CHICAGO – While Chicago office fundamentals remain in tenants’ favor, some metrics signal stabilization, according to Transwestern’s fourth quarter Chicago office market report. Despite the overall market posting the fifth consecutive quarter of negative net absorption, Class A product saw occupancy gains with 323,962 square feet of positive absorption. Leasing activity accelerated during the second half of 2021, with 4.0 million square feet leased, compared to just 1.5 million square feet during the same period in 2020.
The overall vacancy rate, including sublease space, remained unchanged at 17.0%, but Class A vacancy edged down 30 basis points over the quarter, driven by occupancy gains in the West Loop (194,329 square feet) and Fulton Market (153,401 square feet) submarkets.
“This is the first quarter since the onset of COVID-19 where we are seeing steady market conditions,” said Nick Schlanger, Chicago Research Manager. “The fact that fourth-quarter vacancy rates remained flat, after significant increases over the first half of 2021, indicates that the Chicago market has started to stabilize. However, it will take most of 2022 to recover given the sizable amount of market oversupply, mixed with tenants rethinking their office strategy in a post-pandemic world.”
Asking rents dipped slightly to $42.71 during the quarter and landlords continued to offer generous concessions, spurring a flight to quality that will likely continue.
Additional highlights from the report include:
- Office-using jobs in the market grew 3.6% in 2021, with Professional and Business Services adding 19,200 jobs year over year.
- Average asking rent was 2.8% higher at year-end 2021 than it was a year prior.
- Sales volume totaled $968.8 million in 2021, down from $1.4 billion in 2020.
- There is currently 3.2 million square feet under construction in the Chicago market, 43% of which is pre-leased. While deliveries will push up overall vacancy, move-ins will translate to 1.6 million square feet of positive net absorption.
Download Transwestern’s fourth quarter Chicago office market report here.
About Transwestern Real Estate Services
Transwestern Real Estate Services (TRS) adds value for investors, owners and occupiers of all commercial property types through a comprehensive perspective and by providing solutions grounded in sound market intelligence. Part of the Transwestern companies, the firm applies a consultative approach to Agency Leasing, Asset Services, Tenant Advisory + Workplace Solutions, Capital Markets, and Research & Investment Analytics.
The privately held Transwestern companies have been delivering a higher level of personalized service and innovative real estate solutions since 1978. Through an integrated, customized approach that begins with good ideas, the firm drives value for clients across commercial real estate services, development, and investment management. Operating from 33 U.S. offices, Transwestern extends its platform capabilities globally through strategic alliance partners whose unique geographic, cultural, and business expertise fuels creative solutions. Learn more at transwestern.com and @Transwestern.
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