CHICAGO—The office market in downtown Chicago is in the midst ofone of its best years since the onset of the economic recovery. Inthe third quarter, the CBD recorded a positive absorption of300,854-square-feet, according to MBRE'sjust-published market overview.

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This pace roughly matches what happened in the first twoquarters, and year-to-date the CBD has aboutone-million-square-feet of positive absorption. “Through threequarters, the positive absorption in the CBD has already outpacedthe most recent peak absorption figure in 2011 and, if current paceholds, will exceed the 2012 and 2013 figures combined.”

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And Andrew Davidson, executive vice presidentand managing director of corporate services at MBRE, tellsGlobeSt.com that part of the credit for this expansion goes to thediversity of the CBD's economy.

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“Tech companies get the headlines these days because unlike alot of tenants they are expanding,” he says. However, tech firmsare currently soaking up a relatively small portion of downtownoffice space. The more commonplace businesses, such as financialand professional services, still account for most absorption.

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The tech firms Enova, ValenceHealth and Uber did sign significant newdeals for CBD space during the quarter for a combined total of343,779-square-feet. But Davidson points out that the largest newdeal was completed by Wintrust Financial, whichtook 179,332-square-feet at 231 S. LaSalle St. And the quarter'slargest renewal was by the University of Chicago's NationalOpinion Research Center which extended its existing 88,000-square-foot lease at 55 E. Monroe andtook another 30,000-square-feet.

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“Of 146 tenants identified by MBRE as presently on the marketfor new space, just 17 of these are technology-specific,” accordingto another recent report produced by the firm. “The needs of thesetechnology sector tenants are 12.5% of the 7,392,000-square-feet oftotal requirements of all active tenants.”

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The direct vacancy rate sank to 13.75% by the end of the thirdquarter, a decrease of 20 bps. Tenants taking up space in class Bbuildings drove the market as the rate for these properties fellroughly 50 bps to 15.2%. The N. Michigan Ave. submarket did seenegative absorption of 169,193-square-feet, but MBRE attributesthis to the AMA's departure andDraftFCB's contraction.

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MBRE expects the vacancy rate to continue declining.Furthermore, as long as the market does not receive any majorshocks, the healthy trend should continue at least until 2017, whendevelopers will deliver Chicago's newest trophy towers at 444 W.Lake St. and 150 N. Riverside in the West Loop.

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And over the long-term, Davidson remains quite confident that agrowing array of users will absorb space as it opens. “If you lookat the nation's demographic trends, you will see that we have hugenumbers of baby-boomers, about 11,000 per day, which will retire ina few years. They are going to have to be replaced with youngerworkers, and for the most part, those workers are not in thesuburbs.”

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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.