A new report analyzing suburban Chicago’s office market pointed to positive absorption in the second quarter as a bit of good news. But the same report also highlighted just how slow of a recovery office landlords in the Chicago suburbs continue to face.
That is one of the key takeaways from Transwestern‘s second-quarter suburban Chicago office report, which found that while tenants absorbed more office space than they vacated during the quarter, leasing activity remained subdued and availability rates stayed elevated.
According to Transwestern, Chicago’s suburban office market posted 106,407 square feet of positive net absorption during the second quarter, with each of the region’s five suburban submarkets recording gains. The brokerage attributed much of that positive absorption to limited tenant movement rather than a surge in new leasing activity.
The report also showed a modest improvement in direct vacancy. The direct vacant available rate fell 75 basis points during the quarter to 18.8%, though the broader availability rate—which includes all space being marketed—inched up to 25.8%.
Even with the positive absorption, the suburban office market remains far from a full recovery. Transwestern reported that leasing slowed during the quarter. Ravago Manufacturing signed the largest new lease, taking 31,506 square feet at 540 Lake Cook Road in Deerfield. Much of the quarter’s activity, though, came from existing tenants renewing their commitments instead of expanding or relocating. Tate & Lyle Americas renewed 114,213 square feet at 5450 Prairie Stone Parkway in Hoffman Estates, while AbbVie renewed nearly 198,000 square feet across two buildings in Waukegan.
The report also found that asking rents have remained surprisingly resilient despite elevated vacancy levels. Average full-service asking rents rose to $27.16 a square foot, an increase of 80 basis points from a year earlier. The O’Hare submarket continued to command the region’s highest average asking rent at $32.52 per square foot.
Construction activity, though, remains sluggish. Transwestern reported that no suburban office buildings larger than 40,000 square feet were under construction during the second quarter. The firm noted that office development has been minimal since 2016, with most new projects built specifically for owner occupants rather than speculative tenants.
Among the suburban submarkets, the Eastern East-West Corridor led the region in second-quarter absorption with 27,964 square feet, followed closely by the North Suburban market with 26,271 square feet and the Western East-West Corridor with 25,092 square feet. O’Hare posted 22,390 square feet of positive absorption, while the Northwest Suburban market added 4,690 square feet.
According to Transwestern, the largest suburban office sale during the quarter was Real Capital Solutions’ acquisition of the 207,714-square-foot office building at 55 Shuman Blvd. in Naperville for $16.1 million, or about $78 a square foot. The property was 68% leased at the time of sale. Transwestern reported that redevelopment and conversion opportunities remain the primary drivers of suburban office investment activity as investors continue seeking alternative uses for obsolete office properties.
