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CHICAGO-In announcing Insignia/ESG midyear figures for the Downtown Chicago office market Michael Klein, EVP of the Midwest, “We continue to see the effects of the economic slowdown on the commercial real estate markets.”

Midyear figures show the third consecutive quarter of negative net absorption, -675,000 sf, and an overall availability rate of 14.6%, up from 13.9% at first quarter 2001 and 13.9% at midyear 2000. Insignia defines available space as that which is actively marketed and ready for occupancy within 12 months.

Given that the commercial real estate markets typically follow the economy, the last time quarterly statistics yielded positive absorption (1.7 million sf) was third quarter 2000, the same quarter that the availability rate and available sublease space each reached two year lows (13% and two million sf, respectively).

“It’s no coincidence,” says Klein. “The economy began to slow down third quarter 2000–the effects are apparent.” Despite the increase in availability, average asking gross rental rates have remained relatively stable at $29.65, although according to Klein, some owners are beginning to offer increased concession packages.

“We are seeing additional tenant improvement allowances, and, on some occasions, rental abatement,” Klein notes. Sublease space continues to rise as recent corporate layoffs have resulted in a decline in demand for space. Midyear figures show 3.9 million sf of sublease space available, up from 3.3 million sf at the end of first quarter 2001 and 2.3 million sf at year-end 2000.

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