Chicago Office Real Estate Report: Leases, Sales & Construction Projects

Chicago Office Real Estate Market Report 2019

This year, Chicago’s office real estate market is seen as one of the Top-5 markets nationwide in terms of activity. It is one of the regions with the most office property construction* to date according to GlobeSt. The development projects are a sign of the confidence investors have in the The Windy City due to its advantageous location, and flourishing economy.

It should be noted that the economic fallout of the current pandemic remains to be seen. However, our office team believes that there are opportunities within the Chicago commercial real estate market even during this challenging time.

Cawley Chicago’s office experts gather the top statistics for leases, sales, and projects under construction in Chicago’s office real estate market every quarter. This provides a view of of where office real estate stands currently and what lies ahead in the future. Additionally, the overall office real estate stats are compared to Chicago’s suburban areas, Schaumburg and the Eastern East-West Corridor, in order to get an idea of how the markets perform in relation to one another.

As the economy is on the cusp of a restart, we continue to see slower than normal activity.  We believe this will continue for the better part of 2020 as business owners focus on the financial stability of their core businesses.

As of April most office tenants did continue to pay rent. We could see a shift in May and June as the COVID-19 pandemic continues. Some landlords are trying to get in front of this and offering rent abatement in exchange for lease extensions.

Tony Russo, Principal @ Cawley Chicago

 

Like most markets around the country, the Chicago market reacted to this unprecedented time with many segments abruptly coming to a halt. However, within certain segments of the market, industrial for example, activity has continued and there are promising signs.

Looking ahead, the velocity is likely to taper compared to the past 24-36 months, but there will be activity. As businesses plan for their future, there will be relocation needs, contraction needs, some growth needs, and leases that have upcoming expirations.

For the sales market, we will see less sales transacting based on market hype or future potential, rather buyers will need the fundamentals of the deal to make sense. If priced appropriately and there is a supply-demand need, sales will get done.

In addition to all of this, one of the positive signs we are seeing in the market is small businesses starting to sprout. This is partially based on market demand for essential or niche markets, but it is also a factor of attrition and unfortunate consequences of some of the (bigger) players within these industries contracting, or worse, closing their business.”

Zach Pruitt, Principal @ Cawley Chicago

Chicago Office Real Estate Statistics Q1 2020

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

12 Month Deliveries (Square Feet): 5.6 million (5 million in Q4 2019)
12 Month Net Absorption (Square Feet): 2.7 million (1.1 million in Q4 2019)
Vacancy Rate: 12.2% (12.3% in Q4 2019)
12 Month Rent Growth: 2.3% (0.9% in Q4 2019)

Top Chicago Office Leases (Past 12 Months)

1) Property: Citadel Center
Submarket:
Central Loop
Leased SF:
533,889
Quarter:
Q1 2020
Tenant:
Citadel Enterprise America
Tenant Rep:
JLL
Leasing Rep:
The Telos Group LLC

1) Property: The Old Post Office
Submarket:
West Loop
Leased SF:
463,000
Quarter:
Q3 2019
Tenant:
Uber
Tenant Rep:
CBRE
Leasing Rep:
The Telos Group LLC

3) Property: 500 N Collins St
Submarket:
North Kane / I-90
Leased SF:
360,000
Quarter:
Q1 2020
Tenant:
Hoffer Plastics Corporation
Tenant Rep: Not Listed
Leasing Rep: 
Not Listed

4) Property: 311 W Monroe St
Submarket:
West Loop
Leased SF:
270,123
Quarter:
Q4 2019
Tenant:
West Monroe Partners LLC
Leasing Rep:
Sterling Bay

5) Property: 311 W Monroe St
Submarket:
West Loop
Leased SF:
208,000
Quarter:
Q3 2019
Tenant:
West Monroe Partners
Leasing Rep:
Sterling Bay

Top Chicago Office Sales Statistics (Past 12 Months)

Sales Comparables: 925 (1,010 in Q4 2019)
Average Cap Rate: 
8.9% (8.7% in Q4 2019)
Average Price/ SF: 
$165 ($163 in Q3 2019)
Average Vacancy at Sale: 10.9% (11.7% in Q4 2019)

Top Chicago Office Real Estate Property Sales

1) Property: 500 W Monroe St
*Rating: 4
Year Built: 1992
Building SF: 967,000
Vacancy:
0.9%
Price (PSF): $412,000,000 ($426)
Cap Rate: 7.0%

2) Property: 190 S LaSalle Street
*Rating: 4
Year Built: 1986
Building SF: 798,782
Vacancy: 
5.2%
Price (PSF): $230,000,000 ($288)
Cap Rate: Not Listed

