There's office space available on Sand Hill Road, the golden address of Silicon Valley's technology venture capitalists, but it will set you back $70 per sq. ft.

Office buildings in Manhattan are trading at record prices - some more than $500 per sq. ft.

Construction cranes are popping up everywhere. Rocketing job growth is fueling a new wave of suburban spec building, while many companies and investors are returning to revitalized CBDs.

In short, the U.S. office market seems hell-bent on continuing the party that started back in early 1996. Property values continue to rise, as do rents in most major markets. New construction is leading to an uptick in supply, yet demand is keeping pace. Office vacancy rates across the country are at their lowest levels in years.

"It's hard to gauge the health of the entire U.S. office market because conditions from city to city are so different, but nationally, I'd give the sector a B-plus, maybe even an A-minus," says Donald Noland, assistant director of research services for Cushman & Wakefield.

The national CBD vacancy rate stood at 11.7% for the first quarter 1998, down from 14.2% one year earlier. Properties in the nation's suburbs clocked in at 11.4% vacant in the first quarter, down from 12.5% one year earlier, according to Cushman & Wakefield.

"The most successful office markets all share the same characteristics - high barriers to entry, strong office employment growth and opportunities to buy property at a discount to replacement cost," says Michael Steele, president and COO of Equity Office Properties, the nation's largest office REIT.

"Boston, Seattle and San Francisco are three cities where these strong fundamentals have been in place for a long time. Chicago and Denver are getting there," he adds.

It's not surprising that these cities stay open 24-7. The sidewalks don't roll up when the factory whistle blows.

"This year, the smart money will be focused on downtown, as construction soars in the suburbs and fears of overbuilding rise," says Julien Studley, president and chairman of national tenant rep firm Julien J. Studley Inc.

"Companies are willing to pay premium rents in hot urban markets like San Francisco and midtown New York because that's where knowledge-based workers want to live," he continues.

Overbuilding - the bugaboo that forced real estate markets into the toilet during the late 1980s - is rearing its ugly head once again. Approximately 50 million sq. ft. of office space is currently under construction, nearly all of it located in suburban markets. Some estimates say another 50 million sq. ft. will break ground by the end of the year. By 1999, some observers predict that supply of new office space could outstrip demand, especially if the economy cools down or the Asian financial crisis dampens growth in the U.S. technology industry.

Suburban vacancy rates have inched up in cities like Dallas and Atlanta for the first time since 1990. Both cities were among the nation's job creation leaders in 1997, but that growth is expected to fall this year.

"The potential for trouble does exist, especially if demand for office space and rental rates drop," says Cushman & Wakefield's Nolan. "We're not at that point yet, but the industry does need to be aware of what's going on."

Wall Street does seem to taking notice. REITs' stocks have fallen on hard times since the beginning of the year, especially when compared to the impressive returns recorded in 1997. Some investors have fled REIT stocks in search of better returns in the broader bull market, but others look at rising property values and spec construction and see the end of the current real estate cycle coming soon.

Whether you're a real estate bear or bull, it can't be denied that the industry is certainly humming. National trends really only scratch the surface, however, so what follows is a closer look at some of the country's top office markets.

Atlanta Poor Atlanta. It was just two years ago that the world press trashed the city for allowing Coca-Cola, Nike and McDonald's to run amok at the Olympic Games. Today, it's the commercial real estate industry - a linchpin of the region's business community - that finds itself under the gun.

The problem? Overbuilding, or at least the threat of it. Eager developers are pushing office towers and business parks out of the ground at a rate not seen since - you guessed it - the last real estate boom-to-bust cycle of the late 1980s. The region's strong economy seemed poised to absorb all this new office space, but vacancy rates are beginning to inch upwards and rents are stagnating. No one is predicting disaster just yet, but the warning signs are there.

There is more than 6.3 million sq. ft. of commercial office space under construction in Atlanta, a majority of it centered around several suburban submarkets north of downtown. Another 5 million sq. ft. of new office space was put on the market last year. The city's traffic logjams are becoming legendary and poor air quality has put the region under the watch of federal environmental regulators.

In first quarter 1998, the city's suburban vacancy rate rose to 12.2%, from 11.7% in the previous quarter - the first increase since the early '90s, according to Cushman & Wakefield.

