The Downtown office market is “stabilizing,” despite a surge in new inventory and increased tenant demand.
The central business district’s vacancy rate stood at 12.7 percent in the second quarter, according to a report from Colliers International.
That was just 1.5 percentage points higher than the 2016 fourth quarter total, when 4.5 million square feet of new office space flooded into the market, the report said.
Colliers attributed the rosier-than-expected picture to increased tenant demand led in part by co-working firms taking space. An earlier Colliers report said Chicago’s co-working market has tripled in the last four years.
But the market has also seen increased demand from tech companies, and from companies based in the suburbs moving to the city in a bid to attract young workers.
Among the firms cited were Walgreens, which inked a 200,000-square-feet least at 601W Companies’ Old Main Post Office redevelopment; McGraw Hill, which is leasing 65,000 square feet at 120 South Riverside Plaza; and Ferrara Candy, which signed a 60,000-square-foot lease in White Oak Realty Parnters and CA Office’s tower at 635 West Adams Street.
Overall Downtown rents in the second quarter averaged $40.69 a square foot, led by the West Loop submarket at $44.45. The lowest average rent of any of the submarkets studied was $33.43 a square foot in Fulton Market.
The suburban office market was also faring well, according to a MB Real Estate second-quarter report.