"There currently exists in excess of one million sf of sublease space in thearea, primarily in the suburbs, and more is on the way once companies inDowntown Detroit make expected moves. A record number of primary tenants are contracting via consolidation and subleasing, while trying to reduce their overhead. This fact is the best indication of the slowdown," he says.

The potential for a significant amount of newly created non-income producing office spaces being placed on the market clearly exists, Feldman warns, which could decrease occupancy rates even further and increase the amount of negative absorption. This equation holds a major key to the near-term health and condition of what is now a solid but weakened local office market, he adds.

"Hopefully, by the time these leases expire, the economy will have improved, allowing this troublesome space to be leased at an acceptable level, so that it does not become a negative force in our marketplace," he says.

While the economy is slowing, The Beige Book also says rental rates arestaying the same or rising during the crisis. The same is true for the Detroit market, Feldman says. Most communities except Detroit reported increases in rents, he adds.

"As long as the economy does not worsen further and provided a cautiousmindset prevails so that new construction is curtailed and an adequateamount of time is allocated for the filling-in of the more than 20 newdevelopments that have been completed over the last year, the worst of theslowdown may be well under way. The underpinnings of the Detroit marketshould be reinforced over the course of the next six to nine months,"Feldman says.