Looking for signs of hope in the Chicago suburban office market? There weren’t many in the second quarter.
Just consider the second-quarter Chicago suburban snapshot released by Colliers. According to Colliers, the region’s O’Hare submarket continues to hold the lowest office vacancy rate. And that number was a high 20.4% in the second quarter.
Then there’s the Northwest Chicago suburban office market. Colliers says that the vacancy rate in this submarket stood at 32.6% in the second quarter, the highest of all the suburban markets.
The overall Chicago suburban office vacancy rate hit 26.5% in the second quarter. That’s up from 25.5% in the first quarter of this year and 24.5% in the second quarter of last year.
Image courtesy of Colliers.
The second quarter ended with more than 1.14 million square feet of negative absorption in the Chicago suburban office market, according to Colliers. This is primarly a result of tenants that previously downsized or relocated out of the market, including such large officer users as AON and Advocate.
How about suburban office transactions? Colliers reorted that 13 lease transactions of more than 15,000 square feet were signed throughout the Chicago suburbs in the second quarter of 2024. That included Wheels, Inc.’s 215,000-square-foot sublease at 1299 Zurich Way in Schaumburg, Convergint’s 65,000-square-foot lease at Bell Works Chicagoland in Hoffman Estates and Littlefuse’s 53,000-square-foot lease at 6133 River Road in Rosemont.
Five office properties, combinging for a total of 0.7 million square feet, were sold in the second quarter, including Franklin Partners’ purchase of Oakbrook22, a 367,244-square-foot property in Oak Brook that sold for $43.5 million, and Stotan Industrial’s purchase of 2349 W. Lake St., a 116,500-square-foot asset in Addison that sold at auction for $8.2 million.
In addition, there are currently five properties totaling 1 million square feet under contract and seven properties, totaling 1.1 million square feet, that were recently added for sale in the suburbs.
What does Collers see for the future?
First, Collier says that larger corporate tenants are ready to make long-term decisions, with many looking for new office space. That is good news for the sector.
Colliers predicts, too, that well-capitalized Chicago suburban office properties will have a greater opporunity to secure new tenants. Properties that have capital constraints will see even more tenants leave their spaces.
Finally, despite the seemingly grim numbers, Colliers says that leasing activity is increasing in the Chicago suburban office market as more companies require that their employees return to the office at least on a part-time basis. Class-A suburban office assets with the best amenities will see the most leasing activity in the market, Colliers reports.
