Suburban Chicago Office Ends 2017's First Half With Negative Absorption
The suburban Chicago office market, which started Q1 2017 strong, fell back to earth slightly in Q2, according to the latest market report from Cushman & Wakefield. But the firm indicates the activity in the market is an outlier and it remains bullish on the burbs.
The main takeaway from the report is the growing disparity in performance between Class-A office properties and their non-core counterparts. Nearly 70% of new suburban office leases year-to-date were signed in Class-A buildings. The performance of Class-B and Class-C offices resulted in a negative absorption of over 374K SF, compared to 1.1M SF in positive absorption in Q2 2016. The vacancy rate also rose to 19.5% in Q2; it was at 17.1% at this point last year.
But the Class-A leases drove asking rents up from $22.65/SF last year to $23.88 in Q2 '17. The near north suburbs ($31.45/SF) and O'Hare ($30.29) have the highest asking rents of all suburban submarkets, while the Tri-State submarket had the best positive growth, with nearly 80K SF of positive absorption. Tenant interest in these hot markets is expected to drive market activity in the back half of 2017.