What is going on with the commercial real estate market?

Several months ago, an acquaintance of mine shared her thoughts on the commercial office market. She said that the commercial office market would tank in the first quarter of 2008 due to the subprime issues of 2007.

It's the second quarter and we are beginning to see the fallout in the downtown Chicago commercial office sector. According to the March 31, 2008 issue of Crain's Chicago Business, there is going to be a 1.3% drop in value for the downtown office market (pg. 16). Landlords are going to have a tough time in the coming months; tenants are going to see more concessions like free rent and higher tenant improvement (TI) allowances.

Furthermore, the suburban commercial office market is also struggling. According to Grubb & Ellis Research Office Market Trends Chicago Metro, 1st Quarter 2008, the continued downsizing and bankruptcy of housing and tech related companies has increased available office space in the Chicago suburban market.

I am personally seeing my clients take on a wait and see approach. Small business owners are taking a second and third look at the market and wondering if a move really does make sense. Nevertheless, business has a way of making real estate decisions a necessity. Luckily, my clients are prepared to deal with the forthcoming economic changes and are able to make appropriate real estate decisions. Are you?