"The amount of available space in the office market nationally may actually be overstated," Grubb & Ellis says. The zombie buildings, combined with the phenomenon of shadow space, present a difficult proposition for anyone trying to accurately calculate the amount of office space that is actually vacant and available in the US. Shadow space is office space that users are leasing but not occupying because they have downsized their staffs. Researchers like Bach and like Arthur Jones of CBRE Econometric Advisors know the shadow space is there, they just don't know how much. They say that the amount of shadow space is one of the unknown numbers that will play a key role in when and how quickly or slowly the US office market recovers. The problem with trying to tally shadow space, however, is that―although it is empty because the workers who once occupied it have been laid off―it doesn't show up on vacancy reports. Technically, it still counts as occupied space because the tenants who are leasing it have not vacated it or offered it for sublease.

When combined with the difficulty of calculating how much space is off the market, in a sense, because of zombie buildings, the phenomenon of shadow space further muddies the picture. Bach says that, regarding zombie buildings, "Now that the values of many properties purchased during the peak of the market have fallen below the balance due on the loan, some landlords are too capital-constrained to offer the tenant improvement allowances and other concessions necessary to attract tenants in today's marketplace."

However, he adds, "One caveat to the trend is that the wave of foreclosures was much less severe than anticipated. We expected banks to be proactive in taking distressed assets back, but instead, they're avoiding taking those write-downs by helping landlords retain their assets. That being said, the fact remains that many landlords are unable to offer the kinds of tenant improvement allowances and other concessions that require capital on hand. That's good news for landlords who are in a good capital position―they have much less competition than the reported market statistics would indicate."

According to Grubb & Elli8s, a summary of the zombie building trend in key markets across the nation shows that in Atlanta, some landlords are handing the keys back to the bank, prompting operational challenges as properties transfer ownership. "Additionally, amenities such as cafés, restaurants, sundries shops and dry cleaning services normally associated with Class A and Class B+ buildings are at risk of ceasing operations due to decreased foot traffic," Grubb & Ellis says.

In Boston, the active investors of 2006 and 2007 are challenged by decreased property values, causing several trophy Boston-area office buildings to go back to the lender. Several other landlords have been unable or unwilling to make capital improvements to their buildings, including necessary systems upgrades, removing those from broker tours as well.

In Downtown Portland, a large portfolio of historic properties is currently in bankruptcy, meaning that 15% of the class C space in the Downtown market can't compete. "Financial records are being requested on both sides of the table," Grubb & Ellis says. "Landlords want to make sure their tenants will be viable for the full term of the lease, while some tenants are going so far as to require a letter of credit from landlords until all tenant improvements are completed."

In Downtown Chicago, the landlords holding as much as 20% of the office inventory are not in a position to compete aggressively, but those landlords in a stronger financial position are actually able to keep asking rental rates at higher levels than would otherwise be achievable, according to Grubb & Ellis.

Texas, while considered to be a healthy market, is estimated to have more zombie buildings than well-capitalized properties throughout the state. Nonetheless, tenants are still renewing leases and touring zombie buildings in Texas, which is not the case in other markets. "Tenants frequently negotiate a back-up lease in the event the negotiations with the zombie building landlord falls apart, usually due to lack of lender approval of lease terms," Bach points out.