The Real Deal Chicago

Addition of 1M sf of Downtown office space can’t dent vacancy rate: report

"From what I'm seeing, the market is on fire," said CBRE's Kyle Kamin
July 03, 2018 09:30AM

625 West Adams Street (Credit: 625 West Adams)

The overall office vacancy rate Downtown was 13 percent at the end of the second quarter, up just a fraction from the previous quarter despite the addition of more than 1 million square feet of new office space.

CBRE provided second-quarter vacancy rate numbers.

Between April and June, the 800,000-square-foot CNA Center at 151 North Franklin Street opened up, as did the 432,000-square-foot building at 625 West Adams Street.

The strong economy combined with more companies moving Downtown from the suburbs helped offset the new inventory, according to Crain’s.

“From what I’m seeing, the market is on fire,” CBRE’s Kyle Kamin said. “I’ve never seen so much velocity in the marketplace.”

Net absorption during the second quarter was up by 155,000 square feet over the first quarter, according to CBRE. That increase came despite notable contractions. Those included CNA’s move into 290,000 square feet at its new office from the more than 600,000 square feet it occupied at 333 South Wabash Avenue, and law firm Hinshaw & Culbertson’s move from 153,000 square feet at 222 North LaSalle Street into 105,000 square feet in the new CNA building.

But there were some gains, including Peapod’s move from Skokie to about 53,000 square feet at 300 South Riverside Plaza, ad giant Leo Burnett’s two-floor expansion at 35 West Wacker Drive and marketing research company Nielsen’s expansion to nearly 143,000 square feet total at 200 West Jackson Boulevard, according to CBRE.

Kamin told Crain’s he expects supply and demand to remain balanced as even more new office space is delivered Downtown.

601W Companies, for instance, is bringing on 2.5 million square feet in the Old Main Post Office, but it already signed Walgreens Boots Alliance to a 200,000-square-foot lease. [Crain’s] — John O’Brien