Tag Archives: Chicago Office Market Conditions
Sam Chandon, global chief economist of Real Capital Analytics writes an excellent article at The New York Observer titled: Why the Rosier Employment Report Still Falls Short. To summarize, he believes the recent employment report paints a very optimistic picture about the rise of jobs and the overall improvement of the economy. After all, February saw the largest one-month improvement in jobs added to the US market since May 2010. However, due to factors such as the slow rate of job growth and rising global political and economical conditions, the commercial real estate sector, in particular, may see a slower increase in business than expected.
“In areas that are more directly relevant for prime office-space demand, the results have been consistently disappointing. Information services reported no increase in jobs in February. In the financial services sector, employment fell by 2,000 jobs over the month; and this sector has almost 50,000 fewer jobs than a year earlier. While many financial institutions have reported robust recoveries in profit levels, these gains have yet to translate into an observable improvement in the sector’s overall employment levels.”
We agree with Chandon. One month of job gains does not a trend make.
For tenants, the next two years will offer an opportunity to secure dramatically low cost office space. Here’s why:
CURRENT MARKET CONDITIONS
The unemployment rate increased from 8.1% in February to 8.5% in March. Adding insult to injury, January job losses were revised from 655,000 non-farm payrolls to 741,000. Since the recession officially began in December 2007, the economy has lost 5.1 million jobs with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. Many are saying we’re skidding across the bottom of this severe recession but I disagree.
Commercial real estate is just beginning to show weakness that will eventually cripple many owners and force a wave of bankruptcies. In fact, 525 W. Van Buren was the first building to be sold in Chicago’s central business district for $130 million, $6 million less than what the seller or investor paid for it five years ago. This transaction is the first example of a significant downtown commercial real estate property changing hands for less than the seller paid. Read more…