While the drop is a welcome sign, the vacancy rate had been as low as 5.6% in 2000. Sublease space in third-quarter 2003 accounted for 1.8 million sf of overall available space. While that's just a slight increase from the previous quarter, "absorbing the discarded space continues to impede robust growth," C&W researchers say.

Philadelphia County experienced the largest decline in vacancy, down from 11.9% in the second quarter to 10%, primarily because some of its less competitive inventory was taken off the market. Overall vacancy in the western suburbs fell from 13.2% in second quarter to 12.5%, largely because of Tyco Healthcare's 636,000-sf lease for warehouse space along the 422 Corridor.

The average asking rental rates in the MSA dropped slightly across all industrial sectors. The average for manufacturing space slid to $4.11 per sf, compared with $4.25 per sf in the previous quarter; warehouse/distribution rental rates dipped just two cents to an average of $4.44 per sf, and the average at office service properties fell to $8.92 per sf, down from $9.29 per sf in second quarter.