Chicago’s Q3 suburban office market hits highest vacancy in decade

Chicago /
Oct.October 23, 2020 12:47 PM
Liberty Mutual at 27201 Bella Vista in Warrenville (Google Maps)

Liberty Mutual at 27201 Bella Vista in Warrenville (Google Maps)

Office vacancy in Chicago’s suburban market shot up to 25 percent in the third quarter, the highest rate in a decade.

The spike reflects the magnitude of the pandemic-driven recession, as businesses reevaluate their real estate footprint while having employees work from home for safety, or shrinking the workforce to cut costs, according to Crain’s.

Net absorption — the total space leased and occupied, minus the total space vacated — in the third quarter was negative 730,000 square feet, the biggest quarterly drop since the third quarter of 2017. The year-to-date net absorption rose to 1.2 million square feet, Crain’s reported, citing JLL’s third quarter report.

A big chunk of the vacant space came from Liberty Mutual, which vacated a combined 142,000 square feet at buildings in Hoffman Estates and Warrenville. Cisco Systems also vacated its 81,000-square-foot office in Rosemont and moved to the Old Post Office redevelopment downtown. At 2135 Citygate in Naperville, a total of 62,000 square feet of office space was vacated by SMS Assist and Insight Global.

In addition to direct vacancy, about 500,000 square feet of office space hit the subleasing market during the third quarter, bringing the total vacancy rate to 25 percent, the highest level in the suburbs since the wake of the financial crisis in 2010, according to JLL.

Marketing vacant offices against move-in-ready subleasing space poses a big challenge for landlords, as sublet space tends to be offered for less than direct space. But some suburban office landlords remain optimistic, saying that the health crisis could ultimately work in their favor, giving companies with downtown offices a reason to consider having satellite offices to assist their working-from-home workforce.

Suburban offices may indeed get a fresh look in some cases, but it would take a while for such a trend to catch on, JLL Vice President Mike Trumpy told Crain’s. It’s up to companies’ decisions regarding when to return and how much space they need. “A lot of these companies would prefer to wait until they have a lease expiration downtown” before they would commit to new real estate anywhere else, Trumpy said.

[Crain’s] — Akiko Matsuda






    Related Articles

    arrow_forward_ios
    Mayor Lori Lightfoot (Getty, iStock)

    Lightfoot to propose $94M property tax hike

    Lightfoot to propose $94M property tax hike
    1100 W. Fulton Market (Courtesy of Fulton St. Co.)

    $40M building could break Fulton Market records

    $40M building could break Fulton Market records
    Brian Whiting, CEO of Telos Group, and the Old Post Office (Credit: Google Maps)

    Lonely at the top: 601W Cos. opens Old Post Office rooftop park in WFH world

    Lonely at the top: 601W Cos. opens Old Post Office rooftop park in WFH world
    Cars.com CEO Alex Vetter and the building (Credit: Google Maps)

    Cars.com wants to shrink its space at West Loop HQ

    Cars.com wants to shrink its space at West Loop HQ
    TWEET: Plans for luxury condos in Winnetka were scrapped when a buyer nabbed a failed development site: Hoffmann Commercial Real Estate's Gregg Hoffmann and the project site at the corner of Elm Street and Lincoln Avenue (Hoffman; Google Maps)

    Failed Winnetka development site finds buyer

    Failed Winnetka development site finds buyer
    Thor Equities’ Joseph Sitt and Palmer House Hilton at 17 East Monroe Street (Google Maps)

    Thor’s Palmer House hit with $300M+ foreclosure suit

    Thor’s Palmer House hit with $300M+ foreclosure suit
    Sandeep Mathrani, 1155 W. Fulton and 1114 W. Fulton (Credit: Google Maps and John Sciulli/Getty Images for Bloomingdale's)

    Exit strategy: WeWork eats Fulton Market leases

    Exit strategy: WeWork eats Fulton Market leases
    (iStock)

    Chicago’s office market hits ugly vacancy number

    Chicago’s office market hits ugly vacancy number
    arrow_forward_ios

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

    Loading...