CPN - December 2008 - (Page 15)

BOSTON MARKET PROFILE MARKET INTELLIGENCE for sublease office space are holding steady at about 2 percent. Assuming that fundamentals remain sound through the end of the year, the real question mark hanging above Boston’s horizon will be the city’s capacity to ward off the pain of recession. One early indicator that Cleveland noted: the willingness of venture capital companies to invest in Boston’s entrepreneurial technology and life sciences companies, which tend to take starter-size leases. Also in play is the extent of coming job cuts. Not even the sturdy financial sector will be immune. Fidelity Investments is planning significant layoffs that could reduce its 2.6 million-square-foot presence in the city. Cleveland estimated that vacancies will increase 100 to 150 basis points next year, a softening that will also stymie most office development starts. Additionally, Boston’s biggest office landlord, Equity Office, owns 18 percent of the city’s Class A office space, bearing significant sway over the market. Since The Blackstone Group L.P.’s acquisition of the company early last year, Equity Office has pursued aggressive pricing, which has helped drive the city’s average asking rents up to $65 per square foot. A weakening economy could dilute the firm’s ability to keep rents at such high levels, but other owners will watch Equity Office’s pricing carefully. RARE GEMS The fortunes for investment sales in the Boston office market appear as positive as its leasing prospects.“You’ll see some premier, well-located assets trade at good prices,” Brodsky forecast for 2009, citing Broadway Partners’ $167 million sale of the 302,143-square-foot 200 State St. to GLL Real Estate Partners GmbH in September. In another recent Financial District deal, Kennedy Associates Real Estate Counsel L.P. paid $192 million for the 22-story 185 Franklin St. office tower.Verizon Communications Inc., the seller, will lease back 600,000 square feet under a short-term agreement and retain ownership of the remaining 100,000 square feet. Kennedy Associates plans a repositioning that includes the addition of 60,000 square feet of retail space to the 60-year-old former New England Telephone & Telegraph Co. headquarters. Such high-profile trades may, however, turn out to be rare finds in 2009. As Brodsky pointed out, the local investment sales market faces the same issues as much of the country does: a huge gap between asking prices and bids, a possible 15 to 20 percent slide in asset values and a wait-and-see attitude about the economic policies that President-elect Barack Obama and Congress will pursue. —Reach Northeast editor Paul Rosta at paul.rosta@nielsen.com. To read about office construction in Boston, visit www.cpnonline.com/search and enter key words “high hurdles” in quotation marks. EXCEEDING EXPECTATIONS. SURPASSING THE COMPETITION. WWW.C WC AP I TA L .CO M For more information or to discuss your speciﬁc ﬁnancing needs, contact: TAMMY HEYMAN | SENIOR MANAGING DIRECTOR | CAPITAL MARKETS | 646.253.8827 | THEYMAN @ CWCAPITAL.COM www.cpnonline.com • December 2008 • Commercial Property News 15 http://www.cpnonline.com/search http://WWW.CWCAPITAL.COM http://www.cpnonline.com

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CPN - December 2008 Contents Starting Line Retail Data/Analysis Conferences Boston Market Profile Finance International Property Management

CPN - December 2008

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