More Businesses Moving Back To City

Motorola Solutions CEO Greg Brown is ditching the suburbs and is lobbying other companies to do the same.  In an interview with Crain’s Chicago Business recently he detailed plans to create as many as 400 new jobs by the end of 2012.  While the newly spun off company has existing space in Illinois Center, there’s not nearly enough space to accommodate everyone there.  He said that the new location would likely be downtown or in the O’Hare area, which follows a trend we covered lasts month: https://byobroker.wordpress.com/2011/08/02/new-trend-of-businesses-moving-back-to-the-city/

While he says he was influenced by Mayor Emanuel to move back to the city, he follows the lead of other tech firms like Groupon and Google that recognize that talented younger workers prefer to live and work in the city, avoiding suburban commutes.  Mayor Emanuel recently named Brown to the board of World Business Chicago, the economic development agency for the city, and he has been out proselytizing other CEOs to follow his lead.   See the full article here: http://www.chicagobusiness.com/article/20110920/NEWS08/110919878/motorola-hunting-for-office-space-in-chicago

New trend of businesses moving back to the city?

Bucking a trend that started in the 70’s and peaked in the 80’s and 90’s, businesses are starting to abandon the suburbs and move back to Chicago.  Long viewed as an opportunity to reduce operating costs and get more space, companies like Sears Holdings and Sara Lee moved their headquarters out of the city and into massive suburban complexes.  In a surprising about-face, Sara Lee is now considering moving back.  If it happens, they would join other big names like BP, United Airlines, Willis Group, and possibly Barilla and Acco Brands.  Growing firms like Groupon and Google have decided to stay in the city in order to draw from the large engineering and advertising talent pool.   

This shift is partly a result of changing demographics, with people waiting longer to get married and move to the suburbs, and also increased vacancy in buildings downtown, which currently stands at 18%, or 24 million square feet.  Read more about this here.

Downtown vacancy lowest since end of 2009?

Faithful BYOBlog readers (okay, I’m hoping the masses will find this site soon), when you see headlines like this you can be sure of two things:

1) You need to read the details, where you will find that although direct vacancy for downtown space dropped to 14.5% from 14.9% in the second quarter, most of the demand for new space was driven by a handfull of firms like Groupon and McKinsey & Co, as opposed to broader demand from small to medium sized firms, which would signal a more optimistic outlook

2) This is little like putting a bow on a pig.  While Net Absorbption, which measures the change in leased and occupied space from quarter to quarter, was positive for the fourth quarter in a row (549,090 sq ft), the positive trend seems limited to Class A buildings.  Class B buildings actually saw vacancy edge up, while Class C buildings had a small drop.  The general concensus is that there is still downward pressure on demand for office space.

The takeaway from this article is that landlords are looking for any good news to signal a bottom on rental rates.  When tenants approach them without a broker—or BYOBroker–they can justify higher rates with articles like these.  Without the credible market information we provide, you will be negotiating on heresay which in the end will cost you dearly.