Chicago Q1 2023 | Office Real Estate Report

Chicago Office Real Estate Market Report 2019

Long-term utilization patterns are still under scrutiny in Chicago’s office market, driving up the amount of available space. A historical high of 101 million SF of space (19.7% of total inventory) is available in Chicago, an increase of more than 24 million SF since 20Q1. In addition, the sublet availability rate is on the rise again, posting another record-high of 2.4%, or 12.1 million SF. It is also being observed that many employers are letting their lease obligations expire, with no thoughts about moving their stakes elsewhere.

According to Site Selection Magazine, Chicago took the number one prize again for luring the most corporate relocations and expansions for the 10th year in a row, with 448 projects on the books. Yet Chicago’s office space occupancy tells a different story. In fact, its office vacant and available rate now stands at 15.4% — a new record high — and move-outs, or negative absorption, are still outpacing move-ins with -2.1 million SF of negative absorption recorded over the past 12 months.

Even as demand is expected to drift lower over the
coming quarters, Chicago should be at the tail end of its largest supply wave in over a decade, with only 3.6 million SF currently under construction. Finally, the pipelines of new deliveries and under construction are at or lower than their 10-year supply averages.

Slowing demand, high tenant improvement costs, lack of rent growth and higher interest rates have contributed to lengthened deal times and heightened uncertainty in the office market. There are still pockets in the market where buildings are doing well but we are seeing no middle ground, office properties seem to either be holding their own or extremely underperforming”  

Justin Harris, Senior Associate

 

Top Overall Chicago Office Real Estate Lease Statistics (Past 12 Months)

12 Month Deliveries (Square Feet): 579 thousand (2.2 million in Q4 2022)
12 Month Net Absorption (Square Feet): -2.1 million (-1.9 million in Q4 2022)
Vacancy Rate: 15.4% (15.2% in Q4 2022)
12 Month Rent Growth: +0.9% (+0.9% in Q4 2022)

Top Chicago Office Leases (Past 12 Months)

1) Property: 2915 Jorie Blvd
Submarket:
Eastern East/West Corr
Leased SF:
297,127
Quarter:
Q2 2022
Tenant: 
ACE Hardware Corporation
Tenant Rep: CBRE
Leasing Rep: JLL

2) Property: Lincolnshire Corp Center
Submarket:
Central North
Leased SF:
283,257
Quarter:
Q2 2022
Tenant:
Zebra Technologies Corporation
Tenant Rep:
JLL
Leasing Rep:
 N/A

3) Property: Block 37
Submarket:
Central Loop
Leased SF:
266,167
Quarter:
Q3 2022
Tenant:
DBRS, Inc.
Tenant Rep: CBRE
Leasing Rep: Colliers

4) Property: 440 South LaSalle
Submarket:
Central Loop
Leased SF:
262,998
Quarter:
Q3 2022
Tenant:
Chicago Trading Company
Tenant Rep: N/A
Leasing Rep: CBRE

5) Property: 1 North Dearborn
Submarket:
Central Loop
Leased SF:
230,232
Quarter:
Q3 2022
Tenant:
Chicago Public Schools
Tenant Rep: 
N/A
Leasing Rep:
N/A

Top Chicago Office Sales Statistics (Past 12 Months)

Sales Comparables: 927 (1,010 in Q4 2022)
Average Cap Rate:
8.5% (8.4% in Q4 2022)
Average Price/ SF: 
$117 ($174 in Q4 2022)
Average Vacancy at Sale: 12.3% (14.2% in Q4 2022)

Top Chicago Office Real Estate Property Sales

1) Property: James R. Thompson Center (100 W Randolph St.)
*Rating:
3
Year Built: 
1985
Building SF:
945,120
Vacancy:
0%
Price (PSF): 
$105,000,000 ($111)
Cap Rate: 
Not Listed

2) Property: Bldg 1 (1 Corporate Dr)
*Rating: 4
Year Built: 1971
Building SF: 357,591
Vacancy:
0%
Price (PSF): $75,884,591 ($212)
Cap Rate: Not Listed

