CAMBRIDGE, MA-While the high-tech bust and economic slowdown has not been kind to most office markets, it has been particularly cruel to this area, which was laden with high techs and dot-coms until recently. According to Torto Wheaton Research, a year ago, the vacancy rate here was 3%. By the end of the first quarter that figure rose to 5.5% and the number has since shot up to 9.6%.

That number does not even include available space, in which space might be occupied but its owners are looking to sublet the space. Jon Southard, a senior economist at Torto Wheaton, tells “I’ve never seen this before.”

Not surprisingly, Southard blames the high-tech bust for the Cambridge market’s quick plunge. He is quick to point out that it’s not only dot-coms or only the small players that are giving up space. The larger tech-related companies are also responsible for putting space on the market here. Those companies include Cambridge Technology Partners, Palm Inc., Scient, Art Technology Group and Akamai Technologies. Reportedly, tech-related companies have put over 800,000 sf of space back on the market this year.

Of small comfort is the fact that other high-tech-centered cities are suffering as well. “The markets in other high tech cities have gone as quickly,” notes Southard. The South of Market Street section of San Francisco, which was a high-tech center, had a 2% vacancy rate last year; now it’s 32%.

While rents have dropped here in the past few months–from a high of about $70 per sf to approximately $50 per sf–Southard says that it is still too early to see what the final impact will be on asking prices here. He attributes that to the dearth of deals being made here as tenants and owners take a wait-and-see attitude.

“Very few voluntary decisions are being made,” he says. This is, of course, not true in the sublease market where a motivated seller needing to recoup losses makes rents drop very quickly. Owners are still doing okay because those tenants with sublease space are still paying their rents.

How this will all end up is still anybody’s guess. Southard says that this is a situation that can correct itself quickly but it all depends upon the economy. Once the stock market moves up again, the owner-tenant freeze will “unthaw,” rents will stabilize and probably even move up again. Sounds simple, but Southard adds that three months ago he never would have expected things to still be this uncertain now.

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