Lehman / Merril / BofA

We have maintained for some time that the material has not really hit the fan yet.  This weekend, it moved a lot closer to the blades, and we suspect that a major cascade of sublet space is soon to be listed in public.

What does that mean ?  Well, for the first time in a few years, if the vacancy factor adjusts a bit downward, landlords bargaining on full occupancy might have to shift their tune a bit, as the marketplace begins to emit the wet sucking sounds of bottom fishers trodding through space.

For the past 18 months, we’ve felt that the market has been artificially butressed by a vacancy factor out of line with the general economy.  Anticipate the first adjustments in the coming weeks.  We have seen that rents have frozen at a particular point on the upward march, and that more concessions (free rent and/or landlord work) are being offered by owners.  Shortly, rents should begin to drop - and while we may not get back to normal, we should get back to the area where normal businesses can afford to pay rent.  The only quesltion left is will there be any normal businesses that can pay normal rent ?

Neal