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How bad is the downtown office leasing market?
It's "probably the softest I've seen it since I came here in 1971," John Buck, the dean of Chicago office developers, told a gathering of his peers last week.
It's so bad that some landlords are leasing office space at a loss, something they haven't done in a decade. So bad that the owner of the IBM Building, until recently a permier corporate address, is considering selling off some of the skyscraper's space as office condominiums. So bad that some landlords are giving up on the office market and going residential.
With more than 26 million square feet of vacant office space, downtown Chicago is
among the weakest markets in the nation.
Conditions are improving in other big cities, but they are likely to get worse in downtown Chicago before they get better. The most pessimistic observers don't see a recovery until 2007.
Why? Downtown Chicago is one of the few markets where developers, Mr. Buck included, have continued to build new skyscrapers, adding supply to a market already suffering from weak demand. Developers have added 9.5 million square feet downtown since 2000, with another 2.4 million on tap.
"It's just a recipe for prolonged pain," says George Kohl, Midwest-area director for Dallas-based Trammell Crow Co.
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