CHICAGO—The economy and job growth seems to be strengthening, but many in commercial real estate have begun asking why the office market remains somewhat anemic. MBRE has just published their May Market Report and points out that “according to the Bureau of Labor Statistics, Chicago added over 80,000 jobs in 2012, the second largest yearly gain in employment since before 2003.”
Furthermore, MBRE says that the downtown has also begun to have success with business incubators like 1871 and Catapult Chicago, both of which have started up a new generation of high-tech firms. Last month, for example, GlobeSt.com reported that Shiftgig, an online provider for the services industry, joined Catapult Chicago, and as a result, has grown, attracted new talent and will soon break away and seek out new downtown office space. Catapult entrepreneurs have raised approximately $8 million from investors in the past eight months and Galen Mason, a co-founder of Catapult, says he expects them to raise about $20 million this year.
MBRE notes that “a study by the Kauffman Foundation, the world's largest foundation devoted to entrepreneurship, found that when there is net job growth in the U.S. it is primarily driven by start-up firms.” But even though all of this activity bodes well for the future, the efforts have not had a chance to mature, and the office market continues to heal very slowly.
“Many companies have been right-sizing their leases to accommodate for shrinking square-foot per employee ratios and space-saving cloud technology,” according to MBRE. But since this left many firms with unused space still covered by their leases, a recovering economy means they can expand without growing their office footprint.
Therefore, the low vacancy rates that downtown Chicago experienced in the late 1990's remain a long way off, the MBRE report states. Instead, "in the near term, as start-ups mature and established companies finish re-filling their excess space, we expect direct vacancies to continue their slow, methodical decline despite the strong demand drivers previously discussed.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
