Overall, Hampson expects vacancy rates will rise to 13.2% from their present levels at10.5% and leasing rates to dip to an average of $12.59 per sf from its current level of $12.69 per sf. Jim Freitag, vice president of office properties with Coldwell Banker Commercial, is slightly more optimistic, expecting vacancy rates to climb to 12.4% and leasing rates to rise to $12.93 per sf.

Reduced employment growth due to economic uncertainty and layoffs has resulted in huge chunks of office space being put back on the market for sublease, Hampson says. Freitag sees this sublease space as filling the role previously filled by "new product." Continuing layoffs will likely not be felt in the market until the middle of next year, he says.

In Downtown Minneapolis, construction continues on some 3.7 million sf of space, of which about 2.1 million sf is geared for single users. Because many of these single users are now in leased space, the completion of these build-to-suit projects will drive vacancy rates from their current level of about 6.7% to 14.4%. Most developers that had speculative projects in the works have delayed them indefinitely.