"The amount of available space in the office market nationallymay actually be overstated," Grubb & Ellis says. The zombiebuildings, combined with the phenomenon of shadow space, present adifficult proposition for anyone trying to accurately calculate theamount of office space that is actually vacant and available in theUS. Shadow space is office space that users are leasing but notoccupying because they have downsized their staffs. Researcherslike Bach and like Arthur Jones of CBRE Econometric Advisors knowthe shadow space is there, they just don't know how much. They saythat the amount of shadow space is one of the unknown numbers thatwill play a key role in when and how quickly or slowly the USoffice market recovers. The problem with trying to tally shadowspace, however, is that―although it is empty because theworkers who once occupied it have been laid off―itdoesn't show up on vacancy reports. Technically, it still counts asoccupied space because the tenants who are leasing it have notvacated it or offered it for sublease.

When combined with the difficulty of calculating how much spaceis off the market, in a sense, because of zombie buildings, thephenomenon of shadow space further muddies the picture. Bach saysthat, regarding zombie buildings, "Now that the values of manyproperties purchased during the peak of the market have fallenbelow the balance due on the loan, some landlords are toocapital-constrained to offer the tenant improvement allowances andother concessions necessary to attract tenants in today'smarketplace."

However, he adds, "One caveat to the trend is that the wave offoreclosures was much less severe than anticipated. We expectedbanks to be proactive in taking distressed assets back, butinstead, they're avoiding taking those write-downs by helpinglandlords retain their assets. That being said, the fact remainsthat many landlords are unable to offer the kinds of tenantimprovement allowances and other concessions that require capitalon hand. That's good news for landlords who are in a good capitalposition―they have much less competition than thereported market statistics would indicate."