Cushman & Wakefield of Texas Inc., looking for a positive amid the negatives, found a bright spot in the leasing activity, which closed off five million sf in the first quarter or an increase of 25.5% from a year ago. Nonetheless, the bottom line was 966,486 sf in the red at the quarter's end, a startling contrast to the 88,550 sf of positive absorption recorded at the 2002 Q1 close.

Vacancy overall is 13.8% in an inventory of 351.8 million sf. Last year at this time, vacancy was 12%. The C&W quarterly report does not include the AllianceTexas submarket, a missing link that's reportedly on its way to being changed.

The uncertainty in today's world is making it extraordinarily difficult for the pros in the market to offer their best guesses for the future, Kurt Griffin, C&W's director of industrial brokerage in Dallas, tells GlobeSt.com. Will vacancy continue to climb despite a check on construction? "It's anybody's guess," he says. "I'd like to be optimistic and predict that we've hit the bottom, but there's so much uncertainty."

The Dallas market has close to 3.7 million sf under construction, the bulk of which is build-to-suit, Griffin assesses. Deliveries totaled about two million sf in the first quarter. Operation Iraqi Freedom has become "a distraction for people," Griffin adds. "It gives them a reason to pause as it relates to business, capital expenditures and new projects."

Griffin confides some deals for second- and third-generation space are now carrying introductory rents that are "below the operating range." He's heard of some distribution space going for 99 cents per sf for the first year despite building owners' long-held claims that it takes $1.20 per sf to $1.25 per sf just to break even.

When it comes to new space, free rent and higher TIs also abound. "I know the cost of the deal hasn't gone up, but the cost to the landlord has," Griffin says, noting some industrial TI stipends are pushing $6 per sf for office warehouse finish.

Sublease, though, is the albatross, with the bottom line now reading 11.2 million sf, according to C&W's researchers. That's an increase of 60% from last year. And that, without a doubt, Griffin acknowledges is "the negative impact in the market and it is continuing to put downward pressure on the rental rates."