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WALTHAM, MA-The sublease of nearly 14,000 sf here has resolved space issues for two companies, but some say the transaction between Incipient Inc. and BuyZone.com could also portend a trend. After being “off the radar screen” last year, sublease activity appears to be returning, according to suburban specialist James Elcock of Meredith & Grew.

“Going forward in 2008 and 2009, I think you are going to see subleasing becoming more prevalent,” Elcock tells GlobeSt.com. While the EVP does not anticipate anything close to the “chaotic” results that occurred after 2001 when millions of sf of sublease space cascaded into the mix following the technology sector bust, Elcock says a slowing economy and cost-cutting measures will require firms to take a hard look at how to make fallow quarters fiscally useful. “Subleasing really is a byproduct of the company business plan,” Elcock says. “It makes sense for a lot of reasons.”

M&G will address the sublease matter in greater depth at its annual market overview next Thursday, says Elcock, who will be among those from the Boston real estate services firm on hand to assess the state of the industry as 2008 kicks into gear. In the meantime, other observers say they are witnessing examples of increased subleasing in select instances, with battered areas such as the home mortgage field seeming especially vulnerable over the near term. DTZ FHO Partners broker Sean Teague says he has not witnessed any up tick of subleasing in the south suburban market that he covers, but predicts some firms will ultimately take that route. “It’s not a question of if, but when,” he tells GlobeSt.com.

Richards Barry Joyce & Partners has watched office sublease levels drained substantially, from a peak of 11.2 million sf in the first quarter of 2004 to 4.2 million sf at year-end 2007 for its review of 171.2 million sf. M&G puts the mark at 4.2 million sf in its survey of 198.9 million sf, including flex product. RBJ VP of research Brendan Carroll says his firm’s results indicate that sublease is such a small percentage of the available space that landlords are no longer forced to compete on pricing as they did in the days of bloated sublease offerings. “We’re very far away” from landlords being impacted, says Carroll. In Billerica, for example, 54% of the available space in the first quarter of 2004 was sublease, while that figure today has plummeted to just 6%.

The overall market average today is 15%, says RBJ. Waltham, the core market where the Incipient lease was struck, was up to 34% in Q1 2004, versus 21% at present. That is above the norm, but Carroll says he believes it might be a result of the higher rate sublease space can command there compared to less expensive markets. The average asking rent in Waltham is a robust $37.75 per sf, says RBJ, and Carroll maintains that any rise in subleasing could be attributed as much to the higher rates that can be achieved as a result of the strong office market than any sign of desperation.

The motivations behind the Incipient sublease were not divulged, with financial terms also not provided. Besides Elcock, M&G SVP John Carroll III, AVP Elias Demakes and associate John Dolan III negotiated terms between Incipient and BuyZone.com. The subleased space is at 404 Wyman St., a three-story 450,000-sf class A office building within the Hobbs Brook Office Park.

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