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BOSTON-Vacancy rates have remained relatively flat and leasing activity is picking up but rental rates in the city have yet to be told that their downward decline is supposed to stop.

According to Cushman and Wakefield’s third quarter statistics, the city’s central business district has a vacancy rate of 14.3%, up slightly from a year ago when the area’s vacancy rate was at 13.4%. “Quarter to quarter vacancy rates have remained flat,” Thomas L. Collins, senior managing director at C&W’s, tells GlobeSt.com.

Collins notes that anecdotally though, there seems to be more activity. “Tenants are making decisions now,” he says. “They are more comfortable with the economy.” Collins adds that contrary to popular belief, most tenants were holding out because they were unsure about their businesses rather than because than were waiting for the best deals. “Most people think we’re at the bottom,” he notes. “There is a general sense that this is it. It won’t get any lower.”

The economy appears to be rebounding, says Collins, and he projects that by the fourth quarter of this year or the beginning of next year the market will begin to reflect that.

Meanwhile, though, rents for the city’s central business district are at $34 per sf, down slightly from $38 per sf in the first quarter of the year. But Collins points out that while rents are down 20% from their all time high in 1999 through 2000, the rents now are where they were in the late 1990s, when the market was doing okay, and higher than where they were in the early 1990s, when the market was struggling. Collins emphasizes that as the vacancy rates continue to flatten, the decline in rental rates, which has been happening consistently since mid-2001, should stop.

Collins further predicts that net absorption, which was at a negative 290,000 sf for the city’s central business district so far this year, will start to turn positive shortly. He also believes that by the first quarter of next year, rents will start rebounding. “They won’t shoot up,” stresses Collins, “but they will turn the corner in a nice, slow methodical way.”

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