3) Property: 3500 Lacey Rd
*Rating: 4
Year Built: 1992
Building SF: 583,982
Vacancy: 
1.2%
Price (PSF): $128,500,000 ($220)
Cap Rate: 7.7%

4) Property: Burnham Center (111 W Washington St)
*Rating: 4
Year Built: 1914
Building SF: 584,149
Vacancy: 
5.6%
Price (PSF): $80,250,000 ($137)
Cap Rate: Not Listed

5) Property: 801 S Canal St
*Rating: 3
Year Built: 1989
Building SF: 591,577
Vacancy: 
0%
Price (PSF): $68,000,000 ($115)
Cap Rate: Not Listed

*Rating is 1-5, 5 being the best

Chicago Office Construction Projects Statistics

Properties Currently Under Construction: 32 (37 in Q4 2019)
Total Size: 
7,384,083 SF (7,140,370 SF in Q4 2019)
Percent of Inventory:
1.5% (1.4% in Q4 2019)
Preleased: 46.9% (36.3% in Q4 2019)

Top Chicago Office Projects Under Construction

1) Property: Bank of America Tower (110 North Wacker)
Rating*:
5
Building SF:
1,546,909
Stories:
55
Completion:
Q1 2020
Developer/ Owner:
Riverside Inv & Development / The Howard Hughes Corporation

2) Property: BMO Tower (320 S Canal St)
Rating*:
5
Building SF:
1,463,000
Stories:
50
Completion:
Q1  2022
Developer/ Owner:
Riverside Investment & Development

3) Property: Salesforce Tower Chicago (333 W Wolf Point Plz)
Rating*:
5
Building SF:
1,200,202
Stories:
59
Completion:
Q1 2023
Developer/ Owner:
Shapack Partners / Walton Street Capital, LLC

4) Property: 167 N Green St
Rating*:
5
Building SF:
600,000
Stories:
17
Completion:
Q4 2020
Developer/ Owner:
Shapack Partners / Walton Street Capital LLC

5) Property: 800 W Fulton St
Rating*:
4
Building SF:
480,490
Stories:
19
Completion:
Q1 2021
Developer/ Owner:
Thor Equities

*Rating is 1-5, 5 being the best

Chicago East West Corridor Office Real Estate Statistics 2020

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

12 Month Deliveries (Square Feet): 0 (0 in Q4 2019)
12 Month Net Absorption (Square Feet): -538,000 (-645,000 in Q4 2019)
Vacancy Rate: 14.6% (14.2% in Q4 2019)
12 Month Rent Growth: +2.3% (+1.5% in Q4 2019)

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

1) Property: Esplanade I (2001 Butterfield Rd)
Rating: 
4
Deals:
9
Square Feet:
37,310
Vacancy:
16.5%
Net Absorption:
25,040

2) Property: Corridors Two (2655 Warrenville Rd)
Rating:
4
Deals: 
4
Square Feet:
149,896
Vacancy:
5.5%
Net Absorption:
13,107

3) Property: Esplanade IV (1901 Butterfield Rd)
Rating:
4
Deals:
4
Square Feet:
12,930
Vacancy:
13.0%
Net Absorption:
12,930

Chicago Schaumburg Office Real Estate Statistics Q1 2020

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

12 Month Deliveries (Square Feet): 0 (14,300 in Q4 2019)
12 Month Net Absorption (Square Feet): -183,000 (-502,000 in Q4 2019)
Vacancy Rate: 21.5% (21.2% in Q4 2019)
12 Month Rent Growth: +2.0% (-0.3% in Q4 2019)

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

1) Property: Schaumburg Towers (1450 American Ln)
Rating: 
4
Deals:
5
Square Feet:
73,892
Vacancy:
62.2%
Net Absorption:
55,329

2) Property: Centennial Center (1900 E Golf Rd)
Rating:
4
Deals: 
3
Square Feet:
17,140
Vacancy:
16.4%
Net Absorption:
13,688

3) Property: Kensington Corporate Center (1660 Feehanville Dr)
Rating:
4
Deals:
2
Square Feet:
13,597
Vacancy:
56.1%
Net Absorption:
13,597

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

Sales Comparables: 70 (73 in Q4 2019)
Average Cap Rate: 
8.1 (8.9% in Q4 2019)
Average Price/ SF: 
$139 ($141 in Q4 2019)
Average Vacancy at Sale: 31.0% (29.6% in Q4 2019)

Top Eastern East-West Corridor Office Real Estate Property Sales

1) Property: Esplanade II (3500 Lacey Rd)
*Rating:
4
Year Built: 
1992
Building SF:
583,982
Vacancy: 
1.2%
Price (PSF): 
$128,500,000 ($220)
Cap Rate: 
7.7%

