Boston’s Financial District is among the office markets that endured negative absorption during the first quarter of 2005. One block of space in that area came on line following the dissolution of the Testa Hurwitz law firm, which had been located at 125 High St.

Between the harsh winter, April Fools’ Day and pre-dawn clock adjustments, it is easy to understand a bit of springtime confusion this time of year, but whatever the cause, first-quarter figures for Greater Boston’s office market are coming in abnormally skewed, with contradictory results underscoring continued upheaval for the industry.

Although the investment climate remains white hot for commercial real estate of all ilk, office leasing has been sporadic. Cambridge had 4,000 square feet of negative absorption in the first quarter, according to Richards Barry Joyce & Partners, whereas Cushman & Wakefield put the figure at just under 10,000 square feet on the plus side, as a gain of 60,000 square feet in Kendall Square was offset by minus 57,000 square feet of absorption in the Harvard Square submarket. Meredith & Grew Oncor posted positive absorption of 7,500 square feet, a mark that represents a flat quarter at best, acknowledged Executive Vice President Joseph P. Flaherty.

Despite the tepid beginning, Meredith & Grew officials insist they are encouraged.

“We are experiencing a bit more activity, which is exciting,” said Flaherty. “There seem to be more companies in a growth mode than we’ve seen in three or four years.”

According to Assistant Vice President Tucker L. Hanson, Meredith & Grew is tracking 34 tenant requirements representing about 750,000 square feet of space in Cambridge, substantially higher than a few months ago when the count was 16 firms totaling roughly 350,000 square feet.

Most of the velocity is homegrown, observed Flaherty, whose firm puts the Cambridge office vacancy rate at 15.8 percent and the availability rate – both direct and sublease space – at 21.1 percent. As with Cushman & Wakefield, Meredith & Grew reported positive absorption in the core Kendall Square office market, estimating it at 27,000 square feet.

RBJ Research Director Brendan Carroll also voiced optimism about Cambridge, explaining that speculative construction has been held in check and landlords are fighting to keep rental rates from dropping any further. The same is true elsewhere, said Carroll, citing resiliency in Boston during the past year despite worsening fundamentals.

Scraping the Bottom

By RBJ’s estimates, office rental rates for Class A space downtown plunged from a peak of $45.48 per square foot in the fourth quarter of 2001 to $32 per square foot two years later. Since that point, however, the figure has stayed within a dollar of the low mark. “It illustrates that landlords are not willing to drop the rates much more Â… We really have been scraping along the bottom,” said Carroll. The changed ownership of Boston’s office market to real estate investment trusts and institutional players has provided stability, which keeps landlords from panicking in a down market, he added.

The inverted plateau on pricing indicates longer-term confidence in Boston’s office market, but RBJ delivered difficult results for the opening quarter, estimating negative absorption of 275,000 square feet for the Financial District alone, increasing the vacancy rate 0.4 percent to 14.7 percent. Carroll stressed that the situation is not as dire as it might appear, with some of the dip attributed to consolidations that have been anticipated for months, including Deutsche Bank’s departure from an estimated 318,000 square feet at Two International Place and a block of space coming on line following the dissolution of the Testa Hurwitz law firm, which had been located at 125 High St.

The disappearance of Testa is leading other law firms to take more space as they accept attorneys from the erstwhile practice, said Carroll. The negative outcome in the central business district ended a streak of three straight quarters of positive absorption, said RBJ, which also reported negative net absorption of 201,000 square feet in Boston’s Seaport District, bringing vacancy there to 19.6 percent. The Back Bay enjoyed the best quarter, with RBJ placing absorption at 162,000 square feet positive, dropping the vacancy level to 13.3 percent.

Meredith & Grew scored the Back Bay’s absorption up 83,000 square feet, compared to virtually no gain in the Crosstown, Fenway and South Station markets. The firm had a differing outcome from RBJ elsewhere, placing absorption up 40,000 square feet in the Seaport District and 134,000 square feet positive in the Financial District. Cushman & Wakefield reported the Financial District at 35,000 square feet of negative absorption and minus 8,900 square feet for the Seaport. The firm had the Back Bay at 54,000 square feet of positive absorption.

According to Trammell Crow’s report, the Financial District experienced 121,000 square feet of negative absorption, bringing the vacancy rate to 15.2 percent from 15 percent. The overview indicated even greater difficulties for the Seaport District, with just over 200,000 square feet of negative net absorption. That puts the Seaport District’s office inventory of 4.4 million square feet at 23 percent vacant, said Trammell Crow, up from 18.1 percent to begin the year. The Back Bay had the strongest quarter in the Trammell assessment, recording absorption there at plus 171,000 square feet.

Although there were geographic incongruities, most first quarter reports indicated an encouraging opening quarter for suburban Boston. Trammell Crow put net absorption at 622,000 square feet overall, while Meredith & Grew estimated the figure at 765,000 square feet. Cushman & Wakefield placed the suburbs in the black by 585,000 square feet, compared to a 628,000 square feet gain estimated by RBJ. Only one of the nine submarkets tracked by Meredith & Grew was in the negative on absorption for the quarter, with Route 128 North down by 140,000 square feet. Interstate 495 West was strongest, according to Meredith & Grew, which registered 228,000 square feet of positive absorption.

Owing to different inventory samplings and timing of when space is considered available or a lease is deemed completed, the market reports did offer varying outcomes on the suburban situation. RBJ, for example, reported that Route 128 North had positive absorption of 150,000 square feet in the first quarter but estimated absorption in I-495 West at negative 44,000 square feet. Trammell Crow calculated 111,000 square feet of positive absorption in Route 128 North and 135,000 square feet positive in the central, aka west, I-495 submarket. According to Cushman & Wakefield, Route 128 North had 261,000 square feet of positive absorption, compared to just over 3,000 square feet positive in I-495 West region.

Virtually all of the reports indicated a strong quarter in the Route 128 core market that includes Wellesley, Newton and Waltham. According to RBJ, Route 128 West had 177,000 square feet of positive absorption, bringing its vacancy rate down to 16.7 percent from a high of 22.7 percent posted in the second quarter of 2003. Wellesley, meanwhile, has fallen from 9 percent in the second quarter of 2004 to just 3.6 percent at present, RBJ said. Even so, Route 128 South had the most robust quarter, according to RBJ, which put positive absorption at 300,000 square feet following major office leases to such firms as Home Depot (90,000 square feet), and the 170,000 square feet taken in Norwood by the Universal Technical Institute. RBJ also registered the previously announced New York Life Insurance lease for 82,000 square feet in Westwood as a first quarter deal in the Route 128 South market.