According to Jim Costello, a senior economist at Torto Wheaton, Boston is one of the top six markets in the country that went from boom in 2000 to bust in 2001. All six of the top markets had exposure to high-tech failures. "The top six markets with the biggest erosion had the best 2000 and the worst 2001," says Costello. "They led us into the economic downturn and as they shed as much space as they're going to shed, the market will begin to firm up a bit."

Boston is not doing as bad as Austin, Texas--where the vacancy rate went from five percent to 19.9% over the past year--or San Jose--where the vacancy rate went from 1.4% to 14.5%--but it still saw a big change over the course of the year, notes Costello. The report looks at the vacancy rates for the sum of all markets in the country, excluding New York, and it finds that those numbers went from 9.1% at the end of 2000 to 14.2% at the end of this year. "Boston is a little less than the national average which is troubling," points out Costello. "Historically, Boston is always well below the national average." Also, says Costello, Boston has a lower vacancy rate because as an older market it doesn't grow as quickly.

There is a positive note in the midst of all this bad news though. Costello notes that the rate of change in the vacancy rate is starting to slow. The fastest erosion, according to the Torto Wheaton report, occurred from the second quarter--where the rate was 8.7%--to the third quarter--where the rate was 12.1%. By the fourth quarter, he says, the growth of the vacancy rate began to slow down.