"That shows how much people love the building," says LincolnProperty Co. broker Jeff Moore, who joined Boston office chief JohnMiller in negotiating the latest leases on behalf of Invesco. "It'sa class B building with class A amenities and location," Mooretells GlobeSt.com of the building, an historic treasure revered asone of Boston's first commercial properties. Lincoln hasrepresented 84 State St. since Invesco acquired the assetapproximately 10 years ago, and Moore says the fundamentals haveremained superior on both occupancy and rent levels.

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The home to such well-known firms as Colliers International, 84State St. completed nearly 15,000 sf of transactions in the recentflurry to reach full occupancy. The largest deal was cemented byBrooke Private Equity Advisors, followed by Gelb & Gelb, MadRiver Management and Abbott Real Estate Development. Tenant brokersincluded Andy McDonald for Mad River, and Chris Rogers and BryanSparkes of Grubb & Ellis assisting Gelb & Gelb. Brooke wasrepresented by Andy Hoar and Taidgh McClory of CB RichardEllis.

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Specifics of the individual leases were not provided, but Mooredid acknowledge rents have been exceeding $40 per sf at 84 StateSt. in many latter-day deals. Fit out allowances were said to belimited, and concessions such as free rent that were commonplace inBoston barely a year ago were reportedly non-existent. That shouldprevent the returns from becoming diluted.

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These days, however, diluted returns are a diminishing concernin the Financial District, as the sudden dearth of supply and animproving economy hasten rent accretion. Rumors are abuzz that alease at One Post Office Sq. that drove the rates above $90 per sfearlier this year will eventually escalate to $100 per sf, anelusive goal for Boston's office market. That record deal, firstreported by GlobeSt.com this spring, is among several that havereportedly hit over $80 per sf in recent months.

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In Lincoln's mid-year office market report, director of researchEmily Schwartz estimates that the average asking rental rate inBoston has risen by $1.41 since the first quarter to $36.74. Thelevel would likely be higher, she advises, except some landlordsare no longer issuing quotes prior to the start of negotiations, areflection of the rapidly changing paradigm. "The more likely rangeof asking prices for class A space in the Financial District andthe Back Bay is now closer to $45 to $90" per sf, according toSchwartz, noting that a new wave of landlords such as theBlackstone Group is aggressively pushing rates even higher toreflect the hefty price tag paid to gain entry. Blackstone arrivedin Boston on the wings of its $39-billion buy-out of Equity OfficeProperties in February.

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Whether Blackstone et al can regularly receive what they askremains to be seen, but Lincoln's mid-year results supported otherdata showing the fundamentals are moving in their favor. Tracking32.3 million sf in the Financial District, Lincoln puts the directvacancy there at just 6.6% after year-to-date net absorption of126,000 sf. The 58.6-million-sf Boston office market overall posted389,000 sf of positive absorption in the second quarter, Lincolnreports, to put the YTD level at 679,000 sf. That has droppedBoston's vacancy rate to 6.1%, with only the Seaport District(10.1%) in double digits among seven submarkets.

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Looking forward, Moore says the level of tenant activity doesnot appear to be slowing even as the summer season takes hold. Thatbodes well for the remainder of 2007, he says, especially forlandlords with vacant space available. And while that is no longerthe case for Invesco at 84 State St., with the rollover limited,Invesco does reportedly have space available at another Bostonjewel-box building it owns nearby, One Liberty Sq. Richards BarryJoyce & Partners are leasing agents for that property, termed ajewel box due to an ornate design, compact size and consistentcache among tenants. One such Financial District asset, 45 MilkSt., recently traded for nearly $500 per sf.

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