Looking for Class-C office space in Chicago? Good luck. This type of office product is disappearing from the city.
The fourth-quarter Market Beat report released earlier this month by MB Real Estate, reported that Class-C office inventory in the Chicago central business district has shrunk by more than 10 million square feet since 2004. At the same time, the overall office inventory in the city’s CBD has increased by more than 10 million square feet during the same time.
The numbers in MB’s report tell an interesting tale: In 2004, the CBD office inventory in the city was equally distributed between Class-A, -B and -C properties. Today, Class-A office space here accounts for 41 percent of the inventory, while Class-B accounts for 35 percent.
Class-C office space, though, accounts for just 24 percent of the CBD office inventory.
Where has all that Class-C space gone? MB Real Estate says that much of the Class-C office buildings in the city’s CBD were built before 1940. Today, much of this space has been converted to new uses, mostly apartments and hotels. This isn’t surprising; a growing number of people are choosing to rent, and many of them want to do this in the center of urban areas. Chicago tourism is on the rise, too, so the demand for new hotel space in the CBD is also on the rise.
A good example of this trend is the Hyatt Centric at 100 W. Monroe. This new hotel was once a 130,000-square-foot office building that had been built in 1927.
According to MB’s research, 46.7 percent of converted Class-C office space has been transformed into multifamily housing, while 30.2 percent of it has become hotel space. Developers have converted 9.6 percent of this space into student housing, 6.5 percent into Class-A office space and 5.9 percent into healthcare facilities.