Commercial real estate saw a significant turnaround in Chicago in 2014, according to MB Real Estate’s Fourth Quarter 2014 Chicago Market Overview.
The overview reported that although the national unemployment rate was 6.6% in January, by the end of December it had dropped to 5.6%. Research showed Chicago’s metro saw a slightly slower employment recovery during this time, but the resulting new business saw a total of more than 1 million square feet of absorption in the CBD by the end of 2014. Also, Downtown’s direct vacancy, according to MBRE, fell from 14.5% to 13.6%.
For Andy Davidson, EVP/Managing Director of Corporate Services & Tenant Advisory at MBRE, there were three things that stood out to him in 2014.
“First, Class A space, especially at the top end, new developments, did extremely well,” he said. “As evidenced by 444 W. Lake’s signing of McDermott Will & Emery and DLA Piper, and 150 N. Riverside’s signing of William Blair, Hyatt and Polsinelli. Secondly, we saw a continued migration of suburban tenants downtown, primarily motivated by a need for access to a younger labor force. And finally, the incredible growth and activity within in Chicago’s tech scene: Uber, Google, Motorola Mobility, etc. We may have reached the tipping point on tech that Chicago has long desired.”
Overall, the research noted that as demand continues to grow, the forecast for commercial real estate in 2015 is certainly positive. A few highlights from the market overview include:
-111 N. Canal had two more tenants sign new leases to close out the year. The West Loop tech hot-bed is now home to medical technology firm MethodCare which was recently acquired by Louisville, KY-based ZirMed. The company will occupy an office in 32,668 square feet on the fourth floor. Potbelly Sandwich Works moved its corporate headquarters to 27,406 square feet within the building now at 92.6% leased.
-The O’Donnell development site at 150 N. Riverside pre-leased two new tenants in the fourth quarter. Hotelier Hyatt Corporation and law firm Polsinelli Shughart signed for a combined 400,000 square feet in the building which is currently under construction and slated to be opened in 2017.
-The sale of 353 N. Clark was completed this quarter. At $715 million, the sale is one of the largest ever in Chicago but only the second largest of 2014 after the record-breaking $850 million of 300 N. LaSalle in the second quarter. Heitman LLC bought the building from Tishman Speyer Properties LP for a whopping 80% more than it was purchased for back in 4th quarter of 2010.
-Engineering consulting firm Sargent & Lundy signed the largest deal of 2014 in a 441,687 square foot renewal at 55 E. Monroe.
-Chicago Public Schools completed its move to 1 N. Dearborn from its long time headquarters at 125 S. Clark. The now vacant 507,920 square foot building at 125 S. Clark is under complete renovation and will be re-introduced as a refreshed multi-tenant space.