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Improved lifestyles key to suburban revival.

In recent years, suburban commercial real estate markets around the U.S. suffered the recession in tandem with their urban counterparts. Now that recovery or stabilization is under way in most urban markets, a new, emerging trend is bolstering suburban office markets throughout the country.

First let me say that while it is difficult to generalize about real estate in the U.S., there are some universal 'truths' and "trends" that are easy to pinpoint.

In particular, the trend of outsourcing/out-tasking by corporations has resulted in renewed activity in suburban office markets. Many corporations have laid off long-term employees, then re-hired them as independent contractors or consultants. These former corporate employees - most of them with decades of experience and memories of long commuting hours are forming their own firms to service this new business. And, with the freedom to choose their own locations, most are choosing suburban locations that offer them short commutes and a better quality of daily life. Also, since rental rates have declined throughout suburban markets around the country, space in top-of-the-line, Class A buildings is now more affordable - and often a bargain when compared to available space in Class B and Class C buildings in the same market.

In fact, in some markets, including Chicago, Houston, Dallas, Hartford, Philadelphia and Tampa, the suburban office districts are faring better than their urban counterparts. In these markets, as in others, lifestyle issues (including commute, safety, and setting) play a major role in determining location.

In one of the most positive indicators for suburban markets, ONCOR International's Mid-Year Market Data Report recorded positive absorption of space during the first six months of 1993 in 34 out of the 43 suburban office markets tracked around the country. Some markets, like suburban Los Angeles, Central New Jersey and White Plains, NY, experienced the return or addition of space to the total stock But most suburban markets experienced absorption of space, the result of steady leasing activity and a lack of new construction.

One other "universal truth" in real estate these days: Class A properties are certainly faring better than Class B and Class C buildings - especially in suburban markets where the price differential between the different classes of properties has diminished significantly.

In suburban markets throughout the country, we see "small" deals (for less than 10,000 square-feet of space) making up a sizeable bulk of the total leasing activity. Further, we see that most of this activity is focused in Class A properties From this information, we understand that many small and start-up firms are choosing the best suburban locations for their companies - in many cases breaking their own urban tradition in order to achieve a better quality of life.
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Title Annotation:Suburban Markets; suburban commercial real estate market
Author:Jaggard, Stephen H.
Publication:Real Estate Weekly
Article Type:Column
Date:Oct 20, 1993
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