Chicago Q3 2022 | Office Real Estate Report

Chicago Office Real Estate Market Report 2019

Flexible and hybrid workplace trends continue to depress demand in Chicago’s office market, driving up the amount of available space on the market. A historical high of 95.3 million SF of space (18.7% of total inventory) is currently available in Chicago, an increase of more than 20 million SF since 20Q1. 

Even as demand is expected to continue drifting lower over the coming quarters, Chicago remains in the midst of its largest supply wave in over a decade, with 2.7 million SF of space delivering over the past year and another 2.2 million SF currently under construction. In total, demand for office space (absorption) posted -5.0 million SF in Chicago over the past 12 months, pushing vacancy to a 10-year high of 15.2%. The most recent sizable delivery was from Riverside Development’s 1.5 million-SF Union Station redevelopment as the BMO Tower at 320 S Canal. Upon completion, the property was 52% leased to a tenant lineup including its banking namesake (500,000 SF) and law firm Chapman & Cutler (88,000 SF), both expected to move into their spaces in early 2023. 

Although the total amount of space available for sublease in Chicago rose by 40% since the onset of the pandemic, the sublet availability rate appears to have plateaued at 2.0%. Early in 2022, Horizon Therapeutics found a sublessor for its 160,000 SF at 150 S Saunders, Lake Forest, which it vacated in 2020 to be the owner occupier of the former Takeda campus in Deerfield. 

In spite of the significant rise in competitive space and the overall weakened space demand environment, market rents began the year relatively flat, in line with national trends. 

On the investment side, many investors were already shying away from Chicago’s office market before the onset of the coronavirus pandemic, and activity has only declined further since. Sales volume totaled just $3.7 billion over the past year. Investment drivers remain on the opposite ends of the pricing spectrum, from properties priced to move for redevelopment/renovation to the trophy assets, fully leased and market ready. For example, the vacant and former AT&T headquarters at 225 W Randolph (850,000 SF) sold in late 2021 for $165/SF, just as the 85% occupied Bank of America Tower (1.55 million SF) at 110 N Wacker reportedly went under contract for almost $700/SF. Given uncertainty over the near-term leasing environment and inflationary headwinds, sales activity in Chicago will likely remain concentrated in deals with minimal leasing risk and stable cash flows. 

“We have all heard the real estate cliché….Location Location Location, the world we are currently living in is clearly pointing that out.  What stands out to us is that while the macro level absorption and activity figures point to a continued downturn, the latest market stats bring to life how different the market is from one submarket to another.   In some submarkets you see 2, 3, 4 and even 9% absorption growth.  In other markets you see the exact opposite.  These truly are very interesting times in the commercial real estate business” Rawly Lantz, Principal

 

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

12 Month Deliveries (Square Feet): 3.1 million (2.5 million in Q2 2022)
12 Month Net Absorption (Square Feet): -1.8 million (-2.5 million in Q2 2022)
Vacancy Rate: 15.2% (15.3% in Q2 2022)
12 Month Rent Growth: +0.8% (+0.8% in Q2 2022)

Top Chicago Office Leases (Past 12 Months)

1)Property: 2915 Jorie Blvd
Submarket: 
Eastern East / West Corridor
Leased SF:
297,125
Quarter:
Q2 2022
Tenant:
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: 360 North Green
Submarket:
Fulton Market
Leased SF:
223,000
Quarter:
Q2 2022
Tenant:
Boston Consulting Group

4)Property: 600 West Chicago
Submarket:
River North 
Leased SF:
186,000
Quarter:
Q2 2022
Tenant:
Echo Global Logistics Inc.
Tenant Rep:
JLL
Leasing Rep:
Sterling Bay

5) Property: Lake Forest
Submarket:
Central North 
Leased SF:
160,085
Quarter:
Q1 2022
Tenant:
Abbott
Tenant Rep:
Leasing Rep:
CBRE

Top Chicago Office Sales Statistics (Past 12 Months)

Sales Comparables: 1,082 (1,050 in Q2 2022)
Average Cap Rate:
8.1% (8.3% in Q2 2022)
Average Price/ SF: 
$197 ($201 in Q2 2022)
Average Vacancy at Sale: 12.2% (13.6% in Q1 2022)