Annual rental rate increases, as high as 10% in recent years, slowed to only 2.4% last year. In the first quarter, average rates actual fell 15 cents to $22.24 per sq. ft.

In Buckhead, one of Atlanta's most affluent and thriving commercial corridors, three office towers are under construction within blocks of each other, while another was recently completed. One of these new buildings - the 18-story, 430,000 sq. ft. Prominence - is being developed on a speculative basis by Holder Properties, for sale to Equity Office Properties Trust.

"There are signs of overbuilding in some parts of Atlanta, but the city's job growth is just incredible and businesses here are experiencing tremendous success. I am very bullish," says Clark Gore, executive vice president at Holder.

Atlantans are legendary for succeeding in the face of adversity (just ask General Sherman) and their real estate market is no exception. Holder has already agreed to sell Prominence for $75 million to Chicago-based Equity Office Properties once the project is completed. The other Buckhead projects are enjoying strong pre-leasing campaigns.

Whether or not the city as a whole avoids a real estate recession depends on a continuing strong economy and a little restraint from developers.

Chicago Trophy hunting has become a big sport in Chicago as property investors take their best shots at the city's premier office buildings. In May, New York investment bank Blackstone Group plunked down $470 million for the 80-story Amoco Building. The Sears Tower - Chicago's most recognized property - was bagged by TrizecHahn Corp. for $804 million. The Kennedy family sold its massive Merchandise Mart complex to Vornado Realty Trust for $575 million.

"Chicago is one of the few great 24-hour cities in this country. REITs and other investors are willing to pay top dollar because they know the downtown office market will always be a draw for business," says Jacque Ducharme of Julien J. Studley Inc.

Overall first quarter vacancy rates dropped to 12.6% from 13.8% at the end of 1997 on brisk leasing activity. Class-A vacancy rates in the Loop plunged below 8% for the first time in a decade, according to Studley.

Large blocks of space - between 100,000 and 300,000 sq. ft. - are becoming scarce, forcing many tenants to trigger early lease renewal options. After years in which tenants had the negotiating edge, landlords are fighting back.

Rents for premium downtown office space averaged more than $27 per sq. ft. at the end of the first quarter, a $2 per sq. ft. jump from the end of 1997, according to Cushman & Wakefield.

Developers have yet to enter the picture in Chicago, although at least five office projects are trawling the market in search of anchor tenants. Many observers predict that as many as three of these projects could break ground within the year, adding upwards of 2.5 million sq. ft. of office space to the downtown market.

Speculative development has found a welcome home in the Chicago suburbs. Fifteen projects totaling 2.6 million sq. ft. have been completed or are under way in the East-West and North corridors. The rush to build has raised some red flags - absorption is not keeping pace with the new inventory, causing Class-A rents to rise above 20% in some areas.

Dallas There is more than 10 million sq. ft. of office space under construction in suburban Dallas these days, causing many real estate observers to quip that "Big D" stands for "Big Development" or, possibly, "Big Disaster."

Like Atlanta to the east, growing suburban sprawl coupled with a glut of new office space is furrowing some brows. Dallas' suburban vacancy rate rose from 8.9% to 9.7% in the first quarter. The city's central business district is nearly 30% vacant, the highest in the nation, according to Cushman & Wakefield.

Yet at the same time, demand for new office space seems justified by five years of impressive economic growth and employment gains. More than 100,000 new jobs were added in Dallas last year, according to M/PF Research, a number that far exceeded any growth during the 1980s.

"Yes, we have a lot of construction under way, but more than 35% of that space is preleased," says Scott Farber, vice president with Jones Lang Wootton in Dallas. "This talk of concern is premature. Let's wait to see what happens when all this space is built. What you'll find is that tenant demand will be very strong."

Rising vacancy rates have not impacted rental rates so far. Average rents in the suburbs were $24.32 per sq. ft. in the first quarter, up from $23.55 per sq. ft. at the end of 1997, according to Cushman & Wakefield.

Investors don't seem fazed by any long-term consequences that development brings to Dallas. More than $1.9 billion in office properties traded hands last year, most snatched up by REITs. Even moribund downtown saw plenty of action. TrizecHahn Corp. purchased a half interest in the 60-story Bank One Center with Crescent Real Estate Equities. It followed that deal with the purchase of Plaza of the Americas, the largest mixed-use project in the city's central business district.

