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BOSTON-The Boston office market’s cup has not ‘overruneth’ with prosperity, but its meager pipeline, its moderate negative absorption and dwindling sublease availability are mitigating the damage felt by a dastardly economy. Asking lease rates for class A space are on the decline, but not nearly as drastic as comparable cities around the nation.

According to Richard Barry Joyce & Partners’ officeSTATus report for Winter 2010, class A asking leases dropped to $35.54 per square foot, a stumble of $0.24 since Q3. This is in part due to the market experiencing 421,000 square feet of negative absorption, further compressing asking rates, as vacancy increased 0.5%. The city as a whole now sits at a 15.5% vacancy rate.

However, if you think any of that seems like bad news, Brendan Caroll from RBJ may refocus your point of view. “There was a slowing trend in class A asking lease rates. These class A rates declined an average of 3.4% during the proceeding four quarters leading up to the fourth quarter of 2009.” However, he points out, “In the 4Q09, [there was] a decrease of 0.7% market-wide in class A asking lease rates. The rate of decline was lowered materially and the most significant slowing of this rate of decline was the bell weather districts: Financial District, East Cambridge and Waltham.”

Caroll notes that this is not just a “statistical glitch,” it reflects that “landlords adjusted their pricing very dramatically up to these quarters, and they appear to be very comfortable with their pricing up to this point.”

Sublease availability dropped 2% over the last quarter, marking a positive triumvirate for a troubled market, namely: limited negative absorption, low sublease availability and less development on the horizon. Caroll notes that during the tech bust, it was these three factors that nearly drowned Boston in vacancy, saying “sublease availability gave us a little bit of a scare, but it seems to be statistically subsiding.”

As for construction, the pipeline is still waiting on a few projects, notably Fan Pier, but the anticipated developments are 57% preleased. Many of these have plenty of time to lease up the rest of the property as some are not set to deliver until late 2010 or 2011. An indication of the positive effect the shallow pipeline creates, is Cambridge framed by RBJ almost 10 years after the tech bust. The current vacancy in Cambridge is at 9.3%, however if the construction three years prior to today was equal to that of 2001 to 2003, the vacancy rate would be at 19.5%.

In the suburbs, Waltham and Burlington have lost and will lose a few companies–such as an oncoming merger consolidation from Oracle and Sun Microsystems in Burlington–however they are still the pack leaders and rate drivers for their suburban brethren. “The Waltham class A properties, they set their pricing and other areas–such as Framingham, Natick, the boroughs–they have to provide a financial incentive to be in those areas,” Caroll tells GlobeSt.com. “They have to be competitive with Waltham class A, just as Waltham class B has to be competitive.”

Meanwhile city-side, law firms continue their exodus from the Financial District, with Fish & Richardson signing at the Seaport District and Ropes & Gray moving into the Prudential Tower. “There has been a trend that has been in place for about a decade, where law firms had almost a psychological requirement to be in the Financial District,” Caroll explains. “Today, there certainly is a perceived need to be in Central Boston, but that need has really become less Financial District focused and the other, [more] peripheral…the Seaport District and the Back Bay submarkets have just evolved to a point where they have become acceptable and in some ways trendy locations for law firms.” Caroll is quick to point out that it is not the end of days for the Financial District’s lure of law firms, simply that the other submarkets are raising their game.

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