Downtown office market grew in 2019 despite vacancy rate uptick

Nearly all of the central business district’s 2M sf of new space absorbed was in the booming West Loop, according to MB Real Estate report

TRD CHICAGO /
Jan.January 08, 2020 11:07 AM
Chicago saw more than 2 million square feet of new space absorbed into the Downtown office market (Credit: iStock)

Chicago saw more than 2 million square feet of new space absorbed into the Downtown office market (Credit: iStock)

UPDATED, 3:08 p.m., Jan. 8: Chicago saw more than 2 million square feet of new space absorbed into the Downtown office market in 2019, about 50 percent higher than the previous year.

The total was also the most since 2007 in the six areas comprising the central business district, according to MB Real Estate’s fourth quarter office market report.

And like last year, the West Loop again accounted for nearly all of that new space — 1.8 million square feet — according to the report.

Two big leases at 601W Companies’ Old Post Office redevelopment were also highlighted: Pepsi’s 190,000 square feet and Cisco Systems’ 135,000 square feet. Also noted was Invenergy’s 100,000-square-foot lease renewal and expansion — also a 601W Companies’ property — at 1 South Wacker Drive.

New inventory continued to take a toll on vacancy rate, which ticked up again in 2019, to 12.8 percent, compared to 12.6 percent in 2018. It has climbed from a recent low of 11.3 percent in 2016, according to the report.

Within the central business district, the East Loop had the highest vacancy rate at 14.5 percent, followed by the West Loop’s 13.7 percent and the Central Loop’s 13.3 percent. The CBD’s six areas are defined as River North, North Michigan Avenue, River West, West Loop, Central Loop and East Loop.

Meanwhile, office landlords in the Central Loop are already trying to prepare for the 2 million square feet of space that’s expected to become vacant in the next three years. That shadow space is opening up as a result of big companies relocating to new office towers in the fast-growing West Loop. It is the largest submarket with the largest blocks of space available for big tenants, said MB Real Estate’s Caitlin Ritter. It also has the newest trophy towers and the most Class A space, she added.

Earlier in 2019, office building trades in the central business district hit a 20-year low, with only seven properties bought and sold in the first two quarters. That was attributed to the city’s upcoming property tax reassessment in 2021, as investors are choosing to wait on the sidelines to see what happens.

But the year did end on an upbeat note for investment sales. In December, Spear Street Capital paid $412 million for a 46-story office tower  at 500 West Monroe Street.


Related Articles

arrow_forward_ios
BMO Tower at 320 S. Canal St. & Riverside’s John O’Donnell

Another law firm inks big deal at BMO Tower

Another law firm inks big deal at BMO Tower
Governor J.B. Pritzker and Ernst and Young's Mike Parker (inset) with the Thompson Center (Credit: Getty Images, Wikipedia, E&Y) 

State officially puts 1.2M sf Thompson Center on the block. Selling it will be a challenge.

State officially puts 1.2M sf Thompson Center on the block. Selling it will be a challenge.
71 S. Wacker Drive and iManage CEO Neil Araujo (Credit: Google Maps)

Tech company outgrows its digs at 540 W. Madison

Tech company outgrows its digs at 540 W. Madison
Cedar Street completes office-to-apartment complex conversion, Open House Chicago opens its doors: Daily digest

Cedar Street completes office-to-apartment complex conversion, Open House Chicago opens its doors: Daily digest

Cedar Street completes office-to-apartment complex conversion, Open House Chicago opens its doors: Daily digest
Sterling Bay CEO Andy Gloor and 1515 West Webster Avenue (Google Maps)

Sterling Bay will sell Lincoln Yards office building for over $100M

Sterling Bay will sell Lincoln Yards office building for over $100M
Barry Sternlicht, Louis Joliet Mall (Credit: Google Maps and Cindy Ord/Getty Images for 1 Hotels)

Starwood loses control of another mall in default

Starwood loses control of another mall in default
Plaza on DeWitt, 260 E. Chestnut Street

Downtown condo ponders mask mandate, big penalties

Downtown condo ponders mask mandate, big penalties
Mayor Lori Lightfoot (Getty, iStock)

Lightfoot to propose $94M property tax hike

Lightfoot to propose $94M property tax hike
arrow_forward_ios

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

Loading...