"We expect continued strong fundamentals," Equity Officepresident Tim Callahan told analysts. "But we will see someweakening in demand." Management said it expects rental rates inthe trust's portfolio to increase on average by 3% next year, withmarkets like Dallas and San Francisco showing no growth in rentalrates. The trust said absorption continued extremely strong thisyear and the prelease rate in the trust's development pipeline was40% in the third quarter.

Following the acquisition of Cornerstone Properties this summer,management said that the credit rating agencies are very focused onthe trust paring down its large debt load. Financing activityresulted in a significant decrease in floating rate debt in thequarter to 12%, with fixed rate debt being 88%.

In response to analyst questions about Equity Office's potentialinterest in trophy properties currently available in the New Yorkmarket, management said that debt concerns were making the trustcautious on any acquisition activity. Management said that analystscould expect Equity Office to be in fewer markets going forward asthe trust disposes of assets it views as non-strategic. If there isany significant acquisition activity, management said it wouldlikely be on a joint venture basis. Management also said it iscurrently looking at JV opportunities in Equity Office's existingportfolio, with proceeds being used to pay down debt.