The downtown Chicago office market started 2016 off with a flurry of strong activity. Large deal transactions included CNA’s announcement of its relocation to 151 North Franklin for 227,0000 square feet and Cars.com’s transaction to move into 158,000 square feet at 300 S Riverside.
The vacancy rate dropped to 12.0% thanks to over 230,000 square feet of positive absorption. The East Loop contributed the most to this number, with Clark Hill and McDermott, Will & Emery both moving into Prudential Plaza for a total of over 120,000 square feet.
Rental rates remained steady with the direct gross average asking rate ending the quarter at $36.40. A four percent growth year-over-year.
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Suburban Office Market Continues to Strengthen; Vacancy and Availability Rates Decrease
The Suburban office market continued to improve going into the 3Q of 2015. The vacancy rate decreased from 18.9% to 17.8% and the availability rate decreased from 24.4% to 22.3% year over year, respectively. While YTD net absorption is essentially flat at negative 27,182 SF thru the mid-year, it is significantly better than the negative 518,096 thru mid-year 2014. Overall these statistics indicate that the suburban market is becoming healthier and more dynamic.
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Downtown Market Approaches Equilibrium as the Vacancy Rate Continues to Decrease and Asking Rates Increase
Chicago’s downtown office market is continuing to become tighter. The overall vacancy rate has decreased from 13.4% to 12.6%, year over year. This is the lowest it has been since the end of 2008 and now brings the market almost to equilibrium. Simultaneously Chicago’s unemployment rate continued to improve in the second quarter. According to the Illinois Department of Employment Security, Chicago’s unemployment rate decrease from 7.7% in May 2014 to 6.7%, May 2015.
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Tom’s Recommended Reading for the Week
I’m sorry about jinxing the weather everyone. I clearly forgot where I lived. Check out the top news stories in Chicago Commercial Real Estate before heading into the weekend!
- KCura gobbles up more office space on LaSalle Street – Fast-growing legal software maker kCura Corp. is taking a big chunk of extra office space at its home on South LaSalle Street to accommodate all the workers it’s been hiring.The Chicago-based company is adding nearly 50,000 square feet at 231 S. LaSalle St., bringing its total space to 133,609 square feet. It’s the fourth time in as many years that kCura has expanded. In 2009, it had just 8,000 square feet, according to CBRE Group Inc., which represented the company. KCura has experienced explosive growth recently. The company hired 150 people last year and expects to add a similar number this year… Crain’s Chicago
- Hotels are in, office is out for proposed West Loop high-rise – Jupiter Realty Co. has changed course again on its proposed West Loop high-rise, opting to fill it with hotel rooms instead of apartments or office space. The Chicago-based developer wants to build a 23-story tower at 108 N. Jefferson St. with two hotels, a 210-room Hampton Inn and a 128-room Homewood Suites, sharing the building, according to an e-mail Ald. Brendan Reilly (42nd) sent constituents last week. That plan marks a big shift for Jupiter, which first proposed a 45-story tower with apartments and offices when it acquired the sitefor $7.5 million in 2007… Crain’s Chicago
- Open-Plan Office Space: Is It All It’s Cracked Up to Be? – According to popular accounts, the corporate workplace is changing, seemingly reducing demand for office space. The square footage per employee is shrinking due to the increased prevalence of the open-plan office format. As a result, tenants now require less space than they previously needed. The open-plan office format has been increasing in popularity since the recession, as many tenants viewed it as a way to reduce their real estate costs. Moreover, in theory, this format increases employee productivity through easier collaboration… NREI
- Paltry Office Pantries Give Way to Sleek Social Spaces -For 12 years, employees of Anbau, a luxury real estate investment and development firm, worked in a walk-up on Fifth Avenue with no kitchen pantry to heat lunches or make coffee. So it was fitting somehow that the kitchen would become the focal point of the company’s new offices, on East 26th Street, overlooking Madison Square Park. A boomerang-shaped bar made out of Indonesian mango wood doubles as the reception area, making it the first place visitors see. With limestone countertops and stainless steel appliances, the area is more reminiscent of a residential kitchen than it is of an office pantry. In the months since the company relocated, Anbau has hosted cocktail parties in the same place where employees eat lunch and hold staff meetings… NY Times
- Suburban Office Vacancy Rate Rises – The suburban Chicago office market has long suffered from a high vacancy rate, and in the first quarter, that number climbed to 21.2%, up from 20.3% at the end of 2013, largely due to the decisions of several corporations to move downtown and the decisions of others to shrink their footprints, according to Colliers, which recently published its overview of the first quarter. “While there continues to be improvement in certain pockets of the market, tenants in the suburbs are still acting conservatively,” the researchers note. Too few are ready to make the long-term commitments needed to create a healthy market, and many suburban landlords are still offering aggressive incentive packages… Globe St.