For the first time since the early 1990s, sentiment in the downtown real estate community is mostly positive about office-building values.
An opinion poll of 40 building managers by the Building Owners and Managers Association of Chicago found that more than 51 percent believed their buildings have increased in value over the last year. Some 19 percent cited a decline in value and 30 percent said the value was unchanged.
Building values tumbled when commercial real estate crashed in 1990 and 1991, with some losing half their previous market price. A similar survey of building owners last year showed a glimmer of optimism for the first time in several years, but still only 41 percent thought their buildings were rising in value.
The new survey found that 78 percent of the respondents think net effective rents, meaning after concessions and expenses, will climb over the next 12 months. Last year, 75 percent said they thought rents would go up, and in 1994, only 27 percent said they thought a rise was in the offing.
Another association survey found that building occupancy showed a slight decline, to 82.5 percent from 82.7 percent last fall, after rising steadily from depressed levels for the last three years.
But survey analyst John McDonald, professor of economics at the University of Illinois at Chicago, predicted that occupancy would resume a slow climb. He said the slight dip was due to tenants moving out of pre-1960 buildings and to a shift in tenant composition from large users of space to smaller, entrepreneurial business service firms.
The association findings are roughly paralleled by national surveys. A report by Heitman Research, a unit of Heitman/JMB Advisory Corp., a Chicago-based real estate investment group, said the office sector strengthened in 1995 and is likely to continue to do so for at least two years, fueled by a surge in office-oriented job growth and a lack of building.
