Sticker shock. That’s what tenants experienced with asking rents across Chicago in Q2. Especially when combined with additional tax and operating expenses.
Rents steadily tracked upward throughout Q2, increasing 5.2% quarter-over-quarter to $5.06 per square foot.
That to say, according to the latest report by Savills, conditions remain tight for occupiers in Chicagoland.
Eighteen million square feet of net absorption was observed during the quarter, more than triple the long-term average. Vacancy stood at 4.5% this quarter, down 210 basis points from Q2 2021, and the market continued to swell in size, with millions of square feet in new product and 33 million square feet currently under construction.
More than 10 million square feet of space was delivered during the quarter, bringing the 2022 year-to-date tally to almost 17 million square feet of new product. More than two million square feet alone were completed at properties in Kenosha and Joliet, both of which remain available to occupiers, based on the report.
Among the largest transactions this period, Uline leased 757,000 square feet at a spec warehouse development in Kenosha, where it plans to add 120 jobs. CEVA Logistics and Expeditors International signed leases totaling nearly 1.4 million square feet at Bridge Development’s Bridge Point Melrose Park.
The outlook? Despite high price tags, Chicagoans need not worry.
Quality options remain for occupiers seeking space, in spite of familiar challenges of labor supply, inflation, interest rates, recession fears and geopolitical risk.
Large blocks of space in more outlying portions of the market are available in speculative development, and Savills said Amazon is looking to sublease 10% of its space as it seeks to right-size its portfolio following its recent expansion.
All things considered, Chicago remains affordable compared to other U.S. markets and will continue to be attractive to occupiers for the foreseeable future.