The phones are ringing again.

Demand for office space in Champaign-Urbana was anything but robust during the recession, and it's not exactly booming. But area brokers have reported a recent uptick in activity.

"I don't want to overstate this. Things are not heating up, but things are warmer," said Alex Ruggieri, vice president of Sperry Van Ness Ramshaw Real Estate in Champaign.

His firm recently negotiated a five-year lease with the University of Illinois for 22,000 square feet of office space in Illini Plaza, 1817 S. Neil St., C. The UI will move three departments -- purchasing, account payables and procurement -- from leased office space on Green Street to Illini Plaza, pending approval from the state procurement office. And they'll save some money by doing so, according to the UI.

Another positive sign: Two years after opening the Enclave at M2, 301 N. Neil St., C, One Main Development is "seriously considering" finishing another floor of office space now that the fourth floor of offices is about 75 percent full, said Cynthia Faullin, One Main's vice president of development.

Recessions and office space

For the most part, Champaign-Urbana has had a "rather robust market" for office space, and in the past that market has weathered recessions fairly well, Ruggieri said. He characterized the market prior to the most recent recession as "steady eddy" and "progressing relatively well."

Unlike the markets in major metropolitan areas like Phoenix or regions like southern California, Champaign-Urbana does not see boom-and-bust cycles, said Matt Wavering, assistant director of commercial brokerage with Coldwell Banker Commercial Devonshire Realty in Champaign. He estimated the vacancy rate stayed under 10 percent in past decades.

It took awhile, but the recent recession did affect the area's market for office space and more so than in previous economic downturns he's seen, said Ruggieri, who has been in the business for more than two decades.

Wavering estimated the vacancy rate in 2005 and 2006 around 5 to 6 percent, which he considers to be full; Ruggieri estimated it at closer to 8 to 9 percent.

Now Wavering has pegged the office vacancy rate at 20 percent. Ruggieri put it at about 15 percent now, with some isolated pockets around town at close to 40 percent.

"The spaces that did better were ones I would call value places these are older buildings but have been well-maintained," kept clean, with good landscaping and were recently painted, Ruggieri said.

Large, high-end space has tended to have more vacancies than others, Wavering said.

"Filling the Enclave here (at M2) was huge challenge," Faullin said. "The Enclave tends to lend itself to startups and single practicers and small practices," she said.

And not many people during the recession were starting new businesses.

"I think a lot of people were staying where they were for the time being," she said. "There were huge concerns about job stability and you didn't see people in financial or law fields going out on their own at that point."

When the developer opened the Enclave in June 2009, offices also opened up in One Main, the company's nearby building that opened in 2004, and that had never happened before, Faullin said.

An unclear future and a lack of growth and demand prompted tenants to stay where they were, Ruggieri said.

Wavering said he believes the lower end of the market, space that is not quite as attractive and in previous years may have sat empty for a while, is leasing quicker than other spaces because businesses are looking for a way to reduce their costs of being in business.

A tenant's market

With more space available on the market, tenants who are signing new leases or thinking of renewal can ask for improvements like new carpeting or incentives such as reduced rent or even free rent if they sign a long-term lease, he said.

"We're reviewing all our leases and trying to save money where we can and find appropriate locations for the units," said Dan Crawmer, associate director of the real estate at the University of Illinois. He declined to say how much the university would save by moving three units from Green Street to the Illini Plaza because the lease has not been signed yet. However he did say, "it's substantial enough to make the move worthwhile."

"We are seeing some downward pressure on rent," Wavering said, particularly new office space which may have gone previously for $15 to $16 per square foot. The range for average space he said is about $10 to $12 per square foot and those rents have seen "a little downward pressure" but not as much as the newer space. A few pockets around town, such as Robeson Crossing, have seen demand remain steady and those rates have not seen downward pressure, Wavering said.

"It is a tenant's market right now. I recommend anyone looking for office space to attempt to negotiate" with their landlord, said David Carroll, president of CU Aerospace. His company, which got its start renting space in the UI's business incubators on campus, graduated to the iCyt building at the UI Research Park in 2006. The company will move into 1,600 square feet of space in M2 next month.

"We're real excited. ... We weighed the pluses and minuses and in the end decided to move," he said.

Carroll said their time at the research park has been excellent, but "because we're trying to minimize costs we started looking around and Cynthia made us an excellent deal."

Among the features that won them over: the shared kitchen and conference room, utilities being included and so many nearby restaurants within walking distance, according to Carroll.

'On the right track'

Wavering said he does not expect developers to build any new office space, especially on speculation, anytime soon. The vacancy rate will probably come down next year "primarily because nothing new will be coming on market," and the vacant space will start to be absorbed, Wavering said.

It's not until "2013 we'll start to get back into a 'normal market cycle'" when developers will consider building new office buildings again, he said.

"I think we've turned the corner and we're on the right track," Ruggieri said. It's not a huge rebound, "but if you look at the indicators .... (unemployment rates declining, the University of Illinois Flash Index showing a slow, but steady economic recovery) the indicators are in our favor," he said.

Faullin said she is showing office space on a regular basis and there's a new tenant every month.

"Things have picked up considerably," she said. "We have a niche product and that works to our benefit." Enclave offices on the fourth floor all rent on a month-to-month basis and the rent includes use of a kitchen, conference room and other amenities.

The fourth floor is now home to about 25 companies and is around 75 percent occupied. They're now thinking of finishing another floor of office "with not as many bells and whistles so the prices are lower," Faullin said.

"There's no question the phones are ringing. It helped when the sun came out," Ruggieri added.