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The downtown office market, which hit bottom 18 months ago after a sickening three-year slide, is on the rebound.
Recovering rents and lower vacancy rates promise to ease the financial straits of office building owners who have been forced to sign money-losing leases to woo tenants in recent years.
Even so, the budding recovery will do little immediately to benefit older office buildings with marginal locations, mainly because of the huge backlog of new space yet to be absorbed.
"The market is one notch above the bottom, and it's going up," says Mike Sivewright, Chicago leasing director for Compass Management & Leasing Inc., a unit of Equitable Real Estate Investment Management Inc.
Cautious optimism about the market finds support in several key indicators: strong absorption, shrinking vacancies and recent decisions by major landlords to hold onto space in anticipation of rising rents.
Among landlords turning down deals that offer little or no cash return--he kind of deals prevalent in recent years--re Equitable; big insurers Teachers Insurance and Annuity Assn. and Prudential Insurance Co. of America, and pension adviser Heitman Financial Ltd.
Their local holdings include such notable properties as Equitable's 401 N. Michigan Ave., Teachers Insurance and Annuity Assn.'s 311 S. Wacker Drive, Prudential's 225 N. Michigan Ave. and Heitman's Xerox Centre at...