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Chicago Office Market

Average Asking Rent (Price/SF)          $29.75
Vacancy Rate (%)           16.6%
Net Absorption (SF)        999,598

Fears of a possible summer slowdown in the Chicago metro office market were pushed aside this quarter, as activity levels remained high. Vacancy declined at a metro level to 16.6%, a decline of 30 basis points quarter-over-quarter and 120 basis points year-over-year. Rental rates experienced equal growth, increasing to $29.75/SF from $29.12/SF in the second quarter. Facebook signed the largest lease of the quarter, agreeing to take more than 260,000 square feet at the newly opened 151 North Franklin. This brings the building to 90.5% leased. Just last quarter, Facebook moved into additional space at 191 North Wacker. CIBC signed a lease renewal for 220,000 square feet at 120 South LaSalle, and CTC renewed for 114,000 square feet at 425 South Financial Place. WeWork also made headlines this quarter, as it signed leases to open two more locations. The coworking giant will open a 100,000-square-foot office at 515 North State, taking a significant chunk of a large vacant block, and close to 70,000 square feet of space at 330 North Wabash. The firm also subleased the remainder of its available space at 20 West Kinzie to Salesforce. The tech firm has signed several lease expansions at the building but still needed more space. W.W. Grainger signed a lease to take a full floor, 100,000 square feet, of Motorola's sublease space at the Merchandise Mart this quarter. The maintenance supply company will be consolidating its Chicago offices from 500 West Madison and 125 South Clark. Finally, law firm Holland and Knight will be the newest tenant joining the roster at 150 North Riverside. The firm will be cutting its footprint in half, moving from 100,000 square feet at 131 South Dearborn to 50,000 square feet. In the suburbs, ALDI signed one of the largest leases for a second Chicago office at Naperville Woods Office Center for 113,000 square feet. The discount retailer will maintain its original headquarters in Batavia. Also in Naperville, SMS Assist announced it will be opening a new call center for 35,000 square feet at CityGate Centre. At Corporate 500, American Imaging Management renewed its lease for 60,000 square feet.

Chicago Industrial Market

Average Asking Rent (Price/SF)            $5.43
Vacancy Rate (%)              7.8%
Net Absorption (SF)       4,921,220

Following a quarter of minimal absorption and over 5.0 million square feet of new construction deliveries, the Chicago industrial market saw a spike in absorption and only 2.2 million square feet of new deliveries in the third quarter of 2018. Vacancy fell to 7.8%, the first time it has been below 8.0% in four quarters. Third-quarter absorption totaled 4.92 million square feet, the most the market has seen in a single quarter since the end of 2016. Rental rates continued to rise, reaching a record high of $5.43/SF. Year-over-year rents increased 4.0%.
Two submarkets positively absorbed more than 800,000 square feet each: Fox Valley/North Kane with 963,000 square feet and the I-55 Corridor with 806,000 square feet. In the Fox Valley/North Kane submarket, a majority of the absorption occurred in Elgin. BOX Partners moved into 385,000 square feet at 2601 Galvin drive, iHerb occupied 257,000 square feet at 2640 Auto Mall Drive, Heritage Travelware moved into 151,000 square feet at 2500 Northwest Parkway and Amazon took an additional 105,000 square feet at the building. This absorption brought the vacancy rate down from 8.9% last quarter to 5.9% in the third quarter, a huge drop for the submarket that brings its vacancy rate to the lowest it has been in several years. Considering the submarket only has one new building currently under construction, a 45,000-square-foot spec building in East Dundee, the market should expect its vacancy rate to hold steady if not fall further in upcoming quarters.

Chicago Office Market Report
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Chicago Industrial Market Report
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