A majority of brokers, developers and appraisers interviewed by Bach and Ptacek believe office condominiums are a temporary market phenomenon driven by low interest rates, rather than a permanent and expanding niche. Rising interest rates looms as the biggest risk for developers planning office condominium projects in the next three years, the authors report.

Meanwhile, gaining control over occupancy costs is by far the best reason to own an office condominium, more than 60% of the brokers, developers and appraisers told Bach and Ptacek. "Effective rents are often higher for smaller tenants, as they are not offered the concession packages used to lure big tenants," the authors note. Low interest rates were cited by only 20%, and while 6% noted the potential for long-term appreciation, speculation was not part of anyone's equation.

Locally, the office condominium market may have longer legs, if only because of its recent emergence, their report suggests. High vacancy rates in class B and class C office buildings have made the condominium concept appealing to owners, according to the report. "The Downtown Chicago office-condo market is barely 12 months old," Bach and Ptacek say. "Since then, over one million sf of condo space has been added to the market--nine buildings--of which only one building has sold 100% of its units and the rest of which have sold little if any."