Currently, nationwide, the office market is experiencing a "classic recovery," he says, with strong absorption, modest construction, falling vacancies and rising rents. At the end of this year's second quarter, nationwide vacancy was 13.9%, down from 15.6% in the comparable quarter two years ago. Yet, on average, Bach notes that it remains above the generally accepted equilibrium rate of between 10% and 12%.

The tightest office markets, according to the report, are Bakersfield, CA; New York City; the Southern California markets of Riverside, San Bernadino and Orange County; the three major South Florida counties; Las Vegas; Colorado Springs; Washington, DC; and Honolulu. At the other end of the spectrum are Detroit, Dallas/Fort Worth and San Mateo, CA, each with an office vacancy rate above 20%. Year-to-date, tenant demand for office space has been strongest in Chicago, Dallas/Forth Worth and New York City, according to the report.

In a "worst-case scenario," patterned after the major housing downturn of 1991, the report says lost jobs in the housing sector could result in negative net absorption nationwide of up to 16 million sf of office space during the next four quarters. The more likely outcome, it projects, is that housing-related office tenants will vacate approximately eight million sf over those four quarters. That is equivalent to about 10% of total positive office absorption nationwide throughout the past four quarters ending this mid-year.