore often better for landlords to leave buildings vacant rather than lower rents anymore," adds Sciolla.

Current rates for Class A buildings in downtown Boston are now $40 to $50 per sf, down slightly from last quarter. According to Sciolla, significant job creation is needed before rents can start to climb. "In the last two years, we've lost more than 45,000 jobs in Massachusetts, the majority in the Greater Boston area. Based on 250 sf per employee, that's more than 11 million sf of excess space. Right now, we're expecting very slow job growth, and there is no pressure for rents to rise until the vacancy rate comes down toabout 10%, which will take at least two years of positive absorption."

According to CRESA Partners' second quarter market report, vacancy in downtown Boston is now 16%, up slightly from the first quarter. It is expected to hover around that level for another two years.

Sciolla notes that the overall vacancy rate is actually another 10% to 15% higher when unoccupied 'shadow space' is factored in. "That space still needs to be backfilled by existing tenants," he says.

But Sciolla adds that lately there has been increased activity in Boston and outlying areas, with more tenants "kicking tires" and exercising due diligence. "In the next six months, there may be isolated instances of slightly lower rents and slightly higher vacancies in select sub-markets, but it's safe to say that the recession has ended and the corporate real estate recovery has begun, but it will probably be painstakingly slow."