In the city of Boston, the Sublease Market carries no weight

We all have a tendency to generalize. On occasion, we do this because it is difficult to assess the individual components of the generalization. At times, we do this because the generalization has more or a "fear factor" than a closer look at the specifics. Sometimes generalization is driven by the audience to whom we are speaking, writing, or addressing in some manner.

The real estate industry is among the most notorious advocates of generalization in the services industry for all of the reasons above. When we make a statement about the "market", we tend to aggregate markets together that have little to do with each other except proximate geography. In Greater Boston, there is certainly a link between the Financial District market and the Route 495 South market but it is marginal. Although demand is driven in part by the service functions that the Financial District provides to the suburban industrial market, i.e. legal work, that link is not the determinant of either market's real estate health.

Likewise, when we generalize, we can scare the entire market (or coddle it) to increase the impact, in the eyes of the writer or speaker, of the generalization. For example, stating that "rents have fallen over 25% in the Greater Boston commercial market" is a lot more exciting, I suppose, than, stating that "rents have stabilized in the Back Bay and Financial District office markets while the warehouse and R&D markets along the I-90 corridor have seen rent reductions of as much as 40%." That's a measurable fear, depending on what frightens you, but it allows a participant in a market--landlord, financier, tenant--to assess the true market of interest.

Finally, our so called global companies simply can't gather information on 150 cities across the world; include all of them in their quarterly report, and even attempt to avoid generalization. Whether online or on paper, the tome would be enormous. This, again, is the "audience" issue. If your audience is global, your information is generalized.

Meanwhile back in Greater Boston, articles such as the one I cite below and many others issued by the brokerage houses, while accurate in the general sense, belie what is going on in the component markets.

There is less sublease space available in the city of Boston's office market today than there was at mid-year. There is less sublease space available in the city today than there was at the beginning of the year. The most recent high point of sublease vacancy in the market was in the third quarter of 2007. The amount of sublease space at that time was 4 times the amount available today.

Let's look even more closely at specifics. At 570,000 rentable square feet in a market whose total inventory is 72 million square feet and whose total--direct and sublease--vacancy is 6.7 million square feet, sublease vacancy account for 0.8% of market inventory and a mere 8.5% of total vacancy.

The peak of 2007 correlated with the mass confusion of the financial crises where forced or coerced purchases (Merrill to BoA, etc.) caused the new owners to dump space onto the sublease market as an immediate reaction to simply not knowing what to do. Over time, there was not a tremendous amount of actual subleasing transactions. There was, instead, a more logical removal of sublease space by the companies that had originally created the vacancy. The financial situation has generally stabilized and firms could begin to make business decisions inclusive of new divisions as opposed to immediate xenophobic "I may own you but I don't love you" decisions in 2007.

Considering the actual submarket statistics and the rationale behind the decline in Boston naturally begs the question of what the heck is going on in the suburbs. That I'll leave for the suburban specialists because you won't find it among the generalists, well-intentioned though they may be.