Suburban Office Market Going From Bad to Worse

More sobering, however, may be the real estate firm's forecast for 2006. While predicting a 15.1% Downtown vacancy rate three years down the road, JLL says rent growth will be flat at best, if not declining slightly. The picture is worse outside the city, even though JLL expects vacancy to improve to a still worrisome 17.8%. Owners of suburban office properties are likely to see a serious decline in rents, according to JLL.

So far this year, JLL reports rents are down 2.3% Downtown and 1.1% in the suburbs.

With completion of the Bank One Center adding 1.5 million sf to the Central Loop submarket, vacancy there has jumped four percentage points so far this year to 15.73%, according to JLL, and 18.15% when sublease space is considered.

In the suburbs, the O'Hare submarket has fallen to the bottom in terms of direct vacancy, which has risen nearly three points to 23.64% this year, the firm reports. However, the western end of the I-88 Corridor remains the softest market when sublease space is considered, with JLL pegging the total vacancy figure at 32.87%.

Of JLL's top 10 suburban office markets, the city's predicted vacancy rate in 2006 tops only Dallas and San Francisco, markets that also are expected to see a serious decline in rents.