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What keeps senior operating officers of the nation's largest office REIT awake at night? In a word -- occupancy. "If you look at our industry, there is some analogy to filling hotel rooms and airline seats," explains Christopher Mundy, executive vice president of strategic planning and operations for Chicago-based Equity Office Properties Trust (NYSE: EOP), which once again ranked No. 1 on this year's Top Office Owners survey. "Every space that is vacant is really underutilized inventory."

With the current national office vacancy rate for all classes of space hovering between 14% and 16%, landlords these days are as intent on signing and retaining tenants as Shaquille O'Neal is on winning NBA championships. Higher occupancy numbers translate into higher net operating income and a rising stock price -- and the pressure to produce these results is intense.

Equity Office reports that at the end of first-quarter 2002, the occupancy rate of its portfolio registered 90.7%, down from 93.7% in third-quarter 2001. The portfolio includes 767 properties comprising approximately 128 million sq. ft. in 21 states and the District of Columbia. Those ownership totals reflect the completion of the Spieker merger in July 2001, which expanded Equity Office's portfolio by nearly 30%, or 28 million sq. ft. The company's market cap stands at $12.6 billion.

"We want to put ourselves in a position to win all the jump balls with our customers and our brokers, our extended sales force," says Mundy. In non-sports terms, that means implementing best practices such as simplifying lease documents for prospective tenants, paying broker commissions promptly and leveraging the company's scale to improve operational efficiency.

In Boston, for example, the REIT consolidated 13 management offices and opened a 24-hour customer-service call center. "Project New World," as the new pilot program is referred to, saves the company money and improves efficiency.

Most of the 391 office properties acquired in the $7.2 billion Spieker deal are located in the slumping markets of Northern California. "If you look at the markets Spieker was in [San Francisco, Seattle and Portland to name a few], they are strong, intellectual capital markets in very supply-constrained places," says Mundy. "We believe that in the long run, the investment will pay off. In the short term, things have become tougher there."

Indeed, Class-A office rental rates in San Francisco have plummeted from $80 per sq. ft. in fourth-quarter 2000 to $35 per sq. ft. in first-quarter 2002, according to Cushman & Wakefield. The company's exposure in Northern California and elsewhere has not escaped the attention of Moody's Investors Service. "EOP's rapid rise of acquisitions, weakening fundamentals due to slowing rental rate growth and rising vacancies in major markets where it operates, and increased exposure to development, are credit concerns," wrote Moody's in May. "Integration risks are partially offset by the firm's sound track record in merging and integrating firms."

Among its recent milestones, Equity Office became the first REIT ever to be included in the S&P 500 index in October 2001. The company also made the list of Fortune magazine's "Most Admired Companies" in February 2001.

The company's focus these days is less on acquisitions and more on core internal operations, including finding a replacement for Timothy Callahan, who resigned his position as CEO in April. A broad search both inside and outside the company is under way, Mundy says, and a new leader is likely to be named by September. In the meantime, chairman Sam Zell is assuming the role of president and CEO. The company's stock price closed at $30.25 on June 17, below its 52-week high of $33.08.