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BRAINTREE, MA-Despite a flurry of activity in select pockets and a landmark portfolio sale by hometown real estate executive Thomas Flatley, suburban Boston’s southern tier had a disappointing beginning to 2007, according to industry observers and mid-year reports showing across-the-board erosion of leasing levels. Nearly all surveys put absorption negative at six figures for Route 128 South, the larger of the two submarkets.

Jones Lang LaSalle estimates a decline of 259,000 sf YTD in a review of 11.5 million sf. Cushman & Wakefield puts the mark at minus-133,000 on a like amount, while Grubb & Ellis has Route 128 South absorption down by 105,000 sf in its survey of 9.4 million sf.

“The first quarter was incredibly slow,” accedes C&W senior director JP Plunkett, who covers the southern district with colleague Catherine Minnerly. Plunkett, however, insists the lull is temporary, partly a result of the market’s robust 2006 campaign. So many transactions were concluded in the fourth quarter, little was left to carry over into 2007, according to Plunkett, advising that the second frame showed more steam, especially during May. June cooled down, he says, and the bifurcated July 4th holiday has inordinately disrupted deal flow, but Plunkett tells GlobeSt.com that listings are up and velocity appears encouraging going forward. “The leasing market is fine,” he says. “It’s just not wild like it has been, but it will pick up.”

Among the few winners to date in 2007 appears to be Braintree’s Granite Woods Corporate Center, a two-building, 167,000-sf office park that underwent a multimillion renovation after being purchased last year by the Campanelli Cos. The locally based firm has kicked off the second half of 2007 by finalizing another lease at Granite Woods. The Visiting Nurses Association has opted to relocate from Boston into more than 11,000 sf at Building One, director of leasing Peter Brown has announced. Not including a pending lease for another 16,000 sf, Campanelli has already completed 120,000 sf in leases at Granite Woods during the last six months. The biggest coup occurred in the spring when Campanelli landed Traveler’s Indemnity Insurance Co. for a 40,000-sf lease in Building One.

“The continued success of our leasing campaign at Granite Woods Corporate Center demonstrates the property’s outstanding value and the vitality of the Braintree and Quincy markets,” says FHO Partners principal Sean Teague, who represents the office park and handled the VNA deal with FHO brokers Tom Kent and Leeanne Rizzo. Roger Breslin, Frank Durand and David Goodhue of Meredith & Grew were agents for the tenant.The other big news occurred in the second quarter when New York City-based investment group KS Partners paid $52 million for the Flatley portfolio in Braintree. Included was 10 buildings and 420,000 sf, mostly older but well-located assets that KS principal Kambiz Shahbazi is renovating in a bid to push rents. The main buildings in that transaction, first reported by GlobeSt.com in May, include the Blue Hills Commerce Center, the Forbes Business Center and Mark 128 Office Park.As for South office market overall, observers such as RBJ director of research Brendan Carroll and new investors like Shahbazi insist the near-term future looks solid. The Route 128 office vacancy rate ranges from 13.6% in the C&W overview up to 16.1% in the JLL survey. RBJ estimates it at 13.8%, while Grubb & Ellis has a 14.9% result. The I-495 South submarket, which most surveys have around two million sf, remains troubled on the statistical end. The lowest vacancy rate there is 14.8% in the RBJ review, whereas C&W posted it at 18.7% after a brutal opening with minus-286,000-sf absorption. That alarming level occurred in a submarket that C&W puts at just 2.8 million sf in 48 buildings.

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