BOSTON--Despite a national recession that began at the end of 2007, Boston has continued to expand its employment base. While the U.S. has shed 760,000 jobs year-to-date, Greater Boston has added 19,300 jobs over the past 12 months for a growth rate of 0.8 percent, reported Jones Lang LaSalle in its third quarter 2008 report.
Here is the summary of the report:
Office-using jobs expanded by an even greater 1.2 percent year-over-year, making Boston the fastest growing of the U.S.'s top 10 largest office markets. The area's unemployment remains relatively low as well. Only Washington, D.C. currently boasts a lower unemployment rate than Greater Boston's rate of 4.8 percent, which is 130 basis points lower than the national unemployment rate. That said, with the national situation becoming increasingly dire by the day, it's not a question of if, but when our market too will begin to contract. Indeed the initial claims of unemployment, which serve as a leading indicator, are up nearly 20 percent statewide from a year ago. And despite leading the way in employment growth for much of 2008, the pace of growth is about one-third the level of the cyclical peak of 42,000 jobs added year-over-year reached back in May 2007.
The Greater Boston office market registered modest positive net absorption during the third quarter. Leasing activity in Downtown Boston slightly outperformed the Suburbs while in Cambridge transactions were minimal. Landlords have started to soften their stance on rents and slight declines were reported but the market has yet to swing widely. Both landlords and tenants remain relatively deadlocked as everyone waits and watches changes in the economy. New supply in Boston and Cambridge is constrained but in the Suburbs the larger pipeline of new construction projects is starting to deliver.
Something to Watch:
The merger between Bank of America's Wealth Management division, headquartered in Boston, and Merrill Lynch.
Market conditions in Greater Boston and across the nation largely depend on how quickly the government rescue plan and banking sector work together to restore confidence, liquidity, and functionality to the capital markets. The short-term forecast for Greater Boston is slow employment growth, modest net absorption, and softening in non-core office markets. We expect Landlords to utilize free rent and parking incentives instead of concessions which require cash outlays to motivate slow moving tenants. Tenants may modify current space plans, do more with less, and use short term renewals to buy time. The long-term outlook is much harder to assess but due to the last few years of expansion, a diversified economy, and controlled construction current fundamentals should not change significantly.