WALTHAM, MA-Boston’s suburban office market is beginning to match the recovery seen in Boston’s CBD. The recovery that began in Waltham and the surrounding Route 128 submarket is finally moving outwards, as demonstrated in Q1 data compiled by Boston real estate services firm Richards Barry Joyce & Partners. To be released today, the RBJ’s officeSTATus report shows that vacancy rates have fallen precipitously in virtually every submarket abutting Waltham, helping to boost rental rates.

“Landlords are experiencing a pricing power they have not seen since 2001,” Richards Barry Joyce & Partners research director Brendan Carroll tells GlobeSt.com, as demonstrated in the Burlington/Woburn submarket. A year ago, the highest class A asking rents in Waltham was 33% above that found in Burlington/Woburn, $35.50 per sf to $26.75 per sf. That figure now has been whittled down to 11%, $40 per sf to $36 per sf.<p.Rental rates for the entire suburban Boston office market have increased from $23.57 per sf a year ago to $25.26 per sf now, while the overall vacancy rate has finally dropped below 20%, from 21.6% after the first quarter of 2006 to 19.3%, reports officeSTATus. Carroll calls those figures "the most landlord-friendly" in the suburbs since the end of 2002. Net absorption for the quarter was 472,000 sf, headlined by a 180,000-sf expansion by Bose Corp. in Westborough.

Nearly all of the positive absorption for the quarter was in the Interstate 495 West market where Westborough is located, good news for a submarket that suffered mightily following the recession that gripped Massachusetts beginning in 2001. Once hitting 30%, the vacancy rate in the 16.7-million-sf submarket has gone from 27.9% 13 quarters ago to 17.9%, with the mark down from 21% one year ago, says RBJ. “It has been very a solid year for 495 West,” concurs Carroll, who reports that the asking rent is now at $20.82 per sf, a gain from $19.27 per sf after the first quarter of 2006.

Due largely to appreciation in the core community, the chasm in pricing has actually accelerated between Waltham and I-495 West to a 37% difference in average asking rents, up from just 20% two years prior. As a result, says Carroll, price-sensitive tenants are now looking at the outer fringe markets for relief, helping to spur the greater activity around the edges. Since the recovery began in Waltham in late 2003, there has been two million sf of absorption in Route 128 West, but 4.1 million sf in the abutting submarkets such as I-495W, Burlington/Woburn and south on Route 128 in such communities as Canton, Dedham, Norwood and Westwood. Besides the improving economy, Carroll attributes that velocity to the tighter inventory and higher pricing now found in Route 128 West.

Firms are indeed looking at alternatives, according to RBJ vice president Ron Friedman. “We are seeing that, absolutely,” says Friedman, especially for small- and medium-sized companies. “For the price-sensitive [tenant], Waltham is going to be hard to get their arms around from a value perspective,” he says. One interesting outcome from the first quarter numbers is the $40-per-sf ask rate for Waltham, the first time that figure has been hit since the downturn. Waltham, which has 9.1 million sf of office space, posted 37,000 sf of absorption in the first quarter to drop its vacancy rate from 18.7% a year ago to 14.3%, compared to 16.2% for the entire Route 128 West submarket. Route 128 West had 105,000 sf of net absorption in the quarter. The submarket’s vacancy rate last year was 1.5%.

In other suburban activity during the first quarter, the 11.2-million-sf Route 128 South submarket had 14,000 sf of positive absorption and has seen its vacancy fall from 15.2% a year ago to 12.4%. Overall, the suburbs had a solid start to the year, Friedman tells GlobeSt.com. “There’s activity and there’s optimism and we expect those trends to continue,” he says.

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