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Despite the growth of suburban challengers, downtown Chicago is holding its own in the competition for major corporate real estate tenants.
A recent spate of lease renegotiations for downtown office space clearly demonstrates that corporate flight to the suburbs has subsided, and that the city can look forward to increased absorption of office space in the next decade.
Several important downtown office building tenants recently extended their long-term leases in deals that will enable them to grow in the city for years to come.
Other tenants are in the process of renegotiating leases, a development that foreshadows strong demand when millions of square feet of new downtown office space comes on-line, as scheduled, between 1990 and 1992.
Downtown's brightening forecast is a result of several market forces, although real estate professionals also applaud efforts by city planners to transform the Loop into an area amenable to residential, recreational and cultural uses.
But the primary factor has been overbuilding in the city, which has left the 110-million-square-foot downtown office market with a vacancy rate of 11.3% -- still relatively healthy when compared with the 21.3% vacancy rate in the 55-million-square-foot suburban market, according to a first-quarter survey by Coldwell Banker Real Estate Services.
City landlords are offering rents in the $22-a-square-foot range, competitive with $19 rates in the suburbs -- especially since office building tenants are increasingly exasperated with the inability of suburban planners to free their transportation arteries from mounting gridlock.
In addition, most of the tenants that are logical candidates for suburban locations already are in the suburbs, having moved there by the early '80s.
"The city and suburbs have become almost two entirely distinct office markets," says Jacque Ducharme, head of the Chicago office of Julien J. Studley Inc. "The suburbs have become home to the technology, software and communications firms, and the city is home to the professional and financial service firms."
Indeed, figures tracked by Real Estate Research Corp. show that downtown's share of annual office space absorption in the metropolitan area has stabilized at about 40% for much of the decade. That's well below the 58% marketshare captured by downtown office buildings during the early 1970s, but higher than downtown's...