"We believe we've done that, but obviously, only time will tell," Callahan adds.

For the third quarter, however, the results belied the tougher economic climate that has hit the office sector harder than most. Funds from operations were up 12.5% over the third quarter of 2000 to $379.7 million, or $0.81 per share. By another yardstick, earnings per share increased 44% in the third quarter to $0.49 per share.

"We are pleased with our results for the third quarter, in the face of continued economic uncertainty across the country," Callahan says. "The question is, how do you run your business when the near-term outlook is so uncertain?"

Three months ago, Equity Office believed the economy would begin its recovery in the fourth quarter or early next year, Callahan concedes. Now, it has pushed back the ETA of the expected recovery until mid-2002, and adjusted its financial forecasts, including earnings projections, accordingly.

The REIT held a "customer solutions roundtable" the first week of September for about two dozen top clients, who were "guarded" in their outlook but exhibiting a pick-up in their decision-making, Callahan reports. However, that dipped after Sept. 11, before picking up in recent weeks. "The phrase, 'It's done when it's done,' is never more accurate than in these economic times," he adds.

Overall, occupancy fell nearly a point in Equity Office's office portfolio to 93.7%. Vacancies rose in all of Equity Office's 20 major markets with the exception of Los Angeles. Central business districts continued as the REIT's stronger territory than suburbs, exemplified by its home market. While Callahan rated Chicago's Central Business District among the company's stronger performing areas with New York City and Washington, DC, the suburbs ranked among the weaker performing areas in its portfolio.

Equity Office continues to see double-digit vacancies in a few of its holdings in the suburbs. Chief among them is the 1.1-million-sf Westbrook Corporate Center in Westchester, where occupancy at the five-building complex is 78.9%.

Elsewhere in the suburbs, occupancy at the 134,283-sf 1700 Higgins Centre in northwest suburban Des Plaines remains at 83.5% while the 294,972-sf One Lincoln Centre in Oak Brook ended the third quarter with an 85.4% occupancy rate.

Locally, however, Equity Office's occupancy challenges are not limited exclusively to the suburbs. The 617,592-sf office tower at 1 N. Franklin St. in the hot West Loop submarket checks in at 86.6% occupancy.