Scoville tells GlobeSt.com that he expects effectiverental ratesto increase as much as 5% in 2005 whileconcession packages continueto shrink. Grubb & Ellis' fourth quarter Office MarketTrendsreport supports Scoville's predictions. The Bayou Citypostedthree consecutive quarters of positive officeabsorption and willend 2004 in the black rather thanin the red, as it has for the pastcouple of years.During the fourth quarter, nearly 500,000 sf ofofficespace was absorbed, bringing yearly absorption to345,196sf.

The strong absorption pushed vacancy rates down.Overall vacancydeclined for the first time in morethan three years during thefourth quarter and iscurrently sitting at 19%, compared to 19.4% atthe endof the third quarter, according to Grubb & Ellis.TheUptown/Galleria, Westchase, CBD and the Woodlandssubmarkets eachsurpassed 100,000 sf in absorptionthis year, accounting for 1.1million sf ofabsorption.

"We're starting to see the strength of the oil and gasmarkettranslate into demand with many oil and gasfirms now expanding andtaking more space," Scovillesays. Currently, the average rentalrate for Class A spaceis $20.85 per sf, with the Woodlands and FortBendCounty garnering the highest rates at $24.11 per sfand $23.18per sf, respectively. Class B rates at theend of this year came inat $16.33 per sf, accordingto Grubb & Ellis.