Despite tangible signs of an office recovery, Equity Office Properties (EOP) posted a lackluster first-quarter.

The Chicago-based company reported FFO of $226.4 million, or .55 cents per diluted share, versus $302.1 million, or .66 cents per diluted share, in the year-ago period. Total income from early lease terminations in the first quarter of 2006 was $6.5 million, compared to $51.5 million in the year-ago period. According to an EOP news release, EOP’s quarter-over-quarter FFO decline reflects the effect of $2.7 billion in dispositions that the company completed last year.

Leasing volume during the first quarter also declined on a quarter-over-quarter basis. EOP leased 4.2 million sq. ft. of office space in the first quarter, compared to 4.8 million sq. ft. in the first quarter 2005. One piece of good news: Tenant Improvements (TIs) and leasing costs for leases that commenced during the first quarter were $16.52 per sq. ft. on a weighted average basis. The cost of TIs and leasing costs for the first quarter 2005 was slightly higher at $16.98 per sq. ft.