Research Shows Slow Recovery for Greater Boston Office Market

Brendan Carroll, the firm's director of research, tells GlobeSt.com that while the indicator is a positive sign, it is still too early to know whether that segment will rebound quickly. "It remains below trend," says Carroll, noting that the slight drop in vacancy rates hints at the start of an upswing.

The city's vacancy rate has increased during the last two years largely because of the completion of several office project that put new product on the Greater Boston market. With the end of that cycle, Carroll says, the sector is seeing a slight increase in absorption rates.

"The economy is unquestionably getting better," Carroll points out. "We're seeing record levels of corporate profits but what we're not seeing is hiring activity. The bottom line is every company across the board is running more lean with their existing employees or by hiring at a slower pace than they would traditionally to support their growth."

But while less hiring has made for a slower office market recovery, there are signs of improvement. Around Greater Boston, the commercial office market experienced 235,000 sf of positive absorption in the first quarter of 2005, sparking a 20-cent increase in class A asking rates that were previously at $31.72 per sf.

The study also found that the area's submarkets fared well during the last quarter. The Route 128 submarkets experienced a second quarter of significant positive absorption, while vacancy rates remained stable in both the Cambridge office market, where vacancy rates remained steady at 17.3%, and along the Route 495 corridor, which logged a 25.7% vacancy rate.

"Pockets of high and low vacancy continue to exist through the Greater Boston area, reflecting the great diversity of the submarkets throughout the region and demonstrating the critical importance of understanding the market on a submarket level," Carroll says. "The lack of any meaningful speculative construction bodes well for a market recovery."