Despite a rash of corporate relocations to Downtown Chicago, the suburban office market broke even in 2018, with vacancy rates holding steady and rents actually creeping up.
The overall vacancy rate at the end of 2018 was 19.5 percent, the same rate the suburban market started the year with, according to a new report by Colliers International. The end-of-the-year numbers marked a slight rally after vacancies hit 20 percent in the second quarter of 2018, according to the report.
The O’Hare area had the best numbers of any suburban submarket, posting a 14 percent vacancy rate at the end of 2018 — its lowest in 15 years.
Vacancy rates remained flat even as absorption slowed. There was 83,400-square-feet of positive absorption at the end of 2018, compared to 681,300-square-feet of net absorption at the end of 2017, according to Colliers.
The market was buoyed by the lack of speculative construction deliveries since 2010, and none are expected in 2019, Colliers reported. The lack of construction and net absorption helped average rents to increase to $21.32 per-square-foot, an increase over the $20.81 recorded at the end of 2017.
The trend of suburban corporate headquarters moving Downtown continues to impact the market. Suburban landlords have already lost major tenants like McDonald’s and GE Healthcare. This week, snack maker Mondelez International signaled it would move its headquarters from the suburbs to Fulton Market.
There are 44 office buildings in the suburbs that can accommodate users of 100,000 square feet or more, according to Colliers.
Instead of seeking new corporate tenants, landlords and developers have become creative in their efforts to find uses for the vacated corporate properties. At the former site of AT&T’s headquarters in Hoffman Estates, Somerset Development is planning a sprawling “metroburb,” with retail, a conference center, hotel and nearly 500 residential units.
In Schaumburg, UrbanStreet Group and VennPoint Real Estate are proposing a 260-unit apartment complex on the former Motorola Solutions campus.