Report: Office Sector Soft in Chicagoland
October 8, 2012
By: Amy Wolff Sorter
At first blush, Studley's Q3 office report appears to be very optimistic, with the CBD demonstrating a vacancy decline from 17.6% to 17.2% from Q2 and suburban office space also showing moderate improvement. But Joe Learner, Studley's EVP and co-branch manager points out that things aren't quite as sunny as the numbers might be portraying.
"There are pockets of demand, partly coming from the technology sector," he acknowledges. ...
... It's true that demand is high for the loft space favored by technology firms. This is where Chicago, especially the CBD, is experiencing tightening of office space and could see some new construction in this very niched arena. But "outside of the tech world, activity continues sluggish," Learner tells GlobeSt.com. "It's a tale of two cities, in some regard."
Learner goes on to say that the suburbs aren't doing a whole lot better than the non-tech areas of Chicago's CBD. One main reason is because the suburbs are more corporate-oriented, and, as Learner puts it, "corporate American has been successful in doing more with less." As such, demand is soft no matter where you look. ...
... Otherwise, Learners says Chicago area office space trends mirror the national trends. "If you look at what's going on nationwide, companies are using this time to modernize their space while looking out for their balance sheets," Learner notes. "Landlords, in the meantime, are looking to prolong or to get out of their debt situations. This typically requires credit tenants with longer-term leases, but it's not creating more absorption."
Nor will this really change during the near term. Learner believes that employers have finished "right sizing" and hiring for the time being and have brought in enough employees to accommodate their businesses. That, combined with continued problems in China and Europe, could continue to put a dent in both absorption and vacancy declines not just in the Chicago area but nationally.
"We're in a funky time right now," Learner observes. "Until this shakes out, I don't see the current situation changing, except that tech-related companies will continue to grow at a good pace."
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