Suburban office market vacancy rate nudges up
The 23% vacancy for Q2 is slightly above Q1, but investors remain optimistic amid Covid-19’s new reality
In a work world upended by the coronavirus, there is optimism among investors that demand will continue to rise in the suburban office market, as companies and employees search for more space outside Chicago.
But the current reality is a bit different.
The suburban office market vacancy rate in the second quarter was 23 percent, a fraction higher than the 22.1 percent in Q1, according to JLL, Crain’s reported. Net absorption also fell by about 86,000 square feet.
But all is not lost. The modest rise in vacancy from April through June stands in contrast to the previous six straight quarters of falling rates, according to JLL’s findings. The brokerage, Crain’s reported, also found that about 90 percent of office tenants paid their rent in June.
Earlier this month, Somerset Development said it was repositioning the vacant former AT&T campus in Hoffman Estates into a $200 million mixed-use project with 1.2 million square feet of office space. Somerset President Ralph Zucker said that “suburbia is getting a fresh look.” Stonemont Financial recently listed two office buildings — a combined 500,000 square feet — at the former Motorola Solutions campus in Schaumburg for about $100 million.
Meanwhile, the Downtown Chicago office market vacancy rate reached its highest point in more than eight years, according to a report last month. That was attributed to the pandemic. Office vacancy in the central business district jumped to 15.1 percent as of June 30, according to CBRE, up from 13.8 percent in Q1. And in the last month, two companies have either scaled back on their office leasing plans in Fulton Market or abandoned them altogether, citing Covid-19 as a reason to reevaluate their Chicago footprint. [Crain’s] — Alexi Friedman