In the suburbs, the bright spot remains the 128/Mass Pike market where Class A rents have reached $32. Rents for the prime assets in the market are even higher, and currently equivalent to Seaport District B rents in the high $30’s.
Cambridge actually saw rents decline but this happens in a very tight market when the more expensive space gets absorbed. It is not a sign of weakening fundamentals. More so, it’s an indication of dwindling top tier options.
Overall, as a backdrop to improving fundamentals appears to be reasonably strong job growth. Employment data for the year, available through November, suggests that the Boston NECTA added over 38,000 jobs in 2012, exceeding 2011’s tepid growth of 11,000 jobs. The Greater Boston total employment numbers are now only 10,000 jobs shy of the previous peak, making its pace of recovery one of the best in the nation.
It appears that long-time lagging sectors like financial, legal, and accounting services are showing signs of recovery. In fact, the financial services sector added 4,500 jobs this year (a first since 2007). Legal services and accounting also appear to be turning the corner. Growth in these sectors couldn’t happen at a better time. Healthcare, a sector that grew at a pace of 3.0 percent year-over-year through the recession, has slowed and it now growing at a 1.0 percent pace year-over-year.
High tech and life sciences continue to be bright spots. While their pace of growth has slowed as well, they continue to be significant drivers in our recovery, growing at 10.0 percent and 5.0 percent year-over-year respectively.
The risks to Boston’s recovery are the same that plague the rest of the nation at this point. Boston, however, could be disproportionally hit if defense or healthcare spending cuts are severe. We have the benefit of being in a strong position as it faces possible headwinds that stem from Washington or the rest of the world in 2013.