Office Sublease Space Sharply Rises In Chicago's CBD
Sublease space increased significantly in Chicago's central business district in the second quarter, as the coronavirus pandemic raged through the business world.
Available sublease space in the CBD rose 425K SF in Q2 to 3.7M SF, according to MBRE's Chicago Market Overview Snapshot for Q2 2020, released Wednesday. That is the third-highest amount of sublease space on the market in the last 12 years and is a sharp increase from the 2.8M SF of total sublease availability in Q2 2019. Meanwhile, options to fill those holes have reduced — MBRE tracked 46 tenants seeking blocks of 50K SF or more in Q2 2019, but only 32 last quarter.
The CBD had 38K SF of positive absorption, bringing the direct vacancy rate up 72 basis points to 13.41%. Direct vacancy was 12.45% in Q2 2019.
Any positive activity in the last three months was fully attributed to two submarkets: River West and the West Loop. While River North, North Michigan Avenue, the East Loop and the Central Loop all marked negative absorption in Q2, River West soaked up 557K SF and the West Loop absorbed 591K SF.
Combined with the sublease space, the total office vacancy rate is now 15.94% in the CBD, MBRE said.
The increase in vacancy isn't a new phenomenon created by the pandemic; the CBD's direct vacancy rate has risen every year since 2016, according to MBRE data. And it isn't necessarily a worrisome indication of lack of demand — more than 4M SF of office space is delivering in the CBD in 2020.
Though deals have been sluggish as pandemic-related economic uncertainty has caused some companies to hold off on making decisions and the overall fundamentals are trending in the wrong direction, there is a bright spot: Year-to-date absorption is higher in 2020, at 664K SF, than it was to this point in 2019 (523K SF).