Chicago’s suburban office sector set a new record, and not the good kind.
According to NAI Hiffman‘s third-quarter 2024 Metro Chicago Office Market report, the office vacancy rate in Chicago’s suburbs reached an all-time high of 26.2%. That’s up from 25.5% one year earlier.
Not surprisingly, leasing activity was down, too, in the suburban Chicago office sector.
NAI Hiffman reported that total office leasing activity in the third quarter in suburban Chicago totaled under 1.12 million square feet. That’s a drop of 30.4% when compared to the third quarter of 2023.
The suburban Chicago office market has seen 3.2 million square feet of leasing activity year to date. That comes out to a negative net absorption of 994,000 square feet through the third quarter. In the third quarter alone, this slice of the market recorded negative 285,389 square feet of net absorption.
The suburbs’ troubles can be seen in Class-A office properties. Even though demand is highest for this type of office space, the Chicago suburban office market recorded negative 494,949 square feet of absorption through the first three quarters of this year. Last year, Class-A suburban office properties notched 480,533 square feet of positive net absorption.
NAI Hiffman reported that mid-size office product of 20,000 to 100,000 square feet is showing stronger fundamentals in today’s market. According to NAI Hiffman’s report, savvy landlords who can invest in smaller floor plans are benefitting from a broader pool of potential tenants without having to wait for a larger tenant that is looking to relocate.
The office market isn’t doing much better in the Chicago CBD. NAI Hiffman reported that CBD office spaces recorded negative 273,949 square feet of absorption during the third quarter. The CBD office vacancy rate rose to a new cyclical high of 23.2% in the quarter.
In fact, NAI Hiffman reported that the CBD office vacancy rate has risen 1,050 basis points since the start of the pandemic, jumping from 12.7% during the first quarter of 2020 to 23.2% as of the end of the third quarter of this year.
The downtown market registered 1.4 million square feet of new office leasing activity during the third quarter. That is down 31.4% when compared to the same quarter a year earlier.
222 Merchandise Mart Plaza again registered the largest office deal of the quarter, with Medline opting to renew 161,000 square feet. In another notable deal, Capital One renewed its 76,932-square-foot lease at 77 W. Wacker Drive.
