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CAMBRIDGE, MA-A flurry of mid-size tenants looking to upgrade and a rush of biotech companies eager to be near institutions of higher learning has caused rents for class A space here to climb. This has also dried up sublease space and sent vacancy rates edging downward, a study by Cresa Partners found.

“We’ve seen sublease space really vanish in the last 18 to 24months,” Dan Sullivan, with Cresa tells GlobeSt.com. In June2003, there was 900,000 sf of sublease office space available inCambridge. Today, there is only 342,000 sf, of which 109,000 sf has 12months or less remaining on lease contracts. In West Cambridge, there is no sublease space available at all.

“That lack of sublease space is helping Cambridge’s recovery,”Cresa vice president Adam Subber tells GlobeSt.com, noting that assublease space dries up, office users are moving into direct spaceleases that should help cut Cambridge’s current 18.5 % office vacancyrate in both class A and B buildings. “We’re still in the high teens,”he says of the city’s vacancy rate, “but its stronger than its been inthe past three-and-a-half years.”

Continued high vacancy rates means tenants are still able to securefree rent and other concessions but Sullivan says more landlords arebeginning to increase asking rates and are becoming more restrictiveabout concessions as the market tightens. Tighter market conditions also are expected to force office rents up approximately 3% to 5% in the next four quarters, as space becomes scarcer in class A buildings. Rents are already showing some movement in Cambridge, where office space averaged $32 per sf during the second quarter of 2005, reflecting a $1 increase over a year earlier. class B rents for the same period averaged $22.50 per sf, up 50 cents.

“Without a doubt, we’re approaching a state of equilibrium in theCambridge office market,” says Subber. “It’s still a tenant’s market,but the pendulum is swinging.” Mid-sized users have been responsible for much of the absorption in the market during the last year, Sullivan says, but laboratory users, particularly the area’s growing biotech and life sciences firms, are filling up much of the larger office spaces on the market.

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