Both total and net absorption will remain strong, according to Colliers, at 27 million sf and 5 million sf, respectively, despite a predicted rental decrease of 10% to 20%. After a 112% rise last year, such a decrease is in line, according to managing director Jeff Fredericks. "Given these expected outcomes, it would be difficult to argue that the wheels are falling off for Silicon Valley owners and developers of real estate."

The investment market shows healthy levels of interest, though it will likely not reach the $2 billion of activity that took place in 2000. In the office market, where vacancy at year's end was at 1.85% (compared to 3.72% at the end of 1999), demand is expected to remain strong. Of the 5 million sf of space under construction, nearly 85% is already spoken for.

Phil Arnautou, a partner in Colliers' investment advisory group, believes owners will be more selective this year when gauging the viability of tenants and will look for a more secure form of credit than a list of VC funders. He expects "this trend to grow this year but we still see the professional office sector dominated by technology companies."