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Commercial
Chicago

Corporate relocations taking toll on suburban office market: report

After breaking even in 2018, vacancy rates are up and rental rates are dropping at suburban office properties.

Presidents Plaza office space in Chicago
Vacancy rate are rising and rental rates are dropping in the suburban office market. Pictured: Presidents Plaza

The suburban office market is having a tougher time weathering the storm of corporate relocations back to the city.

Vacancy in the suburban office sector rose to 21.8 percent in the second quarter, marking the third consecutive quarter the figure has ticked up, according to RE Journals. Rental rates dropped by 30 cents in the second quarter.

The sluggish performance comes after the suburban office market was able to break even in 2018. Despite major corporate relocations from the suburbs, vacancy last year ended where it began, at 19.5 percent. At the end of 2018, rents jumped by 50 cents year over year.

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The market has been unable to maintain that performance, but there were some big deals.

The largest suburban lease signing in the second quarter was ACCO Brands’ 190,000-square-foot lease extension at the Kemper Lakes Business Center in Lake Zurich.

The success of large office complexes has renewed hope that John Paul DeJoria’s acquisition of the former McDonald’s campus in Oak Brook could eventually spark life in the suburban market.

Large office complexes in the suburbs continue to outperform individual properties, according to RE Journals. Vacancy in large complexes is at 16.5 percent, closer to the central business district’s 12.8 percent vacancy in the second quarter.
[RE Journals]— Joe Ward

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Office