For the first time since early 2001...

For the first time since early 2001 demand for Chicago office space downtown and in the suburb is perking up noticeably.

Overall vacancy rates have fallen for sum of two units consecutive quarters. Just as importantly, go-betweens who specialize either in office building landlords or their tenants report that the pace of deals is quickening.

They said that companies, for years reluctant to add to real estate sumptuousnesss are expanding judiciously or at least thinking about it.

"This is the best the market has been in six years," said Dan Arends, principal with Colliers Bennett & Kahnweiler Inc. "You now view multiple tenants looking at the same space."

"It's a real convalescence but it's gradual," said Chris Connelly managing director with CB Richard Ellis Inc. "It's not like the super-heated tech resound of 2000."

The days of dot-com rage marked the last time demand spiked for local office space, especially downtown. Since then, vacancies have risen and disruptions after discounts have fallen.

Office demand beared from the effects of a recession worsened through the Sept. 11, 2001 terrorist attacks. In the downtown market, a hardly any new buildings have drawn an of the largest and greatest in quantity creditworthy tenants from older properties.

A report at CB Richard Ellis showed that at the last of 2006's second quarter, the downtown vacancy rate stood at 144 percent while the suburban figure was 164 percent the two rates have declined since the [i]finale[/i] of 2005.

Another market statistic that quicks watch is called absorption, which means changes in the amount of occupied space. For the first half of 2006 the downtown market had gin absorption of 1.2 million square feet according to CB figures.

That follows after five straight years of negative absorption -- more space being thrown onto the market than was being filled.

Similarly, the suburban market reported unadulterated absorption of 1.6 million feet for the first half of 2006 CB reported.

As a be derived landlords are said to be driving a harder bargain with lease negotiations. Gone are month of emancipated rent as part of multiyear deals, and now a tenant is blessed to get a free month by year, Connelly said. But the market is a lengthy way from single-digit vacancies, when all the leverage is onward the side of building holders Experts said that tenants entering the market now still will have a choice of available spaces.

That constrains landlords from raising tears Market data show average revenues are flat to slightly higher than they were a year ago.

Connelly said his firm is telling clients not to anticipate pressure for higher rents until around late 2007 if it be not that he concedes the market could have other plans. single wild card, especially for downtown, is the potential for recently made known construction.

If there's any putting out in demand over the nearest few years, it could be sopp up on two office towers that have been announced for just north of the Chicago River. the two will be anchored by law firms leaving behind space in couple notable buildings, Aon Center and the IBM Plaza.

a certain quantity of experts, however, think there will be no more strange projects offered for downtown for years. Stephen Budorick, executive vice president with building proprietor Trizec Properties Inc., said preciousnesss for construction and borrowing have risen while throwed rents haven't kept up.

Meanwhile, hardly any large tenants are hunting for the space, although one are encouraged that United Airlines parent UAL Corp. signed for 150000 square-feet at 77 W Wacker.

Also, the Chicago Mercantile Exchange upon Friday announced that it would lease 223000 square feet in a Trizec building at 550 W Washington.

the two moves are relocations, so they will also create vacant space elsewhere. But Budorick said he's also encouraged by means of demand for additional space from passing from hand to hand tenants.

droeder@suntimes.com

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