CoStar Releases Q3 Chicago Office Market Report

I don’t know who can be credited with saying “No news is good news,” but I have to completely disagree.  As a real estate professional, I think that all news is good news.  By researching and analyzing trends and activities, tenant representatives like me are better equipped to providing the best services for our clients.  That’s why I was excited to receive a notification in my Inbox that the latest CoStar Chicago Office Market Report was available.  It’s free to subscribers and on sale for 50% off for non-subscribers.

Before you reach into your wallet for the full report, I’d like to provide an overview, at no charge, of key learnings that I have gathered from the trends and statistics contained within the report.

  1. There has been a net absorption of space in the central business district (CBD), and the opposite trend in suburban Chicago.
  2. CBD vacancy has decreased from the previous quarter and suburban Chicago vacancy has increased in the same period.
  3. Fifty-nine percent (59%) of the five million (5MM) square feet under construction in the Metro Chicago submarket is pre-leased.

What does this all mean:

Neither the CBD nor the suburban Chicago market has had much new space delivered in the last quarter.  As a result, the absorption statistics and the vacancy statistics correlate quite highly.  Some major tenant moves, like United Airlines relocation to downtown Chicago, have tipped the scales in favor of the CBD versus the suburban market.  There has been limited new space delivery and increased activity as several firms expanded in the CBD in the last quarter, taking more of the increasingly scarce space.  Until the 5MM SF of new space comes on the market, we anticipate a space crunch that will result in lower vacancy and higher rental rates.  Since a majority of this space is pre-leased, it is likely that this will create a vacuum or domino effect, transferring vacancy to ever-lower classes of office space until the system levels out.  Late 2009 will likely be the best time in the next 2-3 years to be in the market for space.

If you want to know more about how these trends may impact you within your submarket, I definitely recommend getting your hands on a copy of the latest report.  Should you disagree with my assessment, feel free to share your thoughts via comments to this post.

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