During the worst days of the Great Recession — and all through the painfully slow recovery that followed it — the office market remained one of the hardest hit commercial real estate sectors.
Today, though, the office market is showing real signs of recovery, with vacancy rates falling across the country. The Chicago region is no exception, as a recent report from Grubb & Ellis shows. And this is good news for commercial real estate brokers in the region. If office is recovering? It’s a good sign that the commercial real estate business in general is bouncing back from the depths it hit during the midst of the recession.
Unless, of course, you’re talking about the suburban market. That’s one market in which vacancy rates actually jumped in the first quarter of 2011.
According to Grubb & Ellis’ first-quarter numbers, the office vacancy rate in the Chicago region dropped 20 basis points to 20.6 percent from the previous quarter, posting 16,300 square feet of positive absorption.
Don’t expect to see too many new office buildings popping up in the Chicago area, though. With the delivery of a 48,000-square-foot build-to-suit project in the Interstate-88 East submarket during the first quarter of 2011, the area’s construction pipeline has nearly been exhausted, the Grubb & Ellis report said. This leaves no new construction underway thus far in 2011 with the exception of Astellas Pharma U.S. Inc.’s new build-to-suit headquarters in Glenview.
Building owners haven’t enjoyed any rent increases, either. According to Grubb & Ellis’ numbers, Class-A average asking rental rates in the region fell 31 cents a square foot in the first quarter of 2011, hitting $29.44 a square foot.
In the Chicago Central Business District, the office vacancy rate fell 40 basis poins to 17 percent. The market enjoyed nearly 130,000 square feet of positive net absorption. Class-A average asking rental rates dropped 83 cents a square foot from the previous quarter, hitting $35.82 a square foot.
In the Chicago suburban area, though, vacancy rates continued to rise, jumping 20 basis points from the previous quarter. For the first quarter of this year, the vacancy rate in this region hit 25 percent. The market saw negative net absorption of 110,000 square feet.
Asking rents in the Chicago suburbs, though, did rise, hitting $24.14 a square foot thanks to an increase of 38 cents from the last quarter of 2010.