Chicago CBD Market Update: Downtown Vacancies Remain at Record High
The Chicago office market conditions present interesting opportunities for tenants in their current and future leases.
As we look closer at the trends across the central business district (CBD), new insights suggest a longer rebound than anticipated with a turning point likely to show face 2022 mid-year.
A decline in vacancy is not expected until the latter portion of 2022
Record high vacancies continue to average around 22%, and expected to increase throughout the middle of next year. In fact, stabilization is not anticipated until late in the second quarter of 2022, with an 18- to 24- month minmum recovery period as we absorb the vacancy experienced since the onset of the pandemic.
Rental rates remain stable as concessions and incentives rise to all-time highs
While rental rates remain relatively stable, we are seeing significant increases in periods of free rent, tenant improvement allowances and greater flexibility as it relates to the ability to offset rent.
Sublease space continues to flood the market
Quality sublease space continues to hit the market, which will likely be the trend taking us into the New Year and increase vacancy rates by 1% to 2% overall. This will create opportunities for tenants in both direct and sublease spaces, enabling more leverage of the market and use of aggressively priced subleases to secure the best economic terms possible.
Demand exists, but the return to work will be a slow process
Despite the soft market, demand is returning from tenants seeking long-term space solutions and taking advantage of the opportunities presented. Long-term leases with significant size spaces continue to drive deals.
In this video, CBIZ Gibraltar’s President and CEO Steve Joseph discusses the current state of the office market with an update on the Chicago central business district.
WHAT THIS MEANS FOR TENANTS
- Especially in today’s climate, the market is tenant favorable as landlords remain highly motivated to offer significantly more favorable terms, concessions and deal incentives in order to fill building vacancies.
- One of the biggest changes to the office market has been the influx of sublease space availability. This may allow tenants currently looking for space to negotiate below market deals in top tier office buildings.
- Even though rental rates are holding steady, the market is primed for tenants as concessions are continuing to rise in this prolonged soft market.
- Employers are continuing to show signs and desire to return to the physical workplace.
As the leading provider of integrated real estate services with a 100% commitment to advocating the interests and needs of tenants, CBIZ Gibraltar understands that no two companies are alike and works to deliver the best possible solutions for our clients. Together, we uncover the potential of your work environment, maximize human capital and map the path to critical business success.