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Comments by: Robert BachSenior VP, research and client services Grubb & Ellis Co.Chicago

Last week’s Feedback Poll took a look into the future of office leasing, asking readers what sectors would form the hottest tenancy. Financial firms blew away the competition, garnering 37% of the vote. Healthcare administration came in second, pulling 26% of the vote. The amorphous “Other” ranked third, with 24%, and legal and media brought up the rear, with 12% and 1% respectively. These results hold little surprise for Bach, who explains the reasoning below:

“Financial companies are benefiting because interest rates have pulled back in the past few weeks and the Fed has stopped raising short-term rates. Long-term rates have declined, and there seems to be a consensus forming that the Fed might even begin to lower the funds rate next year. So an environment of stable or declining interest rates is good for lenders, and you’d have to think that their earnings are going to be growing.

“If you watch CNN, you’ll see all of these ads for financial planning and retirement programs targeted to the aging baby-boom generation, and that’s going to be a growing line of business for a lot of financial-services companies. On the other hand, mortgage lenders could be hurt by a downturn in the housing market, but obviously your respondents aren’t thinking so much of title companies and housing lenders as much as they are business lending.

“Healthcare administration surprises me because our stats show that at least in the multi-tenant and single tenant market there aren’t a lot of healthcare tenants. There’s good job creation in that sector, but a lot of those jobs tend to go to hospitals and clinics.

“I can see global firms or corporate law firms or those specializing in mergers and acquisitions. As in New York, in Chicago over the past few years every major law firm has relocated to better space.

“On the other hand, I was looking at the survey and then I looked at the Bureau of Labor Statistics website. Legal-service employment has actually declined slightly over the past year, which surprised me because legal services are part of a broader category called professional and business eservices, and that includes accountants, architects, advertising firms and consultants. The other sectors are growing. They’re adding employment. I don’t know what’s behind the BLS numbers, but maybe it’s a reflection of the type of law firm.

“In all, I would look to continued, moderate absorption of office space by most types of tenants in 2007 with the possible exception of those directly relating to the housing sector.”

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