In Chicago’s CBD, new office construction has come to a screeching halt, only a couple years after hitting record highs. And even as the effects of the pandemic dissipate, new development continues slowing. What’s behind this deceleration in supply growth? We identify four primary factors weighing on the office construction market and discuss long-run implications for the CBD.
Bradford Allen is pleased to share with you our latest office market reports. Chicago’s downtown office market remained dynamic amid distress in Q1/22 as the flight-to-quality trend continued. With a direct vacancy rate above 18%, rising sublet availability, high-profile properties in distress and ample new deliveries, tenants are finding enticing concessions. Digging beneath the headline statistics, we note:
The direct vacant and available rate was slightly lower (14.9%) than last quarter (15.2%).
Net absorption turned negative after a positive Q4/21, but demand is robust for Class A space in red-hot submarkets
Sublet availability is skewed toward Class B buildings.
Class B buildings comprise the majority of properties with troubled loans.