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BOSTON-Dear Editor:

On July 23, an article was posted on the Globest.com titled Boston’s Downtown Sublease Space Jumps 651%. The article was based on a Colliers International mid-year survey of 15 major downtown markets, which focused on the issue of sublease space. We at Spaulding and Slye Colliers would like to clarify and put into proper context and perspective the statistics released.

At year-end 2000, available office space was almost nonexistent in Boston, and tenants were marketing only 180,115 sf of sublease space, a mere 0.3% of the 51.8-million-sf office market. At mid-year 2001, available sublease space totaled 1.5 million sf. The dramatic percentage increase in sublease space is the result of the low base number and is therefore misleading. Sublease space still represents only 2.9% of the 52.6-million-sf downtown Boston market, not a worrisome level for investors. In fact, at mid-year, Boston recorded lower sublease availability as a percentage of total inventory than several other major downtown markets surveyed by Colliers including Seattle (5.2%), Los Angeles (4.9%), San Francisco (4.7%), and Midtown South, Manhattan (4.1%). In terms of overall vacancy (defined in Colliers’ mid-year survey as both sublease and direct vacant space), Boston ranks among the tightest markets in the nation at 6.1%.

Additionally, to truly understand the potential impact of the sublease market, it is important to consider the risks involved in and the difficulty of subleasing space as compared to leasing direct vacant space. Despite discounted rents, many of the sublease availabilities in Boston lack the size, term, or flexibility to satisfy traditional corporate real estate needs. Currently, only four subleases exist downtown in excess of 50,000 sf with significant term. The remaining sublease availabilities have an average size of only 10,000 sf and an average term of just over two years. Additionally, most of the remaining sublease options are in Boston’s perimeter submarkets, not in the Financial District, and many will be encumbered by customized tech build-outs and financially unstable sublessors, both of which make signing a sublease a higher risk for a new tenant.

The momentum of the sublease market is clearly something to watch carefully. Existing sublease availabilities will continue to compete for active tenants and therefore affect pricing in the market both in Boston and nationally. However, Boston’s overall vacancy rate (vacant and sublease space) of 6.1% remains well below the national average for downtown markets of 9.9%. Despite the increase in sublease space in the first half of the year, we believe Boston remains among the healthiest markets in the nation.

William P. BarrackPrincipal, Spaulding & Slye ColliersBoston, MA

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