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Chicago

In the age of Coronavirus, Chicago real estate’s biggest bright spot fades

Office leasing market was positive yet again in Q1, but it may be the end of the road

The Chicago office leasing market was strong in the first quarter of 2020, but the good times appear to be over. (Credit: Unsplash)
The Chicago office leasing market was strong in the first quarter of 2020, but the good times appear to be over. (Credit: Unsplash)

How quickly things change.

Chicago’s office leasing market just sported its best year since 2019, and it appeared that activity would remain robust in 2020. Everyone knows what happened next.

Net absorption in the first quarter rose to nearly 200,000 square feet, according to CBRE data cited by Crain’s. The vacancy rate in January and February was just under 14 percent, and millions of square feet of new product was slated to hit the market.

Now, with millions of people laid off and the economy likely to contract for at least a year as a result of the coronavirus crisis, Chicago’s biggest real estate bright spot has dimmed considerably.

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The second quarter “will have very little leasing activity and more companies contemplating what’s going on in the market,” CBRE broker Todd Lippman told Crain’s. “I think there’s going to be a good amount of sublease space [available] starting in April and May.”

Per CBRE data, the largest move-ins during Q1 included Showpad’s 50,000-square-foot expansion at Shorenstein Properties’ 1 N. State Street and DBRK Impact House’s move to 200 W. Madison St.

Lippman told the outlet that he and other office leasing brokers remain busy, but his time isn’t spent helping clients ink new deals. Instead, he’s working with clients to review their existing leases. He said he expects leasing activity to tick back up again in the third quarter.

Though the office leasing market had been humming along, the investment-sales market has been sluggish in recent years, with just a handful of deals worth more than $150 million taking place in 2019. [Crain’s] — James Kleimann

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CoronavirusOffice LeasingOffice Market