Chicago’s East-West Corridor runs along I-88, from Westchester out to the fringes of the MSA at the Fox River, with communities like Aurora and St. Charles. But the submarket is bifurcated by another highway, and the performance of office spaces were much different at the close of 2018, depending on which side of I-355 one is looking.
According to the latest research by Colliers International, the Chicago suburban office market broke even at year-end, despite fluctuations earlier in the year. Focusing on the East-West Corridor, however, it’s clear that one portion of the submarket underperformed in the last quarter while the other enjoyed modest improvements.
Looking west of I-355, Naperville had the highest fourth quarter office absorption at 97,361 square feet, followed by Lisle’s 19,530 square feet of absorption. Other cities like Aurora, Glen Ellyn and North Aurora had more modest gains while other cities—namely St. Charles, West Chicago and Wheaton—had negative absorption.
While North Aurora and Winfield have tight vacancies at 3.2 percent, West Chicago is experiencing a 36.8 percent vacancy rate, albeit with one of the submarket’s smaller office stocks of only 146,145 total base square feet. The area’s largest office bases, Lisle (4.1 million square feet) and Naperville (5.7 million square feet), saw a 26.2 and a 14.4 percent vacancy rate, respectively, to close out 2018.
The office market in Naperville is clearly the strongest not just for the western portion of the submarket, but in all of the East-West Corridor. Activity here accounted for 64.4 percent of all absorption in the Lisle-Naperville area in Q4 2018.
For evidence of trust in the Naperville office market, look at Franklin Partners’ redevelopment of the former OfficeMax property, now branded as The Shuman. Designed by Wright Heerema Architects, the rebirth of the 350,000-square-foot building will include a new five-story lobby, new private meeting rooms and a 30,000-square-foot amenity space. Colliers International is handling leasing duties for the property.
On the other side of the I-355 tollway, several cities experienced drastic negative absorption. Westchester had negative absorption of 24,580 square feet from its 1.39-million-square-foot base while Burr Ridge, with a total base of 844,756 square feet, lost 26,156 square feet. Lombard had the largest negative absorption in the submarket with 99,228 square feet lost with 2.36 million square feet still occupied in the city.
Downers Grove, which boasts the largest total office base in the submarket at 5.84 million square feet, lost 58,320 square feet of occupied office space. Despite this, the city’s 4.96 million square feet of occupied office space led the submarket in Q4 2018 and accounts for more than 15 percent of all occupied space in the East-West Corridor.
All told, this portion of the East-West Corridor had 107,535 square feet of negative absorption, almost offsetting the 151,036 square feet of absorption in the cities west of I-355. Among cities with a total base over 200,000 square feet, only Westmont and Willowbrook had single-digit vacancy rates (9.6 and 5.1 percent, respectively). Elmhurst had the highest vacancy rate with 26.7 percent (of 413,273 square feet in building stock), followed by Burr Ridge at 19.3 percent, which has an 844-756-square-foot total base.
It wasn’t all dour on this side of the tollway, however. NAI Hiffman secured approximately 100,000 square feet in leases for several tenants at Oak Brook Regency Towers in the last quarter of 2018. These included new leases, renewals or expansions for Collegis, Wells Fargo Advisors, Joint commission Resources and others.