Top CBD Properties See Strong Leasing In 2019
Leasing activity at the Central Business District’s newest and largest office properties have this year outpaced the rest of the downtown market, according to a new report from MB Real Estate. Properties under construction have also seen healthy activity, a good sign the market will stay vigorous.
Each quarter, MBRE puts out an index report on the last 30 Class-A office buildings greater than 300K SF built in Chicago’s CBD. This set of buildings, which total about 28M SF out of a downtown total of nearly 140M SF, contain some of the CBD’s most desirable space, which the firm said serves as a leading indicator of office market conditions. As new qualifying properties open up for tenants, they will replace the oldest buildings on the list.
Direct vacancy in the 30 top properties decreased by 160 basis points to 9.8% since the last quarterly index report. Meanwhile, the CBD direct vacancy rate reached 12.7%, leaving a 290 basis-point gap between the vacancy rates for the top properties and the rest of the CBD, the largest gap since 2016.
Several significant leases in the 30 top properties were signed since MBRE’s last report. Fitch Group took 65K SF at 1 North Wacker, WeWork signed a 53K SF lease at 1 South Dearborn, Convene expanded by 46K SF at 131 South Dearborn and Dentsu signed a renewal expansion for 126K SF at 515 North State.
The 2.5M SF Old Main Post Office at 433 West Van Buren will join MBRE’s index when completed in September, and it has had a good run over the past few months. Three new leases have been signed, including Abelson Taylor, which took 85K SF. Home Chef leased 73K SF and 84.51 leased 57K SF. The property, being developed by 601W Cos., is now 22.8% pre-leased, and Uber Freight and First Home Loan Bank are reportedly in lease negotiations for 450K SF and 125K SF, respectively, according to MBRE.
The company will soon add another three buildings to the index list. Brookfield Investment Management recently began converting floors eight through 13 of the Macy’s building at 24 East Washington to office use, and expects to complete work on the 652K SF project in 2020. Shapack Partners expects to deliver in 2020 a 600K SF building at 167 North Green, where WeWork just signed a 133K SF lease as the anchor tenant. And Trammell Crow is developing 1375 West Fulton, a 300K SF building, with an expected delivery in 2020.