Chicago Office Market
Leasing volume was slow to start 2024, with roughly 1.4 million SF being completed. Tenants continue to upgrade spaces as they contract, moving into higher-end buildings and spending more on buildouts. The market saw vacancy increase this quarter due to sublease terms expiring and significant 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. With the last of the new construction delivering next quarter, 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 1Q24Chicago Suburban Office Market
Leasing volume recorded its strongest first quarter in the suburbs since 2018. Quarter-over-quarter vacancy decreased 40 basis points to 24.8%, while year over year, vacancy decreased only 10 basis points.The sublease market in the suburbs has not seen the large jump in availability that has plagued the Central Business District market as total available sublease SF declined from last quarter.
Chicago Industrial Market
Absorption in the first quarter of 2024 totaled 3.1 million SF, the lowest quarterly total since the first quarter of 2020. The construction pipeline continues to empty, with 5.0 million SF delivering this quarter and 12.1 million SF still under construction. Construction starts have continued to slow as development financing remains difficult. Vacancy increased 30 basis points to 4.6% this quarter as new construction deliveries outpaced absorption for the third consecutive quarter. Vacancy levels still remain well below the 5.2% average since 2019. As tenants are expected to remain cautious and the remaining under-construction pipeline emptying over the next few quarters, vacancy will continue to be pressured upwards. Asking rates have increased to $6.44/SF this quarter, the highest value in the market’s history as more new Class A deliveries add expensive availabilities to the market.