Suburban Chicago office vacancy sets fifth straight quarterly record

As companies downsize, suburbs getting hit while desire for quality remains

2211-2215 Sanders, Northbrook (Loppnet)
2211-2215 Sanders, Northbrook (Loopnet)

Suburban Chicago offices are emptier than ever.

For the fifth straight quarter, vacancy hit a record high in the suburban market as businesses downsized, Crain’s reported, citing JLL data. New leasing activity is concentrated among companies shedding space with plans to host employees in their offices far less often than before the pandemic.

With workers aiming for hybrid schedules consisting of remote work and only two to four days in the office, and employers reducing footprints accordingly, total vacancy ticked up to 27.1 percent, JLL found. Demand has also consolidated into the Class A office category, leaving little appetite for older and lower quality buildings. That mirrors the pattern seen in the city, where leasing activity has been concentrated in brand new development within the Fulton Market District to the detriment of older towers in the Loop.

“It’s more of the same,” JLL’s Scott Ohlander, who represents tenants in the suburbs, told Crain’s. “Companies that have taken the time to develop a real estate strategy during the pandemic — we’re seeing them now start to implement that strategy.”

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Their strategies are resulting in reductions of their office sizes by between 25 and 40 percent, and even more in some cases.

Some of the highest profile examples include a move by the nation’s second-largest pharmacy chain, CVS Caremark, reducing its footprint by 77 percent from its 266,000 square feet combined at 2211 and 2215 Sanders Road in Northbrook, for a new space at 3100 Sanders. Other moves to shed major space were made by the Federal Aviation Administration — which shrank its office by almost 40 percent — as well as the Blue Cross Blue Shield parent Health Care Service Corporation, which moved into 133,000 square feet in a Class A office at 3500 East Lacey Road in Downers Grove, cutting its space by a quarter from its Class B space at 1020 31st Street.

The record vacancy rate hasn’t scared off all investors from Chicago’s suburbs. New York-based firms Opal Holdings and Sovereign Partners last quarter both made big bets on the office market. Opal picked up the Highland Landmark II property in Downers Grove for $52 million and the former OfficeMax headquarters in Naperville for $73.3 million, both of them close to fully leased. Sovereign bought the 27-story former Gallagher headquarters at 2 Pierce Place in Itasca for $24 million in a bet it could turn around that mostly vacant building.

“The future of suburban office may hinge on how companies perceive their future space plans based on the number of employees returning to the workplace,” the JLL report said.