SoHo now just nogo.

Downtown is the place to go for discounted rents. It's a converse reality in SoHo, however, where steeper rents are boosting commercial vacancy.

Real estate sources argue that SoHo's rising vacancy will force landlords to drop rents, which may in turn help fill some vacancies here.

CoStar data confirms that vacancy is higher in SoHo than it is in the Wall Street area. The total amount of vacant space--including direct and sublease--is slightly over 9% in SoHo. For the financial district, that number is 8%, according to CoStar.

One broker equates the higher commercial vacancy rate in SoHo to a number a factors.

"The rents just haven't come down in SoHo. Also, the area was over-hyped for so long," said Ruth Colp-Haber, a partner at Wharton Property Advisors, Inc.

She also sees cheaper rents in the Wall Street area as responsible for luring tenants south, right past SoHo.

SoHo's inventory of office space is also working against it, since it consists mainly of small floor plates in old loft buildings. For many of the businesses seeking office space in Manhattan, SoHo just doesn't make sense--in terms of the price of its space and the configuration of that space.

"This could be a harbinger of lower office rents in SoHo, where the market has been too overheated," said Colp-Harber.

CoStar data for the area comprising City Hall, the Insurance District, World Trade Center, and the Financial District shows that these neighborhoods have a combined direct and sublease vacancy of 15%. SoHo, Tribeca and Hudson Square have a cumulative vacancy of nearly 18%. Even more telling are the average asking rents in the former area, which is pegged at $32/SF. The area surrounding SoHo boasts an average rate of $36.

Tribeca itself has a combined vacancy rate close to 23%, with 2.6 million SF of direct and sublease space available. The amount of direct and vacant space available in SoHo, Tribeca and Hudson Square is well over 6 million SF.

"SoHo was just loaded with dot-coms. Now there just aren't any left there. If the owners haven't gotten realistic yet with their pricing, they will soon," said one real estate source.

On the retail front, SoHo is also feeling the pinch. With strong demand from retailers to establish a Downtown presence, the same competitive factors are leaving much retail space vacant in SoHo.

"Rents are just lower Downtown. There is also stronger demand to rent retail space Downtown," said Gary Alterman, a principal at Newmark New Spectrum.

Alterman hasn't seen any real movement in the SoHo retail market since Sept. 11. After the attacks, said Alterman, SoHo suffered from the "bridge and tunnel" crowd's absence on the weekends. He doesn't see landlords suffering as much as tenants looking to sublease their space.

"Landlords are still getting then rent checks. So it's the people trying to sublease their space who might be willing to take any price," he said.

As another retail broker sees it, the SoHo retail market was overpriced even before Sept. 11.

"Between 1999 and 2000, the retail rents doubled here. But since Sept. 11 the rents just haven't come down that far," said Robin Abrams, executive vice president at Lansco.

Summing up the immediate future of SoHo retail Abrams said that a lot of people are "on hold", waiting to see what happens next.