Expert: Expect Landlord's Market By 2008

CHICAGO-Greg Leisch, chief executive officer of Delta Associates, a research affiliate of Transwestern, told an audience of professionals Nov. 2 that he predicts the local commercial real estate industry in 2007 will mimic the second and third quarters of this year. He added that a landlord’s market will return for office and industrial property owners by 2008. Leisch spoke to a group of brokers, owners and developers at Transwestern’s 2006 Trendlines event at the downtown W Hotel.

He says the national economy has shown positive movement in the past quarter, such as unemployment dropping to 4.6%, gas prices at the lowest point in the past two years and the stock market trading above 12,000. “And, don’t forget, the Bears are 7-0,” joked Leisch. He admits there are some unsettling figures, such as the job market. However, he says Chicago’s market is higher than expected, at 51,000 new jobs this year, and is on track to average 65,000 new jobs each year for the next two years.

“About 75% of those jobs are high-paying professional jobs, which is why the office market in Chicago has made a faster-than-expected comeback,” Leisch says. “For the past few years, there’s been three million to six million sf of office built each year, whether it was needed or not, and some years there has been negative absorption. Now, we’re looking at the first time in years where we’ll have higher demand than available supply.” Office vacancy already dropped from 16.3% this time a year ago to 13.8% today. As office vacancy drops below 13%, the low end of what he calls the “equilibrium zone” due to positive absorption, rental rates should rise, Leisch says.