New York City When two New York office towers sold recently for more than $500 per sq. ft. apiece - astronomical prices even by Big Apple standards - many investors began to wonder whether the city's real estate market was getting a bit overheated.

New York's economy is booming, thanks in large part to the raging bull market. Vacancy rates across the city are at their lowest levels in years and demand for office space from expanding banks, brokerage houses and law firms couldn't be stronger.

Yet, with prices for everything from trophy high-rises to Class-B relics on the rise, the margin of error is getting slim. "You're starting to see investors make decisions based on projections of 10% to 20% annual future rent growth, and I think that's dangerous," says Larry Doyle, senior vice president for LaSalle Partners in New York.

For the short term at least, being bullish on New York is all the rage. The overall vacancy rate in Midtown dropped to 6.7% in the first quarter, the lowest rate since 1987, according to Jones Lang Wootton.

As the market tightens, rents are leaping as much as $1 per sq. ft. per month. Asking rents for Class-A Midtown office space topped $44.50 per sq. ft. in the first quarter of 1998, up $2 from the end of 1997.

The city's downtown market is sharing in the success. More than 2.1 million sq. ft. of space was leased in the first quarter, dropping the vacancy rate to 10.4%, 37% lower than the year earlier. "Large tenants are playing a game of musical chairs with their office space these days due to all the mergers and acquisitions going on," says Mark Ravesloot, senior director at JLW. "In many cases, tenants are making leasing decisions three and four years out because large blocks of space are so difficult to come by."

New York may be one of the most difficult and expensive construction markets in the country, but development is making its way back. The Durst Organization is leading the charge into the revitalized Times Square market with its 4 Times Square office tower for Conde Nast. International news service Reuters will follow closely with its own Times Square high-rise. Investment bank Bear Stearns is also building a new headquarters in Midtown.

San Francisco San Francisco is the belle of the real estate ball. In May, Boston Properties beat out the rest of the REIT pack to acquire the massive Embarcadero Center office complex. The $1.2 billion deal was arguably the most competitive and expensive single-asset office sale since New York's Rockefeller Center went on the block in 1995.

Embarcadero Center is a hot property because San Francisco's office market sizzles. Vacancy rates in the central business district hover below 3.5%, pushing average rents north of $40 per sq. ft. In most Class-A towers with views of the Bay, rents can easily surpass $50 per sq. ft.

"This market is tight, real tight, and rents keep going up," says L. Leland Whitney, a principal with local independent brokerage firm Whitney Cressman Ltd. "Times are good for landlords and sellers, but at some point tenants will be forced to make some tough decisions if rents continue to rise."

San Francisco is a perennial real estate favorite because it has all the characteristics of a classic 24-hour city that investors drool over. The central business district remains the financial and banking capital of the West Coast, despite losing the BankAmerica Corp. headquarters to merger-mad NationsBank Corp. of Charlotte.

Just to the south, the booming technology economy in Silicon Valley creates more jobs in a month than many cities do in an entire year. Even older, long-neglected commercial buildings in the city's South of Market area are turning into huge profit centers. Savvy investors have been buying up the properties as fast as they hit the market, transforming them into hip, urban workplaces for fast-growing multimedia and Internet companies.

"The overall appeal of San Francisco is that the city's real estate industry is always going to be blue chip," says Chris Curtis, national leasing director for the Shorenstein Co., one of the city's largest Class A property owners. "This is a city that knows how to reinvent itself and is not subject to the wild real estate swings that hamper other markets."

After more than a decade without any new office construction, dirt is finally being moved. Meyers Development Co. and Cousins Properties, the Atlanta-based REIT, are teaming up to build a 27-story, 350,000 sq. ft. office tower. A second office property being developed by Fremont Properties, the real estate arm of Bechtel Corp., is expected to break ground by year's end.

Los Angeles The "Southland" real estate market can be a confusing jumble of more than two dozen submarkets all linked together by congested freeways. It doesn't take a road map, however, to see that Los Angeles' office properties are making a big comeback.

