Boston Office Market
Exhibits Signs of Life

In Boston's generally lackluster office market, a couple of real-estate niches stand out as exceptions: the top floors of skyscrapers in the center city and the premium -- albeit shorter -- properties in the suburban town of Waltham.

The lure of those particular types of properties signals that the Boston office market, which has lagged behind competitors such as New York and Washington, D.C., is beginning a turnaround, says Janice Stanton, senior managing director of analytics for Cushman & Wakefield Inc., a New York-based commercial real-estate-services firm. "You always see a flight to quality at the beginning of a recovery."

"It's the highest-quality properties that are seeing the spikes in rent," says Bob Richards, president of Richards Barry Joyce & Partners, a Boston-based commercial real-estate firm.

Waltham's vacancy rate is still a relatively high 18.7%, but only 9.4% in Class A properties, defined as the most competitive in a market. Similarly, Boston's central business district vacancy is 13%, but space in towers above the 20th floor is under 10%.

Richards Barry Joyce & Partners compared two similarly sized leases signed for the same premium Waltham office building 14 months apart. In the fourth quarter of 2004, the landlords of Bay Colony Corporate Center agreed to give a new tenant three months of free rent. Once tenant improvement costs and other expenses were computed, the net effective rent was $8.95 per square foot. Conditions had changed dramatically by the first quarter of this year, when Bay Colony didn't give up any months of free rent and was able to command net effective rent of $24.50.

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