The office direct vacancy rate in Chicago, for all officebuildings including single tenant buildings and privately ownedbuildings, declined to 11.6% in the third quarter from 12.3% duringthe same period last year. "The office market is as healthy as wehave seen since 2000, the industrial market is at the peak of thecycle (and) investment sales have set record setting volumes,"Leisch says. The vacancy rates for office space and industrialspace, which is currently at 9%, are slightly higher than thenational averages because Chicago has "more mature" space with "anembedded inventory of obsolete space," he says.

There is currently 7.5 million sf of office space in the Chicagoarea under construction but Delta Associates is expecting thevacancy rates "to remain relatively constant" for both the suburbsand Chicago submarkets, he says. "We expect demand and delivery topretty much be in equilibrium for both the downtown and thesuburbs," with the demand at about eight million sf annually anddeliveries to be about 8.8 million sf annually, Leisch says. Rentalrates are likely to increase each year through 2009 "with thedowntown (rates) moving up more sharply than the suburbs," he says.For industrial space, new deliveries of 18.3 million sf areexpected to outpace demand of 13 million sf, which is expected todecrease the rate at which rents are going up from 3% to 2%.

Delta Associates is predicting job growth to continue but at aslower pace than this year's 60,000 new jobs. An average of 30,000new jobs are expected in the Chicago area annually through 2009.More importantly, though, the company says the majority of jobscreated will be "high quality." This year, 82% of the jobs createdare "high quality, high paying, office-producing jobs" withcompanies and employees that "rent office space, who consume highretail goods, who rent class A apartments (and) who buy high-endcondos," he says.