Chicago Office Market
|Average Asking Rent (Price/SF)|| |
|Vacancy Rate (%)|| |
|Net Absorption (SF)|
Conditions failed to improve in the Chicago Metro office market during the fourth quarter of 2022. Sublease inventory rose to a record high of roughly 11 million square feet as recessionary headwinds continued to incentivize companies to cut costs and offload unutilized space into the secondary market. Overall leasing activity was relatively steady in the fourth quarter of 2022, with about 46 deals made over 10,000 square feet. Leasing transactions in the fourth quarter remained concentrated on amenity-rich Class A assets, and tenants are taking advantage of favorable concessions from landlords amidst an oversaturated market. Total vacancy increased 40 basis points quarter- over-quarter to 22.2%, and net absorption was negative for the 10th consecutive quarter. Investment activity was more prominent in the suburbs relative to its Central Business District counterpart, with 14 out of the 16 total deals made this quarter. As 2023 approaches, it is expected that contractions will continue to dominate the Metro office leasing market, leaving both tenants and landlords to develop creative solutions to accommodate a workforce that has embraced hybrid-work arrangements.
Chicago Industrial Market
|Average Asking Rent (Price/SF)||$6.32|
|Vacancy Rate (%)||3.8%|
|Net Absorption (SF)|
Despite a cooling national economy, Chicago’s industrial sector remains a strength of the market’s commercial real estate. Vacancy fell below its previous record level this quarter to 3.8%, a 20-basis-point decline from the previous quarter. The market seemed hesitant to make many moves as absorption fell to its lowest level since the end of 2020 at 3.7 million square feet, an 8.8-million-square-foot decline from the previous quarter. This drop in absorption is reflective of a slowdown in demand in line with the slowing economy, as well as the higher share of renewals signed over the last few quarters. Of deals that begun in the fourth quarter of 2022, 70.3% were the result of direct leases. This share is up from the previous quarter’s 61.1%. Construction activity remained steady this quarter, keeping the same level as the previous quarter with the 29.2 million square feet under construction. Only 1.0 million square feet delivered this quarter after the 12.0 million square foot boom of completions in the third quarter of 2022, when supply chain delays began to ease. Leasing volume slowed this quarter from the third quarter of 2022 as available space continues to dry up and rental rates increase. The top submarket by leasing was the I-80 Corridor for the second straight quarter, partly due to Home Depot’s 990,000-square-foot direct lease at 3301 Brandon Rd. in Elwood, the largest deal in the market.