Top Chicago Office Real Estate Property Sales

1) Property: Leo Burnette Building (35 W Wacker Dr.)
*Rating: 4
Year Built: 1989
Building SF:1,118,042
Vacancy:
0.4%
Price (PSF): $420,000,000 ($376)
Cap Rate: Not Listed

2)Property: Leo Burnette Building (35 W Wacker Dr.)
*Rating:
4
Year Built:
1989
Building SF:
1,118,042
Vacancy:
0.4%
Price (PSF):
 $415,000,000 ($371)
Cap Rate:
7.1%

3) Property: Bank of America Tower (110 N Wacker Dr.)
*Rating: 5
Year Built: 2020
Building SF: 1,546,909
Vacancy:
22.2%
Price (PSF): $210,000,000 ($136)
Cap Rate: Not Listed

4) Property: 225 W Randolph St.
*Rating:
 4
Year Built: 
1967
Building SF:
849,252
Vacancy: 
20.3%
Price (PSF): 
$155,818,000 ($183)
Cap Rate: 
Not Listed

5) Property: 200 W Jackson Blvd.
*Rating: 4
Year Built: 1971
Building SF: 487,436
Vacancy: 
20.3%
Price (PSF): $130,000,000 ($267)
Cap Rate: 6.9%

*Rating is 1-5, 5 being the best

 

Chicago Office Construction Projects Statistics

Properties Currently Under Construction: 17 (16 in Q2 2022)
Total Size: 
2.9M SF (2,381,303 SF in Q2 2022)
Percent of Inventory:
0.6% (0.5% in Q2 2022)
Preleased: 80.4% (80.4% in Q2 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:
Q1 2023
Developer/ Owner:
Hines

2) Property: 360 N Green St.
Rating*:
5
Building SF:
493,680
Stories:
24
Completion:
Q2 2023
Developer/ Owner:
Sterling Bay

3) Property: Ally Lincoln Yards (1229 W Concord Pl)
Rating*:
5
Building SF:
280,000
Stories:
8
Completion:
Q2 2023
Developer/ Owner:
Sterling Bay

4) Property: City Gate III
Rating*:
4
Building SF:
224,000
Stories: 6

Completion:
Q2 2022
Developer/ Owner:
Sterling Bay

5) Property: 311 W Huron St.
Rating*:
4
Building SF:
200,000
Stories:
10
Completion:
Q2 2022
Developer/ Owner:
Sterling Bay

 

*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): 135K (0K in Q2 2022)
12 Month Net Absorption (Square Feet): 87.1K (232K in Q2 2022)
Vacancy Rate: 17.5% (17.3% in Q1 2022)
12 Month Rent Growth: 1.5% ( 1.1K% in Q2 2022)

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

1) Property: 3400 Lacey Rd. 
Rating:
4
Deals:
4
Square Feet:
142,283
Vacancy:
12%
Net Absorption:
61,681

2) Property: Oak Brook Regency Tower 
Rating: 
4
Deals:
7
Square Feet:
16,925
Vacancy:
37.1%
Net Absorption:
30,558

3) Property: Imperial Place (1 East 22nd St.)
Rating:
4
Deals:
3
Square Feet:
165,410
Vacancy:
53.9%
Net Absorption:
19,037

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

12 Month Deliveries (Square Feet): 0 (0 in Q2 2022)
12 Month Net Absorption (Square Feet): -890K (-306K in Q2 2022)
Vacancy Rate: 22.8% (23.5% in Q2 2022)
12 Month Rent Growth: 0.6% (0.5% in Q2 2022)

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

1) Property: Bell Works Chicagoland
Rating:
4
Deals:
2
Square Feet:
91,590
Vacancy:
67.9%
Net Absorption:
656,857

2) Property: Tower II
Rating:
4
Deals: 3
Square Feet: 31,114
Vacancy:
45.7%
Net Absorption:
60,204

3)Property: Tower III (1701 Golf Rd.)
Rating:
4
Deals:
5
Square Feet:
63,831
Vacancy:
39,3%
Net Absorption:
50,737

 

