Done Deals: Cooling Economy Has Minimal Impact on CBD Office Market in Chicago

Sunday, August 10, 2008

Cooling Economy Has Minimal Impact on CBD Office Market in Chicago

(Above, The Magnificent Mile shopping district in Downtown Chicago,)

CHICAGO, IL — After a solid performance in 2007, office fundamentals in Chicago began to soften in the first half of this year due to a cooling local economy, according to a second-quarter Office Research Report by Marcus & Millichap, the nation’s largest real estate investment services firm. (O'Hare International Airport, top right photo)

e CBD office market, on the other hand, is relatively insulated from housing-related weakness, and fundamentals in the area are anticipated to remain healthy this year.

“Investors with market knowledge and elevated risk tolerance are seeking value-add properties in the Northwest suburbs and O’Hare submarkets, where cap rates are in the low- to-mid-8 percent range,” says John Przybyla, regional manager of the Chicago Downtown office of Marcus & Millichap.

Following are some of the most significant aspects of the Chicago Office Research Report:

· Completions are expected to reach nearly 2.6 million square feet in 2008, adding 1.1 percent to inventory.

· Vacancy is forecast to end the year at 16.4 percent.

· Asking rents are projected to finish the year at $27.43 per square foot, rising 2.9 percent.

· Effective rents will gain 1.9 percent to $22.39 per square foot.

· Office-using employment growth in Lake and Kenosha counties has outpaced the rest of the metro with roughly 2,000 jobs added, a 1.9 percent increase.

For a copy of the complete Chicago Office Research Report, as well as reports on other markets nationwide, visit our website at http://www.marcusmillichap.com/.