As Office Vacancy Continues to Dip, Market Prepares for Shadow Space to Hit

With the news last month that at least one more new office tower will soon join the two others now under development here, CBRE has updated its much-talked-about Shadow Space Study, which now shows more than 6 million square feet of shadow space hitting the market from 2016-2018.

20160104 ShadowSpace chart

“Shadow space” refers to office space known to be available but not yet vacated (i.e., holes created in existing buildings by tenants bound for the three new towers) as well as still-unleased portions of those new buildings.

CBRE’s Mark Cassata recently spoke to Crain’ Chicago Business about what this shadow space could mean for the growing market. As landlords have been able to push rents in recent years, excess space could signal a return to a tenant-favored market in the near future.

“I think we’re definitely seeing a swing toward the tenant side come early 2017,” Cassata told Crain’s.

Yet a landlord market still may have some legs to run.

Crain’s also recently reported on CBRE’s Q4 2015 office stats, showing that vacancy dropped to 12 percent from 12.8 percent, the largest single-quarter decrease since 2007. This was thanks to 792,337 square feet of absorption.

Drew Nieman, executive vice president at CBRE, spoke to Crain’s about the potential for a strong landlord market to sustain itself in 2016.

“Will (rents) go up $2 a foot like they did in 2015?” Nieman said. “Maybe it will be lower, but I think (landlords) will be able to keep pushing rents in 2016.”

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