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The amount of Chicago central business district office space on the sublease market rapidly expanded after the coronavirus pandemic’s onset and has surpassed the previous high seen during the Great Recession of 2009. And with the city’s downtown still largely abandoned by the weekday workforce, experts say the amount of unused space for sublease will continue growing into next year.
There is now more than 4.3M SF of available sublease space — up 300K SF from one month ago and an increase of more than 1M SF since the end of Q1, according to a report published this week by MBRE. When the economy hit the bottom of the Great Recession in 2009, the amount of sublease space on the market peaked at 4.2M SF.
“There are now 20 subleases larger than 50K SF on the market, up from five at the end of the first quarter,” according to MBRE.
Among the most recent firms to seek out sublease deals were Cars.com for 52K SF at 300 South Riverside Plaza in the West Loop and Ronin Capital for nearly 72K SF at 350 North Orleans St. in River North, MBRE found. Earlier this year, 150K SF occupied by Groupon at 600 West Chicago Ave. was made available, as was CareerBuilder’s 85K SF at 200 North LaSalle St.
The West Loop and River North contain the majority of downtown’s space for sublease, according to MBRE. The West Loop now has 1.6M SF for sublease, about 37% of the CBD’s total and roughly the same as in August, but River North saw the amount of its sublease space go up in the past month from 452K SF to 550K SF, or 22% of the current total.
The flood of new sublease space into the market may not be over. Many corporate officials continue to reevaluate their firms’ use of space as the pandemic continues and the work from home option is working well enough for many employees. In a June report, Savills said the amount of sublease space on the market could eventually rise to 6.7M SF in 2021 or 2022, more than the 6.1M SF mark set in 2002 after the dot-com crash.
According to the firm’s latest downtown report, Q2 leasing fell 75% in comparison to last year.
“However, occupiers that are actively seeking to lease space should expect favorable terms and increased flexibility,” Savills said. “Landlords competing with swelling direct availability and discounted sublease options will be forced to reevaluate base rent pricing.”
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