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SAN JOSE-The corporate real estate market has not yet bottomed out, according to the latest report by the South Bay offices of CRESA Partners, a New York-based national real estate firm specializing in corporate services and tenant representation. CRESA’s San Jose and Palo Alto offices are projecting area rents will continue to decline and vacancy rates will continue to rise through the end of 2001.

“This has been the lowest level of activity in commercial real estate since 1988, but it also is a time that presents great opportunities for savvy tenants,” Mike Michaels, a principal of CRESA Partners, tells GlobeSt.com. “Companies now have multiple options for securing space throughout Silicon Valley.”

More than 10 million sf of sublease space—the lion’s share of total available space–is now on the market in Silicon Valley, with “old economy” companies as well “new economy” startups continuing to downsize and consolidate. CRESA Partners’ clients recently involved in disposing surplus space include Yahoo!, BroadVision, Symantec, Hitachi, Nuance, Samsung, and AristaSoft.

Mike Michaels, a principal of CRESA Partners, tells GlobeSt.com he expects more companies will cut jobs and push more product back onto the market. Michaels also says that theses companies are and will be negotiating flexible leases upfront.

While it is difficult to pinpoint vacancy rates, Michaels says that vacancy in the area now stands at between 7% and 8%, up several points since the beginning of the year. He predicts it will increase to more than 10% before the year’s end, after having reached record lows of 2.5% in downtown San Jose and 1% in the suburbs in 2000.

Moreover, Area rents for direct and subleased space are variable, monthly lease rates are ranging anywhere from $2/sf to $5/sf per sf compared to $4 to $8 one year ago. CRESA expects them to continue declining through the end of the year.

CRESA Partners advises companies with immediate space needs to be strategic and negotiate sublease space at favorable rates. These companies, which typically sign shorter-term leases, can often move right into existing and convenient “plug-and-play” space, says Michaels.

“Gone are the days of intimidating bidding wars, knee-jerk reactions and outrageous security deposits,” says Michaels. “Tenants now have an opportunity to study more options, negotiate better terms and make more rational moves to ensure their long-term well-being. There is indeed a silver lining in this market …. tenants can take advantage of the changing dynamics.”

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