Office Market Will Decline Through 2010

CHICAGO-While Chicago’s Central Business District has not yet hit the lows seen in the previous economic downturns, real estate experts say the market is well on its way. Even the optimistic don’t foresee any stabilization, let alone recovery, for at least another year. Almost across the board, execs forecast that the worst is yet to come, as rents and occupancy continue on a downward slide.

MB Real Estate’s May 2009 market report shows that sublease space is playing a large role in market troubles, having reached 3.5 million square feet – a number predicted to grow further. Vacancy including sublease space is currently around 15.3%, rapidly approaching the 16.5% vacancy rate the market saw when the dot com bubble burst around 2001. Meanwhile, Chicago’s 12.2% vacancy rate, not including sublease space, has surpassed that of 2001, when vacancy was 11.4%.

“As long as this economy continues, the sublease market is going to continue to grow, evidenced by the unemployment rate and we’re at the start of seeing vacancy really shoot up,” says Andy Davidson, EVP with MB. “Users’ space needs are going to shrink, and groups are going to be trying to renegotiate leases and giving space back early, so you’re going to see those numbers start taking effect.”