Suburban Chicago Office Vacancies hit Record 31.3%

A new reality is settling over suburban Chicago’s office market, where the post pandemic return-to-work wave has been more of a ripple, and rising interest rates are laying the ongoing weakness bare.

That much becomes clear with each passing quarterly report on the office total vacancy — empty space and space that is up for sublease, occupied or not — with JLL showing a record 31.3 percent, Crain’s reported.

The data indicates that nearly a third of all office space in Chicago’s suburbs is either vacant or soon to be vacated by its current occupant without a replacement tenant lined up.

The rate is up by 2.4 percentage points compared with a year ago and 10.3 points from pre-pandemic days.

It has notched record highs for 14 consecutive quarters.

A notable upcoming vacancy in the suburbs is the 600,000-square-foot hole that insurance company Aon is leaving at 4 Overlook Point in Lincolnshire, which landlord Realty Income is trying to sell. Aon is moving to a space about a third of that size at Sentinel Net Lease’s Bannockburn Corporate Center.

The various suburban markets have about 100 million square feet of combined office space. They have added 4 million square feet of vacant space since the onset of the pandemic in early 2020.

That’s nearly 10 percent more than the negative net absorption during the runup and first phase of the Great Recession.

The trend has been reflected in foreclosures and other distress for suburban office buildings, with the shakeup ongoing as major tenants trim their needs for space.

“What’s happening in the suburbs is a big process of resetting the market,” said Andrea Van Gelder, international director at JLL. “This process is going to take a while.”

Downtown and other areas of the city are not immune from the trend, paralleling suburban markets with a record run of highs on vacancies in recent years.