More good news for tenants in Chicago – another office tower on the way

Everybody loves good news, but nobody more than me.  Since my job is to help businesses improve their office space use and decrease occupancy costs, I’m always excited to hear when the market is increasing in tenant favorability.  If you have been reading me for a while, you know that there are over 5 million square feet of new office buildings under way in downtown Chicago.  From both my analysis and that of other brokers in the marketplace, the delivery of this space looks like it will release some upward pressure on rental rates, resulting in either a stabilizing or reduction in asking rental rates for tenants as these properties come online.  Needless to say, adding another 865,000 square feet of office space, as GlobeSt.com has reported that Development Resources proposes to do with a new $325 million office tower, should serve to add fuel to the rent-reducing fire.  Even though they are projecting low $30s/SF net, which places it well above average in the downtown Chicago market, if it is delivered within the same time frame as the other 5MM square feet, we should expect to see some value opportunities in lower class A and higher class B spaces vacated by the anchor tenants moving in to the “newest and greatest”.

On a different note, I applaud Development Resources for proposing a project on the fringe of all of the new development.  Hopefully, introducing this building toward the south end of Wacker Drive will result in more south and west loop revitalization, making downtown Chicago a more vibrant place to live as well as work.

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2 Responses

  1. Good info – this is just another reason why money center lenders are sometimes leery about values on Chicago office buildings. The rents just do not maintain staying towers. As you said – definitely becoming a tenant’s market.

  2. Lisa,

    I think you might have meant “staying powers”, but as a bit of a punster, I certainly appreciate rents in skyscrapers that do not maintain “staying towers” 🙂

    Happy Wednesday,
    Jacob

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