In fact, the state continues to do well in corporate locations despite a national and regional economic slowdown. Illinois placed No. 8 in Site Selection's Governor's Cup race, with some 558 new and expanded facilities in 2000.

Another Banner Year for Chicago's Office Market

Despite a slowing regional and national economy, the Chicago office market had another banner year in terms of commercial real estate activity. According to Cushman & Wakefield, Chicago's real estate market flourished in 2000, with more than 12.1 million sq. ft. (1.1 million sq. m.) rented, compared to 1999's 9.1 million sq. ft. (845,418 sq. m.). At year's end, the central business district's (CBD) vacancy rate dropped to 8.7 percent, nearly 2 percentage points lower than year-end 1999.     "The city's employment and business base has remained fairly constant -- a combination of corporate and regional headquarter facilities, financial services and professional firms," says Richard Plonsker, a director with Cushman & Wakefield's Chicago office. "This diverse tenant base is a major reason why Chicago remains strong in the face of what seems to be a gradually slowing economy."     Construction remains hot in the West Loop market, which accounted for 70 percent of total CBD construction. The market was also strongest in terms of leasing with more than 4.8 million sq. ft. (445,935 sq. m.) leased. New tenants include UBS Brinson and Gardner, Carton & Douglas.     Unfortunately for renters, the West Loop also brought in the highest rental rates. The weighted average asking rent in the market is $28.92 per square foot, up 4 percent from 1999. The biggest jump in rents, however, went to the East Loop, which increased 12.8 percent to $26.54 per square foot.     "We expect [the downtown Chicago] market to remain firm in 2001, with a leveling of rental rates," adds Plonsker.

And the city of Chicago, which was reported as slowly slipping into an economic stupor by BusinessWeek in its article entitled "Chicago Blues" (Oct. 16, 2000), ranked as the No. 2 metro in 2000 for new and expanded facilities, with approximately 73 percent (407) of the state's announcements last year. "So to suggest that we're slipping in the marketplace isn't really tracking what is physically happening," says McDonough.
     Other indicators also point to the state's strength. "The growth rate of per capita income in the state of Illinois is higher at the present time than the growth rate of per capita income of the United States as a whole," says Robert Resek, an economics professor at the University of Illinois-Champaign-Urbana's Institute of Government and Pubic Affairs. "Last year, Illinois' growth rate per capita was about 2.9 percent real, adjusted for inflation, where the nation's per capita income grew at 2.6 percent."
     Still, it is important to note that Illinois dropped two spots in the Governor's Cup race from last year's No. 6 spot. Many analysts suggest at least a slowing in the state's economy. Fred Giertz, a professor of economics at the University of Illinois-Champaign-Urbana's Institute of Government and Pubic Affairs, who conducts a state Flash Index measuring the status of economic activity, says: "There's been a decline in the last several months. I don't know if it's a soft landing or not, but we're not growing as we were six months ago."
     In November, Giertz's index, which reports a weighted average of Illinois' growth rates of corporate earnings, consumer spending and personal income, showed a reading of 101.9, with anything above 100 representing expected real economic growth. November's report was the third consecutive decline, dropping from September's 103.5 and October's 102.8.
     "The latest figure is a clear indication that the economy is slowing down after a decade of steady expansion," Giertz explains. "But there's no evidence of a recession." He also points out that the slowdown is not unlike the slowdown taking place nationwide.
     The reason for the slowdown, Giertz reports, is lower-than-expected corporate profits. But retail sales and individual income appear to be holding steady. The key to the situation, Giertz explains, is whether it is a soft landing, which will allow for slower but continued growth. If not, the slowdown could land hard on the state, he adds.