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Tech Industry

Will tech boomtown become a ghost town?

Eighty percent of the remaining Internet companies in the San Francisco Bay Area will close during the next year, freeing up millions of square feet of office space, new research says.

    Eighty percent of the remaining Internet companies in the San Francisco Bay Area will close their doors during the next year, causing thousands of layoffs and freeing up a vast amount of office space, new research says.

    But the research, scheduled to be released Thursday, has caused a dispute between the two groups involved: real estate giant Cushman & Wakefield and the Rosen Consulting Group, which disseminated the report.

    Although New York-based Cushman on Wednesday would not detail the discrepancies it has with the report, the company said it would release its own findings Thursday.

    "Rosen Consulting Group provided the interpretation and analysis for this report," Christopher Lowery, Cushman's executive vice president of advisory services, said in a statement Wednesday. "Cushman & Wakefield only provided raw data. Cushman & Wakefield does not agree with the conclusions of this report."

    The report, provided Wednesday to CNET News.com by Berkeley, Calif.-based Rosen Consulting, concludes that there is a 70 percent risk that a full recession will hit the San Francisco Bay Area, based on a sampling of Internet companies in the region.

    In looking how the technology sector malaise is affecting the San Francisco Bay Area's real estate market, the report estimates that Internet companies will give up about 4.6 million square feet of office space between 2001 and 2003 and that 1.4 million square feet of renovated space will re-enter the market in 2001 and 2002.

    Those estimates are based on projected Internet closures, lease transactions, and pre-leased space that is now under construction, the report said.

    The city of San Francisco, which has been considered the Internet boomtown of the technology revolution, saw real estate prices for commercial and residential space soar beyond the national average. However, the survey found that "the rise and fall in San Francisco rents corresponds with the growth and decline of Internet employment."

    Rosen Consulting, which is an economic and real estate consultancy, estimates that in just five months, between the fourth quarter of 2000 and February 2001, about 3 million square feet of sublease space returned to the market. Internet companies and other technology companies accounted for 77 percent of that space, the report said.

    The report also said the implication of the technology market downturn is that there may be as much as 4 million square feet of additional office space that will be vacated over the next 12 months.

    A separate report comparing the San Francisco Bay Area with similar markets that are highly concentrated in a particular industry and also experienced economic slowdown will be released by Cushman next week.