Vacancies hold steady, rents tick up in suburban office buildings in 2018: report

A lack of new spec construction helped the market stem the loss of large corporate headquarters

TRD CHICAGO /
Jan.January 08, 2019 02:00 PM

Presidents Plaza (Credit: Glenstar)

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.


Related Articles

arrow_forward_ios
Liberty Mutual at 27201 Bella Vista in Warrenville (Google Maps)

Chicago’s Q3 suburban office market hits highest vacancy in decade

Chicago’s Q3 suburban office market hits highest vacancy in decade
Mayor Lori Lightfoot (Getty, iStock)

Lightfoot to propose $94M property tax hike

Lightfoot to propose $94M property tax hike
Brian Whiting, CEO of Telos Group, and the Old Post Office (Credit: Google Maps)

Lonely at the top: 601W Cos. opens Old Post Office rooftop park in WFH world

Lonely at the top: 601W Cos. opens Old Post Office rooftop park in WFH world
Cars.com CEO Alex Vetter and the building (Credit: Google Maps)

Cars.com wants to shrink its space at West Loop HQ

Cars.com wants to shrink its space at West Loop HQ
Thor Equities’ Joseph Sitt and Palmer House Hilton at 17 East Monroe Street (Google Maps)

Thor’s Palmer House hit with $300M+ foreclosure suit

Thor’s Palmer House hit with $300M+ foreclosure suit
Cook County Assessor Fritz Kaegi and downtown Evanston

Cook County landlords get bad news about 2020 taxes

Cook County landlords get bad news about 2020 taxes
Joe Sitt and 905 W. Fulton Market (Credit: Thor Equities)

Thor Equities’ big bet on Fulton Market is paying off

Thor Equities’ big bet on Fulton Market is paying off
Ald. Walter Burnett (27th)

Alderman Burnett to lift ban on resi development in Fulton Market

Alderman Burnett to lift ban on resi development in Fulton Market
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...