We’ve entered an interesting and challenging period in the real estate cycle to predict – a bottoming market. Typically at this stage of the cycle the market as a whole has entered a period of stabilization, but performance between submarkets can be scattered. While some submarkets, facing soft fundamentals, may be in store for further rental declines, others may start to experience emerging pockets of growth that will catapult them ahead of the overall market.
Severe rent declines from 2008 to the beginning of this year (we recorded a 26.5% decline in the Greater Boston office market between Q1 2008 and Q1 2010) appear to have abated with just a ten cent decline in the second quarter. But while rents overall were virtually flat, performance amongst submarkets varied substantially. Over the quarter for example, the North suburbs actually recorded a 4.0% increase in asking rents, while the North Station submarket on the other hand continued to decline by 6.1%.
With clouds forming on the U.S. economic recovery and soft fundamentals in place for virtually all of our submarkets, it’s hard to imagine vigorous rent growth returning anytime soon. That said, pockets of growth may emerge in 2011 in several submarkets as leasing velocity improves in the months ahead. My bets are for East Cambridge, 128/Mass Pike and the Back Bay to lead the way towards recovery with headline leases, improving fundamentals, and solid tenant demand already in place.
You’ve heard my opinion, what’s yours?
Below is a quick survey to gauge your thoughts on where the market is headed over the next six months. Pick a submarket and tell us whether you believe rents will be up, down, or flat six months from now.