The report says the county's overall office vacancy factor iscurrently 10.8%, but a higher 12.3% at class A buildings. It stopsshort of forecasting exactly how high those rates will go in thefirst half of next year, but says the gap between what landlordswant to charge and what tenants are willing to pay will continue tonarrow "as the supply of available sublease and direct spacecontinues to expand while the number of tenants actively in themarket remains low."

"Once thought to be too diversified to feel the effects of allbut the most dramatic national economic swings, the county'sresidents and businesses must now face a world where there isneither an unending supply of venture capital or expandingbusinesses," the brokerage firm's forecast says. "As landlordslearned in 2001, vacancy rates can increase and there can benegative absorption, even in the most well located and highlyamenitized office buildings."

The coming year will also be marked by a growing number oftenants who want to restructure their lease deals, the report adds,in part because they know landlords will be anxious to keep spacein their buildings leased. A tenant's credit will take on addedimportance, as owners try to avoid repeating the beatings they tookover the past two years when many once-promising dot-com companiesseemingly failed overnight.