While virtually every big brokerage in the area has concluded the Boston commercial market experienced negative absorption in the third quarter, one local broker is saying the Boston office market has turned a corner, posting marginal Class A positive absorption driven by the mutual fund industry.
James J. Adams, president of J. Adams Commercial in Boston, has concluded Boston’s office market recorded 65,000 square feet of positive net absorption in the Class A segment in the third quarter. The gain is modest, Adams said in a report, but a drastic turnaround from 650,000 square feet vacated through the first 6 months of the year.
The B markets continued to see declines in occupancy, with negative absorption of 270,000 square feet in the quarter. Despite the grim figure, Adams again was optimistic in his report, pointing out declines of 400,000 square feet in each of the first two quarters of the year.
Adams speculated that positive Class A absorption, coupled with negative Class B absorption, was not an ill omen for the market, but rather an indicator that fringe companies currently occupying B space were trying to secure favorable Class A leases while the market was still low.
According to Adams, the good news won’t stop in the third quarter, either. Based on a proprietary database of tenant information, Adams predicted gross leasing activity would exceed 7.3 million square feet in the next two years, a turnover of more than 14 percent of all occupied space in Boston.
Adams – a local industry veteran with 29 years of experience, including executive stints at NAI Hunneman and Newmark Knight Frank – analyzes only the Boston market itself, while others examine both the city and its suburban submarkets.
Adams’ report is notable both for its proprietary data set and its unique optimism. Similar third quarter reports from local heavyweights Richards, Barry, Joyce & Partners and Colliers Meredith & Grew found overall third quarter negative absorption in Boston-proper of 53,000 square feet and 17,000 square feet, respectively. A third report by Jones Lang LaSalle concluded Boston did experience positive overall absorption of 93,000 square feet in the third quarter, but was hammered by 80,000 square feet vacated in the Financial District and 410,000 square feet vacated in the Greater Boston market overall.
Indeed, Colliers, Meredith & Grew is projecting another 500,000 to 800,000 square feet of negative absorption through the end of 2010, before gains return in 2011, according to a recent report in Banker & Tradesman, while Adams is predicting positive absorption of 650,000 square feet across all classes of space in 2010.
"I think the brokerage firms in Boston are the best in the country, and I have heard that many times over," Adams said by way of explanation for his optimism in a post on his blog, Boston by Square Foot. "Their market reports are well-written, well-formatted, but relentlessly backwards-looking. And that’s OK. We all need to take measure of what’s happened over the past quarter or over the past year. But I like the future. It’s where things happen."
