At the moment, the total direct vacancy rate in the Central Business District has risen to 9% in the first quarter while dropping in the past year to 11.4% in the suburbs, according to U.S. Equities Realty, LLC's first-quarter office trends report. Net absorption was 536,142 sf in the suburbs in the first quarter, while the CBD saw negative absorption of 144,754 sf.

" I don't know is there's a lot of interest anywhere, frankly," says Julien J. Studley, Inc. executive vice president Rick Schuham, a downtown office specialist. "There's a big pause. A lot of deals have croaked or taken a big breath. And I think that's uniform."

Some deals that were long done are partially unraveling. Schuham notes Commonwealth Edison recently put 122,000 sf in Oakbrook Terrace up for sublease. When the utility company took 430,000 sf at Lincoln Centre II and III in the East-West Corridor submarket, it was the largest suburban office lease of 2000 by 300,000 sf. The suburban market already had 5.1 million sf available for sublease, U.S Equities reports, which when factored in pushes the vacancy rate up to 18.5%.

Howard Meyer, senior vice president of U.S Equities, gives an edge to the Downtown office market. "Tenant brokers will tell you there's a lot going on in the suburbs. But you can't talk about the suburbs without traffic coming up. That bodes well for Downtown," Meyer says.

For those suburban companies that are more adventurous than their generally cautious counterparts, Downtown space often is more attractive than expanding current space, Meyer says. "Will the suburbs continue to be viable? Absolutely. But the Downtown market is seen as a necessary means to acquire the employees they want," he adds.

However, cost-conscious corporate decision-makers are more apt to do nothing rather than sign a new lease. Contrary to the economists who have predicted a second-half upturn, Schuham expects the wait-and-see attitude to persist through the year.

"I don't see anybody sitting on the edge of their seat waiting for a miracle comeback in the second half," Schuham says.

Instant Insights /

No Clear Market Winner in Office Leasing Game

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