CHICAGO—A few signs of life have been seen in the suburbanoffice market, including significant positive absorption in thefirst quarter, and increased investor interest in some submarkets, but the stubbornly highvacancy rate outside Chicago may persist for a very long time,according to the latest market report issued byMBRE.

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The hopeful signs include 198,871-square-feet of positiveabsorption in the first quarter, the company's report notes.However, since the start of the recession, the suburban officemarket has experienced over six million square-feet of negativeabsorption, and with major corporate tenants continuing to migratedowntown, even more “potential headline losses could derail thisprogress in the coming quarters.”

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That migration has been a flood of well-known names includingheadline-grabbing tech companies like Gogo Inc.,which recently decided to leave its 160,000-square-foot suburbanItasca headquarters for 232,000-square-feet at 111 N. Canal St.

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“We've been running out of space,” DebbieFangman, facility manager for Gogo, told GlobeSt.com, andwanted the opportunity to design an office from scratch. “We lookedextensively throughout the Chicago area for a new office,” butopted for the downtown. “I think part of it had to do withtransportation and recruitment.” Gogo found that employees wouldprefer working in an area like River West, which had easy access tomany train lines, rather than the comparatively difficult-to-reachItasca.

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“Seeing the same necessity to have a front-facing metropolitanoffice from which to conduct business and draw talent, other firmshave been making the move,” MBRE notes. “MotorolaMobility, United Continental Holdings,Capital One, Hillshire Brands,Scor Reinsurance, and Legal & GeneralInvestment Management have all joined in on this urbantransition over the last two years.” And if the drug storechain Walgreens decides, as has been reported, tomove from their Deerfield campus to the Old Main Post Officebuilding, it could leave a giant hole in that submarket.

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One particular sign that this trend may strengthen even furtheris the large number of companies opening satellite offices in theCBD, perhaps as a way of testing the waters. “DiscoverFinancial Services, while continuing to occupy601,578-square-feet in Riverwoods, recently leased26,000-square-feet for a satellite office at the Apparel Mart, andthey're just one of many who are opening up branches downtown forbetter access to young labor and clients,” the company notes.

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Guggenheim Partners, formally based in suburbanLisle, they point out, last year closed its suburban office andmoved into their new headquarters at 227 W. Monroe, expanding itsinitial lease in the building. “Like Guggenheim Partners, theseinitial ancillary leases may be a precursor to a few more wholesaletransitions in the next few years. If so, the effect on thesuburban market could be dramatic.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.