Contact Us
News

Q1 Chicago Office Sales, Leasing Activity Off To Their Strongest Start In 4 Years

Want to get a jump-start on upcoming deals? Meet the major Chicago players at one of our upcoming events!

One South Dearborn, Chicago
One South Dearborn

Is investor interest in Chicago-area office properties on the upswing? Based on NKF's Q1 market report, the signs are promising. Office sales in the greater Chicago area totaled over $1.2B in the first three months of 2018, led by Sterling Bay's $510M acquisition of 600 West Chicago and Starwood Capital's $360M purchase of One South Dearborn. The year's totals will jump in a big way once Sterling Bay closes on its $680M deal for Prudential Plaza. NKF notes the only other time in the past four years office sales topped $1B in the first quarter was in 2015.

Q1 also saw strong activity in the office leasing sector. There was 619K SF of positive net absorption in 2018's early goings, more than double that of Q1 2017. The area's vacancy rate dropped 50 basis points to 16.9%. Rent growth increased to $29.09/SF, but Class-B suburban properties continue to struggle, compared to their Class-A counterparts. The vacancy rate for Class-B office ended Q1 at 24.5%. One reason is Class-A office owners are commanding rents in excess of $24/SF, allowing them to upgrade amenities.

The NKF report predicts an increase in vacancy ahead. Big moves like CNA leaving 333 South Wabash for 151 North Franklin and DDB leaving Aon Center for Michigan Plaza mean there will be an increase in shadow space in the central business district.