The Chicago office space market is showing positive movement with decreasing vacancy rates, several large lease signings and continuing strong, but lessening new construction as we move through the year. Lease rates have started to decline slightly, so we will be watching that closely for our tenant clients. This article reviews Q2 ’16 commercial office absorption, vacancy, and rental rates in the Chicagoland market. Come back for Part 2 where we look at some of the large lease signings and sales activity.
Chicago Office Space Absorption in Q2 ’16
Net absorption in the Chicago office market overall was positive as more new tenants leased space resulting in a decrease in the vacancy rate to 13.1%. That compares positively to the decrease in absorption of Q1 ’16 but is significantly lower than the strong showings in Q3 and Q4 2015. The gain in absorption was 48,608 square feet overall.
Class A and B office markets saw an overall decrease in net absorption with a negative 172,949 square feet and 14,916 square feet respectively. Class C office market saw a positive absorption, gaining 236,473 square feet. The central business district was negative 223,977 square feet but suburban markets turned positive with 272,585 square feet leasing in Q2 2016.
Chicago Office Space Vacancy in Q2 ’16
As stated previously, the overall office vacancy rate continues to fluctuate, but decreased slightly to 13.1% at the end of the quarter, compared to 13.2% in Q1 2016. This compared to 13.0% in Q4 2015 and 13.4% at the end of Q3 2015.
Class A office projects saw similar fluctuations in vacancy rates, reporting 14.4% at the end of the quarter, which was slightly higher than the previous quarter but significantly down from 15.0% in Q3 2015. Class B office vacancy rate was steady at 13.3%. Class C office vacancy, the lowest in the area at 9.8%, was down from 10.3% and 10.7% in Q3 / Q4 2015 respectively. The central business district vacancy rate was steady at 10.8% and suburban office market vacancies decreased slightly to 14.5% from 14.6% at the end of 2015.
Chicago Office Space Rental Rates in Q2 ’16
The average lease rate decreased 0.6% from $23.41 per square foot to $23.28 per square foot. Class A office rates were at also slightly less at $26.07, with Class B office rates higher than the previous quarter at $21.24 and Class C office rates down from Q4 2015 at $18.26 per square foot. The central business district rates were up at $32.62 per square foot and suburban markets down slightly to $19.28 per square foot.
At Golden Group Real Estate, we specialize in tenant representation real estate services for office space users in the Chicago area, helping local business owners find office space and negotiate lease and purchase agreements. We never represent landlords, so we are prepared to negotiate aggressively on behalf of our tenant clients.
For more on Golden Group Real Estate, read about our real estate services. Let us know if we can help you find office space for rent or buildings for sale. Call us at (630) 805-2463, email us at [email protected].