Conditions improved in the suburban and downtown office markets for the second consecutive quarter, according to NAI Hiffman’s First Quarter 2011 Chicago Office Report.
Total vacancy in the Chicago area improved slightly in the first quarter of 2011, with the downtown office market recording 575,085 square feet of positive absorption and the suburban market 417,590 square feet of positive absorption, for vacancy rates of 16.14 percent and 22.63 percent respectively.
Four leases in the downtown market eclipsed 100,000 square feet, with KPMG LLP recording the largest new lease for 260,000 square feet at the AON Center. The largest new lease in the suburban market was CVS Caremark’s 119,245-square-foot lease at 2100 E. Lake Cook Road in Buffalo Grove.
Despite the increased leasing activity, overall asking rental rates continued to tick down. Class A space in the downtown market was $31.90, down slightly from the previous quarter, while Class B rates held steady at $26.44 and Class C was down to $21.79.
Overall suburban rates were down to $20.26. However, demonstrating the strength of quality property in the recovery, Class A rates held at $22.31. The majority of leasing activity in the suburbs has been in the Class A marketplace, with 1.6 million square feet of absorption taking place in the last two quarters. The Class B and C markets continue to languish as tenants flock to quality assets that are still offering a relatively good price.
The recovery pace may be modest, but as consumer confidence, retail spending, and hiring continue to rise, the report suggests that it will accelerate throughout the remainder of 2011.
“I believe that the rest of 2011 will see continued improvements in market conditions in spite of the volatility created by rising gas prices and the changing international political landscape,” said David Petersen, COO of NAI Hiffman in the report. “We are by no means recovered from the recent recession; however our industry markers suggest we are beginning to witness a steady rising from the bottom.”
Significant Leases 1Q 2011:
Downtown
- 200 E. Randolph St. AON Center 260,000 s.f. to KPMG LLP New lease
- 303 E. Wacker Dr. 196,189 s.f. to Groupon New lease
- 875 N. Michigan Ave. John Hancock Center 140,000 s.f. to GolinHarris and Weber Shandwick New lease
- 1 N. Franklin St. One North Franklin Building 116,000 s.f. to PNC Bank Lease expansion/extension
- 233 S. Wacker Dr. Willis Tower 83,000 s.f. to Tressler LLP Lease expansion/extension
- 1 N. Dearborn St. One North Dearborn 77,883 s.f. to Pierce and Associates Lease renewal/expansion
Suburban
- 2211-2215 Sanders Rd. Northbrook, 266,000 s.f. to CVS Caremark renewal
- 2100 E. Lake Cook Rd. Buffalo Grove, 119,245 s.f. to CVS Caremark New lease
- 885 Sunset Ridge Rd. Northbrook, 75,000 s.f. to Nestle in a New lease
- 4225 Naperville Rd. Lisle, 71,479 s.f. to Armour-Eckrich Meats Lease renewal/expansion
- 1750 E. Golf Rd. Schaumburg, 61,239 s.f. to Assurance Agency, Ltd. Lease renewal/expansion
- 1701 Golf Rd. Rolling Meadows, 52,801 s.f. Fifth Third Bank Lease renewal/reduction
