It’s easy to see the negatives when looking at the most recent downtown Chicago office report released this week from JLL. After all, JLL reports that the downtown Chicago office market closed the first quarter of the year with negative 86,906 square feet of net absorption, yet another three-month period during which the CBD saw negative absorption.
But there is also hope in JLL’s report, though that requires a closer look at the numbers.
Where is that hope? It requires a longer-term view. JLL reported that absorption figures in the Chicago downtown office market have remained nearly flat for the last three quarters. Is that a sign that absorption is plateauing and could begin to turn a corner? That’s the hope.
Additional hope comes from the performance of the Class-A and Class-A+ slice of the Chicago CBD office market. JLL reported that these higher-quality office spaces, which represent 34% of Chicago’s office inventory, continue to outperform other classes.
According to JLL’s research, Class-A, Class-A+ and trophy office spaces accounted for more than 650,000 square feet of positive absorption in the Chicago CBD during the last three quarters.
JLL predicts that absorption figures in this part of the market will continue to improve. Some tenants looking for new office space during the next year might face additional competition from other tenants because of the scarcity of this higher-quality space.
The Chicago CBD saw 1.3 million square feet of closed office leases during the first quarter of the year. A total of 71% of this square footage closed as new leases.
JLL reported that traditional industries such as professional services, finance and legal services accounted for 56% of all office leases signed in the Chicago CBD during the first quarter.
What about new deliveries? JLL reported that as of the end of the first quarter, 1.2 million square feet of new office space was under construction in the Chicago CBD. The last two office properties in the 350,000-square-foot 919 W. Fulton Market and the 849,000-square-foot renovation of 225 W. Randolph will be complete in early April.
But JLL reported that there are no new office buildings expected to break ground in the city’s CBD in the near future. This means that Chicago will be without any office construction for the next few years.
The Chicago CBD ended the first quarter with a total vacancy rate of 23.7% and a direct vacancy rate of 22.1%, according to JLL.
