Among the new developments under construction is Prime Group Realty Trust's 1.38-million-sf Dearborn Center, now 88% pre-leased nearly two years before completion with Citadel Investment Group, LLC's taking the top 206,148 sf of the building. That's among approximately 4 million sf coming on line in the next three years, but Prime Group CEO Richard S. Curto notes that 65% of that is pre-leased. That includes his REIT's 1.2-million-sf joint venture with the Pritzker family, whose Hyatt Corp. plans to take 400,000 sf.

"Our market Downtown should be able to accommodate that delivery," Curto says.

The short-term prognosis, though, is clouded by the economic slowdown despite Boeing Corp.'s much-publicized announcement of its move to 270,000 sf at 100 N. Riverside Plaza. "Some would-be big-block users – companies that take more than 100,000 sf at a time – are rethinking their decisions to expand until the direction of the economy becomes more positive," according to the Studley report.

Curto's figures shows the Downtown market posting 247,019 sf of net absorption in the first quarter, a rosier picture than the negative-144,754-sf reported by U.S. Equities Realty, LLC. U.S. Equities also shows a 9.0% vacancy rate Downtown, a full point above Curto's figures. Regardless, Curto predicts the Downtown market will post net absorption by 1.5 million sf to 2 million sf by the end of the year.

Curto, whose REIT has its entire suburban office and industrial portfolio on the market, sees 4 million sf of office product coming on line in the suburbs this year but expects 2.5 million sf to be absorbed. That follows a banner year in 2000, when the suburbs saw 3.7 million sf of absorption. The vacancy rate, pegged at 11.4% overall by U.S. Equities, can only go up, Curto adds, before turning back down in late 2002.

"The absorption of these buildings will take longer than they have," Curto says. "It'll take 18 months to two years to catch up."

Curto has less reason to be glum about the suburban market as the Prime portfolio there is being leased at rates 27% below the current market.