3) Property: 115 S LaSalle St
*Rating: 4

Year Built: 
1975
Building SF:
591,845
Vacancy: 0%
Price (PSF):
$75,000,000 ($127)
Cap Rate:
Not Listed

4) Property: The Reserve at Deer Park (21440 Lake Cook Rd)
*Rating: 4
Year Built: 2002
Building SF: 341,092
Vacancy:
0%
Price (PSF): $59,000,000 ($173)
Cap Rate: 9.2%

5) Property: Bldg 3 (3 Corporate Dr)
*Rating:
4
Year Built: 
1991
Building SF: 
308,305
Vacancy:
4.1%
Price (PSF): 
$53,672,362 ($174)
Cap Rate: 
Not Listed

*Rating is 1-5, 5 being the best

 

Chicago Office Construction Projects Statistics

Properties Currently Under Construction: 24 (24 in Q4 2022)
Total Size:
3.6M SF (3.4M SF in Q4 2022)
Percent of Inventory:
0.7% (0.7% in Q4 2022)
Preleased: 63.7% (75.4% in Q4 2022)

Top Chicago Office Projects Under Construction

1) Property: Salesforce Tower Chicago (333 W Wolf Point Plz)
Rating*:
5
Building SF:
1,200,202
Stories:
59
Completion:
Q2 2023
Developer/ Owner:
Hines

2) Property: 360 North Green (360 N Green St)
Rating*:
5
Building SF:
493,680
Stories:
24
Completion:
Q1 2024
Developer/ Owner:
Sterling Bay

3) Property: Hyde Park Labs (5201 S Harper Ave)
Rating*:
5
Building SF:
302,388
Stories:
13
Completion:
Q2 2024
Developer/ Owner: 
Not Listed

4) Property: Lincoln Yards (1229 W Concord Pl)
Rating*:
5
Building SF:
285,000
Stories:
8
Completion:
Q2 2023
Developer/ Owner:
Sterling Bay

5) Property: City Gate III (2180 City Gate Ln)
Rating*:
4
Building SF:
224,000
Stories: 
6
Completion:
Q2 2023
Developer/ Owner:
Not Listed, Lincoln Property Company

*Rating is 1-5, 5 being the best

 

Top Eastern East-West Corridor Office Real Estate Lease Statistics (Past 12 Months)

12 Month Deliveries (Square Feet): 217K (135K in Q4 2022)
12 Month Net Absorption (Square Feet): -107K (-248K in Q4 2022)
Vacancy Rate: 17.1% (17.4% in Q4 2022)
12 Month Rent Growth: 1.1% (1.3% in Q4 2022)

4 & 5 Star Office Properties Leasing Activity in Eastern East-West Corridor (Past 12 Months)

1) Property: Oak Brook Regency Tower (1415 W 22nd St)
Rating: 
4
Deals: 
7
Square Feet:
16,796
Vacancy:
29.1%
Net Absorption: 
31,492

2) Property: 999 Oakmont Plaza (999 Oakmont Plaza Dr)
Rating:
4
Deals: 
3
Square Feet:
20,815
Vacancy:
46.6%
Net Absorption:
30,448

3) Property: Parkview Plaza (1 Parkview)
Rating:
4
Deals: 
6
Square Feet:
47,761
Vacancy: 
14.5%
Net Absorption:
11,467

Top Schaumburg Office Real Estate Lease Statistics (Past 12 Months)

12 Month Deliveries (Square Feet): 0 (0 in Q4 2022)
12 Month Net Absorption (Square Feet): -49.3K (-286K in Q4 2022)
Vacancy Rate: 23.6% (23.7% in Q4 2022)
12 Month Rent Growth: 1.2% (1% in Q4 2022)

4 & 5 Star Office Properties Leasing Activity in Schaumburg (Past 12 Months)

1) Property: Bell Works Chicagoland (2000 Center Dr)
Rating:
4
Deals:
5
Square Feet:
99,987
Vacancy:
77.4%
Net Absorption:
656,877

