Many districts reported increased office vacancies inmetropolitan areas inthe second quarter, with signs of additionalweakening in July, according tothe Fed study.

"The sluggishness that has affected the US economy for some timenowfinally is being felt in our speculative, multi-tenant officemarket," Feldman says. "As a result, for the first time after someseven consecutive years of unprecedented prosperity, our localoffice market is experiencing a general slowdown accompanied by asense of judicious caution, as both tenants and property ownersawait a clearer indication of where both the national and localeconomies are headed."

Feldman adds there continues to be a slow and gradual decreasein occupancy, one that commenced in January 2000, when the localoffice market stood at an all time high of 94.3%. It slid to 92.3%in January of this year and then still further to 91.1%. He saysthis slide isattributable to company downsizing and slowercommitments to the 2.6 million sf of new office space that came online within the last year.

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