"The much-publicized move of Boeing Corp.'s headquarters not only strengthens the Downtown market, but reaffirms the Downtown market and Chicago as one of the truly great 24-hour cities to do business and raise a family," Reschke says.

The strength of the Downtown market has helped Prime Group's $345-million Dearborn Center development, which is 63% pre-leased. However, Prime Group stock fell 4% on the earnings announcement to $13.25 per share after briefly setting a 52-week low. In addition to lower earnings, the company announced it is no longer close to selling its 8-million-sf suburban office and industrial portfolio, which it expected to complete last month.

Boeing's decision to take 270,000 sf at 100 N. Riverside Plaza takes a major chunk out of the 400,000 sf of sublease space that came on the Downtown market in the first quarter, Reschke says.

The Downtown vacancy rate actually dropped to 8.0% in the first quarter, Reschke says, while net rents for Class A space rose 3.9% to $20.58 per sf. However, the picture is much different outside Downtown, he adds, which comes as no surprise to suburban building owners and leasing brokers.

"The current economic slowdown has affected the Downtown and suburban markets in dramatically different ways," Reschke says. While the vacancy rate dropped Downtown, it rose to 10.5% in the suburbs with net rental rates flattening at $15.93 per sf.

Prime Group had hoped to dispose of its 8-million-sf suburban office and industrial property portfolio. That includes three-building, 925,822-sf Continental Towers in Rolling Meadows, adjacent to the Northwest Tollway, one of two suburban sites Boeing officials gave serious consideration before deciding on 100 Riverside Plaza.

"I'm disappointed to report that we have not executed a definitive agreement," Reschke says. "The market for selling suburban office buildings is very difficult, and we've resurrected discussions with other parties."

First-quarter industrial sales included the 120,000-sf 6700 W. Touhy Ave. in north suburban Niles and 310,000-sf 43-47 Hintz Rd. in north suburban Wheeling for a combined $17.4 million, a gain of nearly $2 million, says Prime Group President Richard S. Curto.