Chicago Office Market
Leasing volume was slow for the first half of 2024, with roughly 2.9 million SF being completed over the past two quarters. The market saw vacancy increase this quarter due to sublease terms expiring and negative absorption as contractions signed in the last 24 months added more vacant space to the market. There has been a tightening within Trophy Towers and view space on the top floors. Competition for top space in the Central Business District is expected to continue to absorb the limited supply and push trophy rates higher.
Download Chicago CBD Office Market Report 2Q24Chicago Suburban Office Market
Leasing volume had a slight decline from historical second quarter averages at 0.9MSF, bringing the YTD total to 2.2 MSF. Even though total volume was down the Wheels deal in Schaumburg was the largest lease completed in the metro. Leasing and investment activity continues to be impacted by uncertainty in the office market. Deals are getting through the finish line, but with less velocity as occupiers and investors approach transactions with greater caution.
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Chicago Industrial Market
Increases to the vacancy rate slowed to 10 basis points this quarter, up to 4.7%. Vacancy levels remain well below the 5.1% average since 2019. Tenants have exercised caution in their leasing decisions, resulting in moderated absorption levels. The construction pipeline continues to empty, with 2.8 million SF delivering this quarter and 13.5 million SF still under construction. Construction starts have continued to slowed to a near 10-year low as development financing remains difficult. After falling to 7.3 million SF in the first quarter of 2024, total leasing volume accelerated to 11.3 million SF of in the second quarter, the highest quarterly volume in a year. Asking rates continue to increase, up to $6.52/SF this quarter as more new Class A deliveries add expensive availabilities to the market. Asking rates have moved inversely to taking rents as a large portion of deals done are in smaller, cheaper product. Due to slow activity in recent Class A deliveries, year-over-year asking rates have grown. Asking rate growth will decelerate as occupiers remain cautious in leasing decisions and more available space decreases landlord leverage.