2) Property: Tower 3 (1701 Gulf Rd)
Rating:
4
Deals: 3
Square Feet: 30,256
Vacancy:
26.7%
Net Absorption: 
52,013

3) Property: Schaumburg Corporate Center (1515 E Woodfield Rd)
Rating:
4
Deals:
6
Square Feet:
46,814
Vacancy:
50%
Net Absorption: 
32,157

 

Top Eastern East-West Corridor Office Sales Statistics (Past 12 Months)

Sales Comparables: 78 (83 in Q4 2022)
Average Cap Rate:
8.0% (8.3% in Q4 2022)
Average Price/ SF: 
$96 ($106 in Q4 2022)
Average Vacancy at Sale: 8.6% (11.3% in Q4 2022)

Top Eastern East-West Corridor Office Real Estate Property Sales

1) Property: 2222 Kensington Ct
*Rating: 3
Year Built: 1974
Building SF: 103,015
Vacancy:
0%
Price (PSF): $10,245,117 ($99)
Cap Rate: Not Listed

2) Property: Ace Hardware Corp (2200 Kensington Ct)
*Rating:
3
Year Built: 
1974
Building SF: 
103,015
Vacancy:
0%
Price (PSF): 
$10,189,513 ($99)
Cap Rate: 
Not Listed

 

Top Schaumburg Office Sales Statistics (Past 12 Months)

Sales Comparables: 51 (57 in Q4 2022)
Average Cap Rate:
7.1% (7% in Q4 2022)
Average Price/ SF: 
$67 ($75 in Q4 2022)
Average Vacancy at Sale: 38.9% (34.8% Q4 2022)

Top Schaumburg Office Real Estate Property Sales

1) Property: Northwest Point (50 NW Point Blvd)
*Rating: 4
Year Built: 1999
Building SF: 177,095
Vacancy:
0%
Price (PSF): $29,100,000 ($164)
Cap Rate: Not Listed

2)Property: 2700 W Higgins Rd
*Rating:
3
Year Built: 2003
Building SF: 
21,201
Vacancy:
0%
Price (PSF): $12,500,000 ($590)
Cap Rate:
Not Listed

 

Eastern East-West Corridor Office Construction Projects Statistics

All-Time Annual Average Square Feet: 276,288 (277,060 in Q4 2022)
Delivered SF (Past 8 Qs):
273,504 (241,220 in Q4 2022)
Delivered SF (Next 8 Qs):
20,00 (101,544 in Q4 2022)
Proposed SF (Next 8 Qs): 912,275 (912,275 in Q4 2022)

Top Eastern East-West Corridor Office Project Deliveries

1) Property: Oak Brook Commons (Commerce Dr)
Rating*:
4
Building SF:
81,544
Stories:
7
Completion:
Q1 2023
Developer/ Owner:
Not Listed

Top Eastern East-West Corridor Office Projects Under Construction

1) Property: 448 E North Ave
Rating*:
4
Building SF:
20,000
Stories:
10
Completion:
Q2 2023
Developer/ Owner:
Not Listed

Top Eastern East-West Corridor Office Projects Proposed

1) Property: Oak Brook Commons  
Rating*: 
4
Building SF:
351,000
Stories:
13
Completion:
Q2 2024
Developer/ Owner:
Oak Brook Hines Development

 

Schaumburg Office Construction Projects Statistics

All-Time Annual Average Square Feet:  250,844 SF (253,132 SF in Q4 2022)
Delivered SF (Past 8 Qs):
0 SF (0 SF in Q4 2022)
Delivered SF (Next 8 Qs):
0 (0 in Q4 2022)
Proposed SF (Next 8 Qs): 101,821 (67,00 SF Q4 2022)

Top Schaumburg Office Projects Proposed

1) Property: Schaumburg Medical Center (405 Arbor Glen Blvd)
Rating*: 
4
Building SF: 
45,000
Stories:
3
Completion:
Q2 2024
Developer/ Owner:
Not Listed / Marc Realty

Data Sources: Cawley Chicago & CoStar
*Cited Sources: Globe St – Office Property Construction

 

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