The overall vacancy rate rose to 16.1%, the highest level innine years, according to the report released Thursday. That's anincrease from 14.7% at the end of the second quarter, Vacancy ratesrose in each submarket except the southeast market. Vacant subleasespace accounted for 2.1 million sf of the total 4.5 million sfawaiting tenants. That's up from 1.9 million sf in the secondquarter. The direct vacancy rate citywide is 8.5%.

The market fell so fast that building owners had a hard timecatching up to it, Charles Heimsath, of Capitol Research, tellsGlobeSt.com. "It was just hard for your mind to grasp that it took10 years to go from 75% occupancy to 95% occupancy," he says, "andsix months to go from 95 to 85%. If you're in the market, it's hardto get your mind around that concept."

Now, the Austin market, he says, "has moved from the denialphase" to what he calls the "let's-make-a-deal phase." "For thefirst six months of the years, we just didn't have any activity tospeak of because the difference between the ask price and bid pricewas so large," Heimsath says. "That seems to be narrowing now andwe're getting some leasing activity."