It’s been a while, but there’s finally some optimism in Chicago’s CBD office market.
In its second quarter 2024 CBD Chicago office report, Colliers reported that the downtown Chicago office market is seeing increased activity, especially in sublease space. As Colliers says, a growing number of tenants are once again engaging with the Central Business District market.
And in especially good news, the Chicago CBD saw 123,000 square feet of positive net absorption during the second quarter. That is only the second quarter in four years in which this market has seen positie office absorption.
As Colliers says, this could be a sign that this sector will once again experience sustained positive activity.
Asking rents, especially in Class-A trophy buildings, also rose during the second quarter, hitting an average of $43.07 a square foot overall. That’s up from an average of $42.67 a square foot a year ago.
What about vacancy rates? Colliers reported that the total office availability rate in the downtown Chicago market fell this quarter to 29.1%. That’s still a high figure, but it lower than the historic high of 29.6% registered in the first quarter of this year.
Colliers said that sublease available space in the Chicago CBD decreased significantly in the second quarter, dropping from 7.6 million square feet available in the first quarter to 6.97 million square feet as of the end of June.
As Colliers writes: “This quarter’s activity may signal the tipping point that every player in the market has been looking for.”
New office construction activity is still slow, though. Colliers reported that only 414,554 square feet of new office space was under construction as of the end of the second quarter. That is down significantly from the more than 1.12 million square feet of office space under construction in the Chicago CBD in the first quarter of this year and the 779,180 under construction in the second quarter of 2023.
Office deliveries in the Chicago downtown market totaled 646,143 square feet in the second quarter. That is down from more than 1.2 million square feet in the second quarter of 2023.
Still, the overall news from Colliers’ report is positive. Yes, the Chicago CBD office market is still struggling with a high vacancy rate. Construction activity has dwindled. And investment sales activity has fallen significantly. But that positive absorption number and an increase in leasing activity is hopefully a sign that better days are ahead.
