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The commercial real estate market in Downtown Chicago continues to show the signs of the sluggish national economy, according to the latest CB Richard Ellis (CBRE) 2Q10 MarketView report on the downtown Chicago office market.

At midyear, the quarter ended with a substantially higher overall vacancy rate and negative net absorption.

“There is no question that until there is job growth and confidence by companies to expand, the downtown office market will continue to struggle with a rising vacancy rate,” said Lisa Konieczka, executive vice president, CB Richard Ellis.  “That being said, we have not reached the overall vacancy numbers or negative net absorption of past recessions, therefore the market is poised to recover as the country and the world emerge from this recession in the coming months.”

The report found that the vacancy rate, for the CBD office market rose to 15.2 percent from 14.9 percent in the first quarter and 13.8 percent at year-end 2009.  This is the highest vacancy rate since fourth quarter 2005, when the market showed a vacancy rate of 16.0 percent.  The increase in vacancy rate is predominately due to numerous tenants contracting in size through restructurings or relocations into smaller requirements.

“Tenants still have a strong position with landlords, giving them leverage to negotiate substantial concessions and reduced rental rates, although restricted access to capital has caused many landlords to offer substantial rent abatement packages and minimal tenant improvement allowances as part of their deal structure,” said Ms. Konieczka.

For the sixth quarter in the last ten quarters, net absorption reported negative 140,000 square feet.   On the bright side, this is one of the lowest amounts of negative absorption reported since the beginning of 2008.  The first quarter of 2010 reported the highest quarter of negative net absorption with 704,543 square feet.   Significant contributors to the negative net absorption this quarter were lease expirations and tenants vacating space.

Tags | CB Richard Ellis, Chicago, Office