The National Association of Industrial and Office Properties sponsored its annual half-day bus tour of local commercial real estate properties last week. This year’s event, which focused on Boston and Cambridge, drew 250 attendees affiliated with the industry.

The suburban Boston office sector has finally “turned the corner” after three sparse years, but short-term gains will be measured, CBRE/Whittier Partners principal Michael F. Ripp told a commercial real estate gathering last week. Preceding the annual bus tour sponsored by the National Association of Industrial and Office Properties, Ripp said unsteady job growth and disappointing first-quarter results tempered a banner 2004, in which suburban leasing reached 4.6 million square feet of net absorption.

“The market will continue to stabilize, although rents will stay flat, especially for Class B and C properties,” Ripp said in the breakfast program at 22 Battery Wharf Road in Boston’s Fort Point Channel District. Tuesday’s kickoff to the fourth annual bus tour also featured Fred Yalouris of the Massachusetts Port Authority, who updated plans to replace the depressed Central Artery viaduct with the Rose Kennedy Greenway. Six buses then spirited some 250 attendees through Boston and Cambridge, stopping for a luncheon at Fenway Park and presentation by Red Sox Chief Operating Officer Michael Dee before returning to the launch site in the early afternoon.

The 180,000 square feet of net absorption through March represented the fifth straight quarter on the plus side for the suburbs, including positive outcomes in nine of the 10 submarkets. But while insisting “the worst is behind us,” Ripp said the opening quarter was slower than expected and warned of a “dark cloud” of business consolidations hanging over the Massachusetts economy, underscored by ongoing takeover attempts of Gillette Corp. and the parent company of Canton-based Dunkin’ Donuts. “If the trend continues, excess corporate space could flood the market,” Ripp acknowledged.

Mergers and acquisitions might erode recent progress cutting sublease and “plug-and-play” deals, said Ripp. Sublease space now represents less than 6 percent of the available suburban inventory of 22.4 million square feet, according to CBRE/Whittier data. That compares to 8.5 percent at year-end 2003 and a peak of 9.7 percent to close out 2002. Barely 2 percent of the supply was sublease in 2000 prior to surging to 7.6 percent in 2001.

Ripp placed the suburban office vacancy rate at 21.4 percent and asking rents at $17.60 per square foot, down slightly from $17.68 per square foot at year-end 2004. Still, Route 128 North and Route 3 North outperformed expectations, and Ripp reported the Route 128 West submarket remained vibrant after an impressive 2004, allowing asking rents for top-grade space to tip $30 per square foot in Waltham after a precipitous drop from the market’s peak. Despite little growth from technology firms, which drove the brief spike in 2000 and 2001, Class A buildings in Route 128 West are now down to 13 percent vacancy, said Ripp, and are only 9 percent in Waltham. Such improvement helped fuel the $272 million sale of that community’s Bay Colony Corporate Center in January to Beacon Capital Partners after $1.3 billion of investment properties sold in the suburbs during 2004.

In luring such firms as Reed Elsvier from Newton to 225 Wyman St., Waltham has dropped the roster of Class A opportunities for tenants needing more than 25,000 square feet of Class A space to seven in the Route 128 West corridor. “It is definitely a bifurcated market,” Ripp explained, with older facilities far more plentiful. Unfortunately for such buildings, Ripp said larger tenants are increasingly mulling new build-to-suit construction for any sizeable requirement. Other large tenants have been striking so-called “blend-and-extend” agreements that provide longer term for their existing landlords in exchange for reduced rental rates, further hurting the prospects for vacant or underused properties.

‘The Right Direction’

For all the potential roadblocks, Ripp said he is enthused by the office market’s current climate in the aftermath of the prolonged downturn. “The signs are pretty telling that we’re finally getting there,” he said, adding that small and mid-sized companies are driving most of the resurgence.

Organizers of the NAIOP program and bus tour did their best to spark positive thinking, as exemplified by its “Reverse the Curse” theme. David Begelfer, executive director of the Massachusetts chapter of NAIOP, said the mood was generally upbeat among attendees. “Things seem to be heading in the right direction,” Begelfer said. “It may not be an enormous leap, but some of the numbers are looking a lot better, and I think that is getting through to people.”

NAIOP bills the bus tour as a chance to quickly evaluate the commercial real estate landscape. After concentrating on the suburban north market a year ago, last week’s event targeted Boston and Cambridge, including the Hub’s Financial District, Longwood Medical Area and Back Bay and Cambridge’s Kendall Square. Out-of-town investors joined developers, trade professionals and landlords such as Equity Office Properties and Boston Properties for the half-day sojourn, with the ground-zero visit augmented by guides on each bus who provided experienced insight into local markets, plus investment specialists who could handle sales queries. “They know everything that is going on,” said Begelfer of the bus captains and volunteer experts. “It is really a great way of getting a lot of valuable information very quickly.”

Besides taxing its own staff, NAIOP enlisted an army of member talent to make the fourth annual event a reality. CBRE/Whittier principals David Fitzgerald and Timothy Lyne served as co-chairmen for the tour, while assistance also was provided by that firm’s Research Director Scott Hutchinson and associate Warwick Olney, as well as Carolyn Sidor, managing director of business development. CBRE/Whittier also sponsored a bus, as did Cushman & Wakefield, Richards Barry Joyce & Partners, Trammell Crow Co., Spaulding & Slye Colliers and Meredith & Grew.

Fitzgerald captained his firm’s bus and gave the Boston overview. Trammell Crow principal James McCaffrey offered investment advice and Spaulding & Slye Colliers principal Debra Gould conducted the Cambridge tour, while Leah Prebluda of CBRE/Whittier served as the vehicle’s facilitator.

Tim Bianchi of Lincoln Property Co. was the Cambridge expert on the Cushman & Wakefield bus. The sponsors featured Cushman & Wakefield Executive Director David Martel providing the Boston overview and Edward C. Maher Jr., another executive director, offering investment expertise, as well as Victoria Goldberg as facilitator.

RBJ President Robert B. Richards captained his firm’s bus and was the Cambridge analyst. Ted Wheatley of the Staubach Co. assessed the Boston market, while CBRE/Whittier Senior Vice President Elizabeth Thomas gave the investment guidance. Laura Onessimo of Skanska USA Building was facilitator for the RBJ troupe.

Trammell Crow supplied Barry Hynes as captain and Deb Howertown as facilitator, Codman Co. principal Darryl Morse was on board for the Cambridge review and Spaulding & Slye Colliers principal Cappy Daume offered investment assistance. On the Spaulding & Slye-sponsored bus, principal William Barrack was captain and advisor for the Boston tour. Meredith & Grew Executive Vice President Joseph Flaherty conducted the Cambridge portion, RBJ Vice President Richard Herlihy was the investment specialist and Gene Kennedy of Lee Kennedy Co. handled facilitator duties.

The Meredith & Grew bus featured Executive Vice President Lisa Campoli as captain and investment advisor, Associate Director David Townsend of Cushman & Wakefield on Cambridge and CBRE/Whittier’s Lyne as the Boston ace. Tom McGarrigle of Paradigm Partners was facilitator.