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