The reason is the economy, which has rebounded completely from several years of defense and aerospace industry cutbacks. Entertainment, which generates $85 billion in revenues a year, is still the top dog in town, but telecommunications, high-tech, health care and service sectors jobs are on the rise.

L.A.'s pricey Westside is getting the bulk of the attention from investors these days. Nearly 40 buildings swapped hands for about $1.75 billion in 1997, including the trophy Fox Plaza, best known as the setting for the action film Die Hard. Westwood/West L.A. is the tightest Westside market, with a sub-9% vacancy rate and average rents of $25.68 per sq. ft. in the first quarter. Class-A rents in Century City top $32 per sq. ft., with vacancy rates just north of 10%.

The Tri Cities towns of Burbank and Glendale, located east of downtown, are just as strong, with a combined Class-A vacancy rate of just under 11%.

In May, the Ohio State Teachers Retirement System spent $95.8 million, or $231 per sq. ft., for an office property in Glendale - a record for the Tri-Cities market. Local developer PacTen Partners is currently constructing a 520,000 sq. ft. speculative high rise dubbed Glendale Plaza.

Even downtown L.A., long regarded with distaste by many office tenants, is improving its image. More than 800,000 sq. ft. in lease deals were signed downtown in the first quarter, dropping the vacancy rate to 19.5% from 21.1% at the end of 1997.

A new arena housing the Los Angeles Kings and the Lakers is expected to break ground soon, which should bring a little more 24-hour life to the central business district.

Washington, D.C. Local developer John Akridge Co. served up fresh oysters, jumbo shrimp and beef tenderloin to real estate insiders in late June, celebrating the groundbreaking of its new office project in the eastern end of downtown Washington, D.C.

The real estate shindig was one of three held in the same week, marking the start of 1.1 million sq. ft. of new office construction in the nation's capital. Scant amounts of development over the last several years has dropped the city's vacancy to just above 10% - 6.5% for Class-A properties, according to Julien J. Studley Inc. At the same time, demand for premium office space from fat cat law firms is growing. (Whitewater prosecutor Ken Starr's legal team is said to be one of the largest acquirers of office space in recent months.)

Rental rates for Class-A space averages about $33.60 per sq. ft. this year, compared to $31.76 per sq. ft. in 1997. All three of the city's latest office projects - Akridge's Victor Building, the Lincoln Square mixed-use project of Lawrence Ruben Co. and Market Square North, developed by Gould Property Co. and Boston Properties - are located within blocks of MCI Center, the city's new hockey/basketball arena.

"There's a renewed sense of confidence in downtown, especially around the arena," says Stephen Goldstein, branch manager at Studley's downtown office. "Developers are sinking significant investment dollars into the retail components of their projects and power dining and family restaurants are popping up all over the neighborhood. That kind of activity can only help the office market."

That confidence has also affected the investment market, where REITs are huge players, as always. Crescent Real Estate Equities paid $161 million, or $304 per sq. ft., for a premium Georgetown office building in the first quarter. Local business press also reported that Charles E. Smith Commercial Realty was in talks to sell its 50-building office portfolio to Vornado Realty Trust for as much as $1 billion.

The robust office market extends beyond the Beltway. In Northern Virginia, vacancy rates as low as 5% are fueling 7.6 million sq. ft. of new construction, nearly 50% of which is pre-leased.

Boston Boston is buzzing with news that the city's first speculative office tower since 1990 will break ground in September. Millennium Partners of New York and local developer MDA Associates are pushing ahead on a 550,000 sq. ft. office tower in the city's Back Bay.

The project may find itself with competition rather quickly. Reports in the local business press say Boston Properties is pushing plans for its own 815,000 sq. ft. office tower. The building would be constructed on a site in the Prudential Center office complex, which the REIT recently acquired from Prudential Life Insurance Co. for just over $700 million.

Boston is one of those cities that solicits rave reviews from just about everyone. What's not to like? It's the top East Coast city for job growth, backed by strong financial, health care and technology companies. People actually work, live and play downtown, and the scarcity of land safeguards against overbuilding.

Boston's vacancy rate has plunged below 4% downtown and rental rates have soared to $38 per sq. ft., according to Realty Information Group. Trophy properties, such as 125 High St., are commanding rents topping $56 per sq. ft.