The local major brokerage houses have differing opinions onwhere the CBD office vacancy rate is, between 11.6% and 13.4%, butall agree that while it had been going down, it's now rising backup because tenants are getting nervous and holding off on deals. "Ithink we won't see vacancy rates continue to drop, but willstabilize and creep back up," says Lisa Konieczka, an EVP with CBRichard Ellis. "However, landlords will still want to meet theirpro-forma goals."

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Todd Mintz with Equis Corp. says market rental rates are attheir highest point in the CBD, a figure right around $37 per sf,and prices will likely hold steady regardless of the economy,especially with the top class A properties. "The really high-floor,class A rate is going to stay high, but the rest of the space willdrop," he says. "But we're still looking at one of the worst timesfor our tenant clients to make deals. We will try to get them ashort-term extension, try to get them into the market later thisyear, which will be a far better time for striking a deal."

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Tiffany Winne, corporate managing director with Studley, agreesthat the demand for top-of-the-market space still sees peoplewilling to pay premium prices. "I know that at the new 300 N.LaSalle, there's not any unencumbered full floors left to lease,"she says. "But the landlord-favored market is starting toevaporate. If we're right, this will turn out to be one of theshortest landlord-favored periods that we've gone through in 20years. We did a study that showed that tenant-favored periods,since 1987, lasted four-to-six years, while landlord-favoredmarkets lasted two-three years, and this last one would set arecord."

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The last three-to-six months has ended the short-lived landlordcycle, says Mike Sessa, a managing principal with Staubach. "We'reseeing the inventory about to come into the market in 2009-10, andcouple that with the uneasiness in the economy and the election, ithas everyone nervous, and certainly has landlords nervous, they'restarting to lose their momentum. On the tenant side, we're takingdeals on a case-by-case basis, some users are being very thoughtfulabout deals."

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There are large deals out there waiting to land, he tellsGlobeSt.com. You've got BP looking for several hundred thousand sf,KPMG out for about 300,000 sf, and Ernst & Young also out forabout that much, he says. "I know Mercer is close to signing a dealat 155 N. Wacker, and we have the American Medical Association veryclose to deal for the Union Station redevelopment."

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What these large tenants do in the next 12-15 months, whetherthey renew, relocate into second generation space, anchor a newbuilding or leave the market altogether, will have a major impacton the CBD market, Konieczka says. "Demand is just stalled ascorporations look to see what happens with the economy. Landlordsneed to make the decision if they're going to hold rents high, it'sa matter of who will be the first to blink," she tellsGlobeSt.com.

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However, there's still a halo of good news surrounding Chicago,says Tamara Kos, and EVP with Transwestern. No matter how high therates are, or even if they're lowered, the city is still one of thebest deals, she tells GlobeSt.com. "In comparison to other markets,such as San Francisco, New York City or even London, Paris orSingapore, a major international firm in Chicago pays a fraction ofwhat it would pay in those cities. Plus, there's not that muchbarrier to entry, we're one of the most development-friendly citiesin the whole country."

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Though he didn't have much time to talk Thursday after arrivingback from a Phoenix office market conference, John Abuja, anassociate VP for Marcus & Millichap Downtown Chicago, did agreethat his city is seen in a strong positive light by the rest of theworld. "Investors are favoring Chicago, we're in the top four orfive for where they'd prefer to spend their dollars in 2008," hesays.

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