Chicago ranks third on the Colliers International’s top office metros snapshot research report released in June.
On the report, Chicago’s core inventory reaches 145,247,654 square feet just behind Washington DC and Manhattan. The core central business district submarkets for Chicago include the West Loop, Central and East Loop and River North.
More than half of the 10 markets tracked in this report saw rent growth in the first quarter. However, a marked slowdown in the rate of rent appreciation is already underway.
Seven markets experienced office vacancy rise and five had negative absorption. Chicago had a positive net absorption of 956,608 square feet. The report notes pre-leasing of new trophy office towers remains strong and the rapid absorption of this space allows landlords of existing trophy assets to push rents.
Two properties delivered 2.4 million square feet in 2016 and 150 North Riverside will add 1.28 million square feet. The building is already 83 percent preleased and include tenants such as William Blair & Co. and Hyatt’s new world headquarters.
Successful preleasing has led to the first fully-speculative project of the cycle from White Oak Partners and CA Ventures. The property at 625 West Adams Street is 434,934 square feet and due for delivery in the second quarter of 2018.
Average asking rates at new towers range from $55 to $60 per square foot, according to the report. Vacancy in the West Loop is extremely tight at less than 4 percent for Class A+ properties so the prior generation of trophy towers are able to command rents only slightly below new construction.
Companies continue to move from the suburb to the downtown area. Most recently, GE Healthcare decided to move its operations from suburbs to 500 West Monroe where GE Transportation is already headquartered. Another company, EXP, will consolidate into one location at 205 North Michigan Avenue and other relocations are anticipated.