The Chicago suburban office market continued its run of positive absorption in the first quarter 2016, with gains recorded at 147,463 square feet.
Continued absorption has driven vacancy down since its high of close to 22 percent in 2011. Overall vacancy dipped another 10 bps in Q1 and now sits at 18.2 percent. The space that has benefitted the most from this run has been the Class A market, where landlords are now pushing rents reaching $26.96 psf, up from approximately $25 psf in 2012.
“We’ve had some good absorption and several markets in the suburbs are strong right now, but demand seems to be slowing down,” said Diana Riekse, Senior Vice President at CBRE. “In addition, there are a number of large blocks of shadow space in the western East-West Corridor that will be hitting our statistics soon due to a handful of large corporate users moving out of the area.”
Rents for the overall market increased 1.3 percent year-over-year to $22.06.
“Rents are still affordable when we look at the entire metro area,” Riekse said. “As the rent gap widens between the CBD and the suburbs, I think some companies will take a hard look at the suburbs for opportunities.”
This activity has been driven by the expansion of firms specializing in technology, telecommunications and manufacturing.
East-West and O’Hare submarkets lead the way
In Q1, the East-West Tollway, which includes Oak Brook, and the O’Hare submarkets accounted for more than two-thirds of all leases. The East-West Tollway recorded 42 percent of leases in Q1, while O’Hare checked in at 25 percent. The largest lease of the quarter took place in the East-West Corridor with vAuto expanding and renewing its headquarters in Oakbrook Terrace to 66,689 square feet.
Other findings include:
- 12 suburban office properties are currently being marketed for $878 million
- Class A vacancy rate remained unchanged at 13 percent
- The unemployment rate increased to 5.1 percent, showing more job seekers entering the workforce.