2) Property: One Lincoln Centre (18W140 Butterfield Rd)
*Rating: 4
Year Built: 1986
Building SF: 317,525
Vacancy: 
21.4%
Price (PSF): $45,000,000 ($142)
Cap Rate: Not Listed

3) Property: 815 Pasquinelli Dr
*Rating: 3
Year Built: Not Listed
Building SF: 36,842
Vacancy: 
0%
Price (PSF): $17,350,000 ($471)
Cap Rate: Not Listed

Top Schaumburg Office Sales Statistics (Past 12 Months)

Sales Comparables: 52 (54 in Q4 2019)
Average Cap Rate: 
7.8% (9.3% in Q4 2019)
Average Price/ SF: 
$83 ($68 in Q4 2019)
Average Vacancy at Sale: 4.8% (6.7% in Q4 2019)

Top Schaumburg Office Real Estate Property Sales

1) Property: 2600 Forbs Ave
*Rating: 4
Year Built: 2008
Building SF: 90,000
Vacancy: 
0%
Price (PSF): $7,385,000 ($82)
Cap Rate: Not Listed

2) Property: 141 NW Point Blvd 
*Rating: 3
Year Built: 1982
Building SF: 114,642
Vacancy: 
0%
Price (PSF): $7,000,000 ($61)
Cap Rate: Not Listed

3) Property: 2359 Hassell Rd
*Rating: 3
Year Built: Not Listed
Building SF: 27,000
Vacancy: 
0%
Price (PSF): $6,450,000 ($239)
Cap Rate: Not Listed

Eastern East-West Corridor Office Construction Projects Statistics

All-Time Annual Average Square Feet: 290,120 (292,960 in Q4 2019)
Delivered SF (Past 4 Qs):
125,788 (127,293 in Q4 2019)
Delivered SF (Next 4 Qs):
240,100 (135,000 in Q4 2019)
Proposed SF (Next 4 Qs): 728,175 (877,955 in Q4 2019)

Top Eastern East-West Corridor Office Projects Delivered

1) Property: 172 E Schiller St
Rating*:
4
Building SF:
29,000
Stories:
2
Completion:
Q4 2018
Developer/ Owner:
Ryan Companies / Bob Babiak

2) Property: The York Building (134 N York St)
Rating*:
3
Building SF:
34,800
Stories:
3
Completion:
Q2 2018
Developer/ Owner:
Not Listed / First Course Productions

Top Eastern East-West Corridor Office Projects Under Construction

1) Property: Hub Group Building 2 (2000 Clearwater Dr)
Rating*:
4
Building SF:
135,000
Stories:
4
Completion:
Q3 2020
Developer/ Owner:
Not Listed / Hub Group, Inc

Top Eastern East-West Corridor Office Projects Proposed

1) Property: Oak Brook Commons Offices 
Rating*:
4
Building SF:
220,000
Stories:
7
Completion:
Q2 2021
Developer/ Owner:
Hines / Not Listed

2) Property: 600 E Butterfield Rd 
Rating*:
4
Building SF:
207,955
Stories:
1
Completion:
Q2 2021
Developer/ Owner:
Not Listed / Northern Baptist Theological Seminary

Schaumburg Office Construction Projects Statistics

All-Time Annual Average Square Feet: 279,112 (286,364 in Q4 2019)
Delivered SF (Past 4 Qs):
106,922 (106,922 in Q4 2019)
Delivered SF (Next 4 Qs):
180,000 (0 in Q4 2019)
Proposed SF (Next 4 Qs): 695,224 (695,224 in Q4 2019)

Top Schaumburg Office Projects Delivered

1) Property: One Arlington (3400 W Stonegate Blvd)
Rating*:
3
Building SF:
15,922
Stories:
1
Completion:
Q1 2019
Developer/ Owner:
Not Listed / 25N Coworking

2) Property: James Paul Petri Public Works (450 E Devon Ave)
Rating*:
4
Building SF:
91,000
Stories:
1
Completion:
Q4 2018
Developer/ Owner:
Not Listed / Village of Elk Grove

Top Schaumburg Office Projects Under Construction

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

Top Schaumburg Office Projects Proposed

1) Property: Northwest Point (NW Point Blvd)
Rating*:
3
Building SF:
250,000
Stories:
6
Completion:
Q2 2021
Developer/ Owner:
Not Listed / Not Listed

2) Property: Medical Arts Campus (999 N Elmhurst Rd)
Rating*:
4
Building SF:
209,224
Stories:
3
Completion:
Q4 2021
Developer/ Owner:
Not Listed / DLC Management

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

 

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