BOSTON-A survey of 15 major Downtown office markets by locally-based Colliers International indicates that an unexpected 651% increase in sublease space here. The increase in sublease space overall was 182.8%.

Downtown markets that are home to a high concentration of high-tech firms posted some of the highest increases with San Jose behind Boston at 588%, San Francisco came in next at 420.4% and Seattle at 285%. While this area’s huge increase is surprising, Ross Moore, vice president and director of research at Collier’s, emphasizes two factors that contributed to Boston’s seemingly sudden jump in sublease space.

First, there is a misconception that Boston’s Downtown area did not have that many tech firms. “Clearly,” “that is not the case.” he tells Moore also notes that percentage increases don’t always paint a complete picture. Because this area’s fundamentals had kept the market in good shape through the end of last year, the numbers now indicate a sharper contrast than in other markets, where the downturn had impacted those markets much earlier. “Boston was starting from a low base,” he says. “In the year-end 2000 numbers, Boston was not even starting to slide yet while San Francisco had already started to slide by then.”

According to Moore, these numbers are probably the most dramatic change this area is going to see. “I don’t think we’re going to see much worse,” he says, but quickly adds that while we won’t see these same numbers, things are not going to get significantly better for a while. “Things have picked up in the last six weeks compared with the first three months of the year but it’s still pretty quiet around here,” he notes.

Rents here for lease rates on direct space are down 13% in the first six months of the year, which is a “pretty significant number,” says Moore. If that figure is combined with sublease space, rents would be down nearly 25%. “Lower sublease rates are having an impact on direct lease rates. “It’s pretty hard for owners to maintain asking rents when comparable space is 25% lower. Owners can only hold out for so long,” he says.

While vacancy rates are hovering around 6%, which is still considered a property owner’s market, Moore believes that the area is edging closer to a tenant’s market. “Rents are going to fall and demand is not likely to pick up anytime soon,” he predicts.

But there is a light at the end of this tunnel. Moore adds that when the recovery comes it will be quick. “It will take everyone by surprise,” he says.

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