One such sage is Mike Connor, a 15-year Valley broker with BT Commercial's Palo Alto office. Connor, a former Stanford footballer, says he's sure this is not a return to the market of the early to mid-nineties.

"No, definitely not, for several reasons, among them that the overall economy is much stronger than we had ten years ago, but also because we have much better industry balance and don't rely on the defense industry as we did then, and we don't nearly have the supply of available land to develop," says Conner. "Nowadays what you see is redevelopment of functionally obsolete properties. This market is much healthier."

Still, Connor admits there are some major differences in the market today versus a year ago, the major one being the size of the sublease market. A year ago, says Conner, tenants competing for space primarily because of capital flows into Internet start-ups. "A year ago we identified 1200 new companies that had an average of $13-14 million in invested capital," says Conner. "With that kind of action, vacancy was no more than 3% from South San Francisco all the way down the Valley. Then the bubble burst."

And the VC spigot turned off, meaning that many fewer companies are hunting for space and even the big guys like 3Com are shedding, and the vacancy rate is at 8% and climbing toward double digits. "All the excess is going on the market as sublease space," says Connor, "and some blocks are as large as 200,000 feet in the mid- and north-Peninsula, where many of the Net firms were created."

So, now it is the first quarter of 2001 and these troubled tenants have some major decisions to make. Says Connor, "that's correct and some have already given the space back to owners and developers. Others have been or will be bought out, and others will choose to sublease their space. The tenants with stronger businesses and legitimate growth plans, such as Yahoo! and Juniper, are either taking the space now or waiting to see if rents will go lower."

And the net effect? "The immediate implication is that there will be fewer transactions in the first quarter," predicts Connor, "but in my view this is a delay in demand, not a disappearance. There are still many solid tenants out there. What we will see is a nice rebound starting in the late 2nd quarter and continuing strong through the year, particularly if (Federal Reserve Chief) Greenspan cooperates. Rents are down about 15-20% from where they were a year ago, and they may go a little lower, but by year's end they are going to bounce back to where they are now or even a bit higher."