Yes, vacancy rates are high in office properties across the country. But not all office properties are created equal, as the latest Transwestern Chicago Office Market Index proves.
Transwestern’s second quarter index found that vacancy rates are far lower in larger and newer Class-A office buildings than they are in the greater Chicago CBD office sector in general.
Transwestern’s Chicago Office Market Index charts the fortunes of the last 20 Class-A office buildings greater than 300,000 square feet built in the city’s CBD. As Transwestern says, these buildings, representing some of the Chicago CBD’s most desirable office space, is a good indicator of overall office sector conditions.
Transwestern’s index, then, represents about 19.7 million square feet, about 12.4% of the total office inventory in the Chicago CBD.
At the end of the second quarter of this year, the direct vacancy rate of the office buildings in Transwestern’s index stood at 7.9%. That is 14 percentage points lower than the 21.9% direct vacancy rate in the broader Chicago CBD office market.
It’s yet more evidence that the flight to quality is real. Tenants are increasingly paying more per square foot while leasing a lower amount of total office space. This allows them to move into some of the city’s best office properties while paying about the same amount total for rent. The hope is that these higher-quality office spaces will encourage employees to come into the office more frequently.
In the second quarter, 360 N. Green St. in the CBD became the newest office property added to the Chicago Office Market Index. The 492,532-square-foot building was 69.5% pre-leased, with anchor tenant Boston Consulting Group preleasing 225,000 square feet. The addition of this property meant that 111 S. Wacker Drive, the previously oldest property charted by Transwestern, dropped off the list.
The largest new lease signed at a building in the index during the second quarter was Prudential’s lease of 27,580 square feet at 150 N. Riverside Plaza in the West Loop. There are five blocks of direct space greater than 100,000 square feet available at index buildings. Two of the largest are the 276,218-square-foot and 179,752-square-foot blocks at 300 N. LaSalle St.
