Any signs of hope for the Chicago suburban office market? Some small ones, according to the latest research from Transwestern.
In its third quarter Chicago Suburban Office Market report, Transwestern reported that tenants signed several large office leases in the Chicago suburb during the most recently completed quarter.
At the same time, the direct vacancy rate in the suburbs decreased by 80 basis points on a year-over-year basis.
Transwestern also reported that available sublease space in the Chicago suburban office market fell 21.6% when compared to the third quarter in 2023.
It’s important to note, though, that the Transwestern report found plenty of remaining challenges for the Chicago suburban office market, too. For instance, that vacancy drop was largely because of inventory being removed from the market.
What were some of those bigger office leases signed in Chicago during the third quarter?
Medline Industries signed the largest new suburban lease since 2022, taking 214,560 square feet at 2375 Waterview Drive in suburban Northbrook. Transwestern reported that several other large tenants recommitted to their suburban offices in the third quarter.
Transwestern also reported, though, that even with the closing of some larger leases, overall office leasing activity remains much lower than what is needed for a market turnaround in the Chicago suburbs.
Transwestern reported that the Chicago suburban office market is expected to remain an uncertain one for the foreseeable future, with an abundance of available space making it a tenants’ market.
The numbers remain grim for this sector. Transwestern reported that net absorption in the Chicago suburban office market totaled negative 282,627 square feet in the third quarter. That brings the year-to-date total down to 1.35 million square feet of negative absorption.
Office demand, though, remains dependent on class type. In the third quarter, Class-A office space saw 86,240 square feet of positive absorption in the Chicago suburbs, while the Class-b and -C sectors had negative 368,867 square feet of net absorption.
Direct leasing activity totaled 1.1 million square feet in the third quarter of 2024, well below the pre-pandemic quarterly average of 1.9 million square feet from the 10 years prior to the second quarter of 2020.
The Chicago suburban office direct vacancy rate increased by 30 basis points to 22% during the third quarter, while the overall vacancy rate increased by 10 basis points when compared to the second quarter, rising to 22.8%.
Again, though, this varied depending on office type. Transwestern reported that the suburban office market’s Class-A direct vacancy rate decreased by 30 basis points to 23.1% in the third quarter. The Class-B and -C vacancy rate increased by 40 basis points to 21.6%.
