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Chicago's commercial real estate market is starting to act a lot like the stock market: The bubble is bursting.
Major deals are being put on hold or canceled outright. Investors and lenders are getting cold feet. And the road ahead is rocky. Prime Group Realty Trust last week backed out of a $239-million agreement to buy IBM Plaza--just one of several sales that have been caught in real estate's downdraft.
The IBM deal was characteristic of the big appetite of Chicago-based Prime Group and other real estate investment trusts (REITs) for showcases that would appeal to individual investors attracted to a long-term inflation hedge.
Prime Group blames the breakdown on the failure of IBM Plaza's owner to deliver on a "material condition" that was part of the sale conditions. But other real estate sources point to price levels that suddenly seem overvalued in today's market.
"The traditional sources (of funding)--life companies and pension funds--are being besieged right now," says developer Marvin Romanek, another seller...