In the wake of the last five weeks' irrational exuberance its time to get real again. Via the Zack's investment blog, real estate giant Cushman & Wakefield reports office vacancies continue to rise around the country (out of 31 markets tracked, only one, Dallas, saw reduced vacancy). FT's Alphaville blog points out that CDS spreads for U.S. banks markedly widened on Tuesday, underscoring investor anxiety.

Office vacancy rates rose [subscription required] nationally for the first time in four years in Q4 2007, The Wall Street Journal reported Monday.

Citing data provided by Reis Inc., a New York real estate research firm, The Journal reported that the addition of an unusually large amount of new space and tenants shying away from lease signings pushed the national vacancy rate to 12.6% in Q4 2007 from 12.5% in Q3 2007.

The survey indicated that the increase came after 16 consecutive quarterly vacancy rate declines and also noted that the subprime mortgage-affected West (Los Angeles) and South (Fort Lauderdale, Fla.) saw vacancy increases of 1.9 and 1.7 percentage points, respectively.

Economic Analysis: The pertinent information here is not the size of the vacancy increase, but the fact that the office vacancy rate rose. While qualifying the above by noting that it's only one quarter -- and one quarter does not a trend make -- the vacancy rate increase, when viewed against a backdrop of other sluggish / sub-par data on residential housing, corporate profits, job creation, retail sales and consumer confidence, paints a decidedly modest economic picture. It's another data point that suggests that the U.S. economy is already in slow-growth mode, or perhaps worse.