Office Market Update: Suburban Chicago – Trends Shaping Midyear 2024
What is the current state of the office market?
Our team at CBIZ Gibraltar is always monitoring conditions across office markets – and there are several key insights that can benefit tenants leveraging the current landscape for economic advantage.
In the suburban Chicago market, demand is highly focused on move-in ready spec spaces and good condition second generation spaces.
Overall, the market is seeing a reduction in office inventory as outdated office buildings continue to be sold to developers for redevelopment and conversion opportunities. Many of these properties are being converted into data centers, warehouses and distribution centers.
Notable trends and data from Chicago’s Suburban Markets in Q1 include:
VACANCY: Vacancy remains consistent, with the overall rate in the suburban market at 25.7%. The O’Hare submarket continues to be the best performing suburban Chicago submarket with the lowest vacancy at 21.8%.
North and Northwest submarket vacancy is at 23.1% and 32.3%, respectively. East/West corridor vacancy is at 22.3%.
With an abundance of available inventory, adaptive reuse continues to lead conversation around the suburban office markets. The phrase, used in conversation related to the city, refers to the idea of exploring ways to convert office space or buildings into hotels or multifamily use; and in the suburban office market has meant evaluating converting office parks and large buildings to industrial use. Of course, challenges around adaptive reuse in the Chicago submarkets are expected with great potential for ongoing pushback from communities, among other considerations in an environment with no new development.
ASKING RENTS: Gross asking rates in the suburban Chicago market continue to vary across building classes and submarkets. The avg. overall gross asking rental rate in Q1 was $27.01/SF in the suburban market.
- O’Hare reported an avg. gross rental rate of $30.15/SF.
- North submarket reported an avg. gross rental rate of $28.30/SF.
- Northwest submarket reported an avg. gross rental rate of $24.00/SF.
- East/West Corridor reported an avg. gross rental rate of $25.60/SF.
LEASING ACTIVITY: Leasing activity remains low compared to pre-pandemic norms, being down by 43% in the first quarter of 2024.
Notable leases in Q1 include the Dover Corporation renewal of their 78,801 square foot space in Downers Grove and Sesser Family Companies signing a 64,883 square foot lease in Oak Brook. City of Evanston signed a 51,508 SF lease and STERIS Corporation signed a 49,052 SF lease, both in the North suburban market.
Whether tenants seek to acquire additional square footage or consolidate their existing space, our teams assist in evaluating and identifying all facets of the real estate process so our clients can make sound business decisions.
At CBIZ Gibraltar, we are constantly developing innovative and strategic ways to better our results for our clients. With the ever-changing market around us, tenants need a proactive approach to negotiating, evaluating, and managing their real estate needs so they can put their focus on their business goals and objectives.
Whether your real estate plans are immediate or far-off, we would like to get to know you and your office space needs.