CHICAGO — A 7.4% increase over the same period last year. Activity slowed in the suburbs, however, with year-to-date leases totaling just over 3 million square feet, a 9% decline from 2018, according to the newly released “Chicago Q3 Office Market Snapshot” from Cushman & Wakefield.
Chicago CBD Office Stats:
- Robust absorption of Class A space lowered the overall vacancy rate to 13.1% in the third quarter, from 14.2% in third-quarter 2018.
- Fueled by an ongoing wave of corporate relocations, the West Loop was the most active submarket, with 4.5 million square feet of lease transactions executed so far in 2019, up 35.9% from the first three quarters of 2018 and accounting for 57.8% of total CBD leasing this year.
- The third quarter’s top three new lease transactions were: Uber (450,000 square feet), Accenture (226,000 sf) and Exelon (200,000 sf).
- The Fulton Market District recorded the highest jump in leasing activity so far in 2019, with 481,000 square feet signed, a 72.5% increaseover the first three quarters of 2018. The biggest lease in this submarket was WeWork for 88,754 square feet. Fulton Market ended the third quarter at 7.4% vacancy, the lowest in the CBD.
- Overall asking rents increased 2.5% to $40.32 per square foot, $1 per square foot higher than last year.
- Just under 5.6 million square feet of new construction and redevelopment projects are set to deliver by the end of 2020, located primarily in the West Loop and Fulton Market.
Chicago Suburban Office Stats:
The overall vacancy rate fell 190 basis points, to 22.8%, from third-quarter 2018 due largely to inventory exiting the market for renovation or redevelopment into new asset types.
- Net absorption was negative 4,625 square feet year-to-date, down from 305,000 square feet of negative net absorption in the first three quarters of 2018.
- Bifurcation in the suburban office market continues, with Class A product in the “inner suburbs” dramatically outperforming the rest of the market:
- Class A assets in submarkets closer to downtown had an overall vacancy rate of 13.9% in Q3.
- Class A vacancy in more distant submarkets was 19.4% and Class B and C vacancy in closer submarkets was 21.0%.
- Class A rents in closer submarkets were 22.6% higher than those in outer submarkets.
- Overall gross asking rents ticked up 2.5% year over year to $23.85 per square foot.
- Investment sales in the third quarter totaled $60.8 million, up 50% from Q2. However, investment activity is down significantly from 2018’s robust figures. Total YTD sales reached $155.5 million, an 86.7% drop YOY.
- The third quarter’s top three new lease transactions included Centene (90,000 square feet at 1333 Burr Ridge Parkway, Burr Ridge); Sirius Computer Solutions (38,112 square feet at 5505 Pearl St., Rosemont); and Stericycle (36,355 square feet at 2333 Waukegan Road, Bannockburn).
Market Perspectives:
Steven Bauer, Executive Director, Cushman & Wakefield – Chicago downtown office leasing team
“The ongoing demand for high-end space has pushed leasing activity to the highest level we’ve seen in a decade. Companies want to be in Class A buildings to attract best-in-class talent in today’s tight labor market. While new construction is adding supply, it’s also leasing up quickly, so development of Class A space is expected to continue.”
Sean Kropke, Executive Director, Cushman & Wakefield – Chicago suburban office leasing team
“It’s the tale of two markets in the suburbs. Class A properties in inner-ring suburbs continued to dramatically outperform, with lower vacancy and higher rents. We predict this gap will continue to widen as owners of well-located assets continue to undertake capital improvement projects to increase marketability.”
About Cushman & WakefieldCushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.