The Impact of Terrorism Fears on Downtown Real Estate Chicago Office Market Cycles

Executive Summary. This paper identifies the cyclical patterns of an office market under potential terrorism threat by comparing vacancy rates and rent per square foot trends before and after September 11, 2001. This study goes beyond identifying general market trends and focuses specifically on office trends among trophy, Class A, and Class B buildings in Chicago. The findings indicate that trophy buildings were severely impacted by 9/11 and did not recover until the end of 2005. Class A buildings were also significantly impacted, although less than the trophy buildings, while Class B experienced even less of an impact. In general, the Chicago office market cycles were estimated to be between 6.4 (sublease vacancy of Class B buildings) and 13 years (total vacancy of Class A buildings).