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

Sales Comparables: 81 (78 in Q2 2022)
Average Cap Rate:
8.3% (8.4% in Q2 2022)
Average Price/ SF: 
$140 ($147 in Q2 2022)
Average Vacancy at Sale: 14.6% (16.4% in Q2 2022)

Top Eastern East-West Corridor Office Real Estate Property Sales

1) Property: Highland Landmark II (3025 Highland Pky)
*Rating: 4
Year Built: 1998
Building SF: 281,416
Vacancy:
4.4%
Price (PSF): $33,800,000 ($180)
Cap Rate: Not Listed

2) Property: 711 Jorie Blvd. 
*Rating:
3
Year Built: 
1980
Building SF:
160,154
Vacancy:
76.8%
Price (PSF): $33,800,000 ($211)

Cap Rate: 
Not Listed

 

Top Schaumburg Office Sales Statistics (Past 12 Months)

Sales Comparables: 58 (55 in Q2 2022)
Average Cap Rate:
8.6% (7.3% in Q2 2022)
Average Price/ SF: 
$127 ($99 in Q2 2022)
Average Vacancy at Sale: 20.1% (18.3% Q2 2022)

Top Schaumburg Office Real Estate Property Sales

1) Property: 1501 W Shure Dr 
*Rating: 3
Year Built: 2017
Building SF: 200,000
Vacancy: 
0%
Price (PSF): $56,000,000($280)
Cap Rate: Not Listed

2)Property: Arlington Green Executive Center
*Rating:
2
Year Built: 1984
Building SF:
62,715
Vacancy:
37.7%
Price (PSF): $14,400,000 ($230)
Cap Rate:
Not Listed

3) Property: Golf Tower (2550 W Golf Rd. )
*Rating: 3
Year Built: 1979
Building SF: 276,516 
Vacancy:
0%
Price (PSF): $13,000,000 ($49)
Cap Rate: Not Listed

 

Eastern East-West Corridor Office Construction Projects Statistics

All-Time Annual Average Square Feet: 276,984 (271,460 in Q1 2022)
Delivered SF (Past 8 Qs):
106,220 (106,220 in Q1 2022)
Delivered SF (Next 8 Qs):
242,571 (216,544 in Q1 2022)
Proposed SF (Next 8 Qs): 1,227,275 (1,183,275 in Q1 2022)

Top Eastern East-West Corridor Office Project Deliveries

1) Property: Hub Group Building 2 (2000 Clearwater Dr)
Rating*:
4
Building SF:
135,000
Stories:
4
Completion:
Q1 2021
Developer/ Owner:
Not Listed / Hub Group, Inc

 

Top Eastern East-West Corridor Office Projects Under Construction

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

2) Property: 448 E North Ave
Rating*:
4
Building SF: 22,000

Stories:
10
Completion:
Q1 2023
Developer/ Owner:
Not Listed

Top Eastern East-West Corridor Office Projects Proposed

1) Property: Oak Brook Commons  
Rating*: 
5
Building SF:
351,000
Stories:
13
Completion:
Q1 2023
Developer/ Owner:
Oakbrook Hines Development

 

Schaumburg Office Construction Projects Statistics

All-Time Annual Average Square Feet:  257, 908 SF (259,256 SF in Q2 2022)
Delivered SF (Past 8 Qs):
180,000 SF (180,000 SF in Q2 2022)
Delivered SF (Next 8 Qs):
0 (0 in Q2 2022)
Proposed SF (Next 8 Qs): 696,288 (732,228 SF Q2 2022)

Top Schaumburg Office Projects Delivered

1) Property: The Boler Company (Progress Pky)
Rating*:
4
Building SF:
180,000
Stories:
8
Completion:
Q4 2020
Developer/ Owner:
UrbanStreet Group, LLC

Top Schaumburg Office Projects Proposed

1) Property: Medical Arts Campus (999 N Elmhurst Rd)
Rating*:
4
Building SF:
209,224
Stories:
3
Completion:
Q2 2023
Developer/ Owner:
Not Listed / DLC Management

2) Property: Huntington 90
Rating*:
3
Building SF:
155,064
Stories:
6
Completion:
Q3 2023
Developer/ Owner:
Not Listed / McShane Development Co.

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

 

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