The vacancy rated in the CBD continued to increase "at amarginal pace," he says, "indicating that a vacancy peak has eitherarrived or is close at hand. Vacancy rates actually started todecline in several submarkets, including the entire East Market andclass-B space in the Independence Square Market. Surprisingly," headds, "this is the first time since 1999 that class-A1 space hasseen its vacancy rate turn downward."

Asking rental rates dropped $0.11 per sf in the overall suburbanmarket, however effective rates were lower due to concessions. Theoverall CBD full-service rental rate is $23.74 per sf, whichClements says "is probably 5% to 10% above the effective rate.Tenants still have the upper hand."

Class-A office buildings in the local office market saw morethan 770,000 sf of positive absorption this year to date, a mirrorimage of class-B properties, which had 750,000-sf of negativeabsorption, an indication that tenants are moving up to betterspace, rather than a sign of expansions or new companies enteringthe market.