Chicago’s office market hits ugly vacancy number

Pandemic struck as developers invested in 6.5 million square feet of new space

Chicago /
Jul.July 14, 2020 03:30 PM
(iStock)

(iStock)

Downtown Chicago’s office market has hit a wall as office vacancy reached its highest point in more than eight years.

Largely due to the coronavirus pandemic following substantial investments in the market, office vacancy in the central business district jumped to 15.1 percent as of June 30. That percentage is up from 13.8 percent at the end of the first quarter, according to CBRE.

The devastation comes just six months following the best year that the market has seen in a decade, and it may only get more painful, according to Crain’s.

There are currently 6.5 million square feet of new office space under construction right now, less than half of which has been pre-leased. Such new inventory drove most of the vacancy increase seen in the CBRE report.

However, with most of the new office supply becoming available in 2022 and 2023, some say that they don’t believe that the pandemic will have long term consequences on the market.

“You can’t create company culture over Zoom,” CBRE’s Jon Cordell told Crain’s. “We’re being forced to [work remotely] right now. But given the option, companies and employees will want to work together face to face.”

While Cordell said that he’s seen interest slowly return, leasing activity has largely been decimated as a result of the pandemic. Activity during the second quarter plummeted 75 percent from the first three months of the year, according to data from Savills.

Other reports have posited that less dense footprints would win out in the end.

Cities across the country are similarly struggling to imagine what the long-term impacts of working from home may be, including New York, where residents have increasingly bought homes in the tristate area due to remote work expectations.

[Crain’s] – Sasha Jones


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