Chicago’s Q4 office leasing records 2.7M sf of new deals, highest since the pandemic

Recovery to pre-pandemic levels remains a long way off

Chicago’s Q4 office leasing records 2.7M sf of new deals, highest since the pandemic
Fulton Market office (Loopnet)

Chicago’s office market saw 2.7 million square feet of new leases in the final quarter of 2021, the highest since the pandemic, but recovery to 2019 levels remains a long way off.

Leasing volume from October through December was up 3.6 percent from the previous quarter and was the highest in seven quarters, according to Savills’ downtown Chicago office report.

The city’s leasing volume for all of 2021 totaled 7.3 million square feet, an increase from 5.5 million square feet signed in 2020. Last year’s figure, however, is 44 percent lower than the pre-pandemic level of more than 13 million square feet in 2019.

Chicago’s office market remains highly bifurcated as flight to quality leaves trophy buildings largely unaffected by the pandemic. About 36 percent of the top transactions occurred in the West Loop, led by professional services, transportation and manufacturing companies. The vacancy rate for Class A properties in the last quarter of 2021 was 18.4 percent, 9 percentage points lower than Class B buildings.

“While fourth-quarter activity offered positive signaling, the Downtown Chicago office market remained bruised by the ongoing effects of the pandemic and work-from-home,” the report said.

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Average asking rents for Chicago’s downtown office market fell by 0.6 percent in the fourth quarter to $40.47 per square foot. Fulton Market had the highest average asking rent among Chicago’s downtown submarkets, rising to $43.46 per square foot from $42.94 in the previous quarter.

The availability rate for the fourth quarter rose by 0.8 percent to 23.2 percent.

Chicago’s sublet availability shrank by 1.8 percent to 5.6 million square feet from the previous quarter. “Sublease supply, while slowly declining, remains elevated and it will continue to exert downward pressure on asking rents,” which will create tenant-favorable conditions, according to the report.

The biggest deal of the last quarter was US Bank’s extension of its 121,000-square-foot lease at 190 South LaSalle Street. Other notable leases included Vizient, a Texas health care management consulting firm, and Milwaukee Tool’s new deals at the Old Post Office totaling about 180,000 square feet.

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