BOSTON-Global warming has nothing on this city’s office market, or so it would seem in a mid-year report released today by Richards Barry Joyce & Partners that shows positive absorption of near-record levels during the second quarter and continued rental accretion. RBJ’s overview also shows Boston’s recovery is spreading out as prime locations approach full occupancy.

“The numbers are big,” RBJ director of research Brendan Carroll tells, with 1.6 million sf of positive absorption between April and mid-year. That marks the sixth straight quarter of positive absorption, and the 5.1 million sf absorbed since halfway through 2006 is the most for any such period since 2001. “The metrics look good just about everywhere,” says Carroll, whose Boston-based firm tracked 630,000 sf of positive absorption in the city during the quarter, with 315,000-sf of that occurring in the Back Bay District, now among the strongest office markets in the country.

Besides the standard mid-year review, RBJ issued a special look dissecting office market trends since conditions began improving four years ago after the brutal recession that started the decade. Since the third quarter of 2003, a limited number of submarkets have enjoyed the lion’s share of leasing activity and rental rate gains, discloses RBJ, which refers to the top performers as the “hot markets.” They include Class A space in Boston’s Financial District and Back Bay, plus all categories of office product in East Cambridge, Burlington, Waltham and Woburn.

Collectively, the hot markets account for 60.2 million sf, compared to 111 million sf in the remaining areas. Since Q3 2003, the hot markets have seen their vacancy rate decline from 21.1% to 9.6%, whereas the larger pool has only experienced a dip from 19.6% to 16.8%. That means 69% of all leasing in metropolitan Boston has been done in the “hot markets,” says Carroll, which account for just 35% of the inventory. There has been 8.4 million sf of absorption since 2003 in the hot markets versus 4.5 million sf for the remainder.

“The numbers are very telling,” says Carroll, although he also stresses that the recovery is finally spreading, partly a reflection of the wider geographic gap between asking rents, but also due to a dwindling level of inventory in the best areas. Waltham has 88% of the region’s office product under construction within its boundaries, but Carroll says that community and Burlington are still poised to run out of space by 2010.

“If the volume of demand continues as we’ve seen it, we may very well have the dynamics necessary for both new construction and more absorption in adjacent areas,” says Carroll. Indeed, “it is already happening,” he says, noting that the western suburban district commonly known as “the Boroughs” has posted nearly 600,000-sf of positive absorption in the past four quarters, while the Route 128 South market had 235,000-sf in that period. That result is impressive, says Carroll, given that the office space inventory in such communities as Canton, Dedham, Norwood and Westwood is just 3.7 million sf. “That’s a submarket likely to grow in the near future,” he says of Route 128 South, with the developers of Westwood Station proposing a 120,000-sf office building. During the period from Q3 2003, there has been 3.1 million sf added in the hot markets, whereas the remaining supply has remained flat, posting a slight decline of 39,000 sf.

As for second quarter results, the Back Bay’s performance on absorption was only outdone by the Route 128 North office market’s 316,000 sf total, followed by 275,000-sf for Route 128 West, the core suburban market anchored by Waltham. Only four of the submarkets had negative results for the quarter, with the suburban absorption total positive by 800,000 sf. The suburban vacancy rate is now 18.8% compared to 11.9% in Cambridge and 10.4% for Boston, says RBJ.

As with other indices, the Back Bay did the best on vacancy in Boston at 8.8%, and RBJ reports that the 12.1 million sf submarket is now highest in the region on office rents given rate appreciation of stratospheric proportions. Since mid-year 2006, Back Bay average rents have risen above $56 per sf, a 56% increase in just one year, while the Financial District has seen a 40% gain and East Cambridge is more than 33% higher than a year ago. The average for Class A rents throughout Greater Boston is now $38.58 per sf., highest since the second quarter of 2003, according to RBJ’s review.

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