Saturday, July 28, 2007

Office occupancy: downtown boom, suburban swoon

In a post on Thursday I mentioned that downtown office buildings in some major markets were doing well, but that I was concerned about, among other things, rents and vacancies in the suburbs.

Here's a story in the Tribune confirming my suspicions. The gist of the article? Because of the subprime residential debacle, businesses that service the residential market such as mortgage companies, mortgage brokers, title companies and the like have given up 1,000,000 sf of their space, thus creating even more vacancies in the 'burbs.

Vacancies mean lower rents and lower sale prices in the suburbs. The real question is to see whether the trend continues over the long term or not. And will some tenants choose to relocate or move some portions of their businesses out of downtown to save money? If the predictions of rising downtown rents are correct, I would not be surprised.