"San Jose vacancy rate: Occupancy rose nearly 4 percent among downtown's 15 Class A office buildings. That brings the vacancy rate to 21.4 percent. Occupancy fell slightly for the downtown core's 51 Class B and C buildings, bringing the vacancy rate to 19.5 percent."

When Equity Office Properties Trust (EOP) slashed its dividend last month, few people were surprised. The nation’s largest office landlord hasn’t covered its dividend by earnings since late 2002. But the 34% dividend cut from $2 to $1.32 a share was an about-face for EOP Chairman Sam Zell, who has often said the dividend is “sacred.”

2005 was a year of recovery for the office sector, and most industry sources expect more of the same as the New Year unfolds. Analysts caution, however, that the resurgence will not be uniform as market gains will be sharply divided between coastal cities and nearly everything in between.

7 World Trade Center, one of the first towers to rise along Ground Zero, is lagging behind the recovery with just 40,000 sq. ft. of its entire 1.7 million sq. ft. leased as of late December. The problem, say brokerage sources, are the above-market rents at 7 World Trade Center.

For the first time in five years, rents for top-quality office space increased as vacancies fell among 10 of the largest global markets.

Markets improved across the board, but Hong Kong and London had the most eye-catching numbers, according to a study by CB Richard Ellis, the Los Angeles-based real-estate-services firm. By the end of 2005, Hong Kong landlords bumped up their asking rates for leases on Class A properties by 45% to $58.81 a square foot, as the vacancy rate fell to 4.8% from 6.9% in December 2004.

As with the improving fundamentals seen in many parts of the U.S. over the past few quarters, many of the largest global markets have benefited from increasing demand for office space while new construction remains constrained.