"Denver's office market is still reeling from the implosion of the high-tech, telecommunications and financial services sectors that occurred in late 2001," according to the report.

Lease rates are down 13% since the end of 2000, and property owners are offering aggressive tenants such as rent abatement, free parking and generous tenant improvement allowances.

Some landlords are even offering lease buyout, exceptionally reduced first-year rental rates and creative renewal options, the report notes.

"These trends are expected to continue throughout the coming year, as the market is not expected to recover quickly," Grubb & Ellis notes.

Vacancy rates will flatten out by mid-2003, it predicts, and should begin to decline by the end of the year.

In addition, corporations will become more realistic about unloading their real estate, as they get property off their balance sheets and raise capital, according to the report.