JLL’s Chicago Suburban Office Market Report
As vacancies have tightened across the suburbs, rental rates have been increasing. Year-over-year, Class A rental rates increased across all but one submarket at the same time that market wide vacancy rates decreased year-over-year. While North Lake County’s Class A rental rate did not increase year-over-year it did increase from last quarter rising by $1.57. This trend will continue as vacancy rates tighten further. This tightening will be supported by current tenants in the market looking for a combined 6.7 million square feet of space.
Extensions and Renewals Lead Leasing Activity in Q2 2015
The second quarter saw a flurry of renewals and extensions throughout the suburban market. Renewals and extensions accounted for 475,000 square feet of leasing activity during the quarter. The largest renewal was from United Stationers; the company will be staying at 1 Parkway North in Deerfield. The Class A building will be undergoing renovations including upgraded common areas, atrium makeover and an employee friendly social spot. In the O’Hare submarket Life Fitness signed a 70,000-square-foot renewal at Columbia Centre III. These renewals and extension show the strong commitment many companies have made to the suburbs.
Suburbs See Major Ownership Changes With Portfolio Acquisitions
Two major portfolio sales have led to some ownership shake-ups across the suburbs this quarter. Chicago based Equity Commonwealth completed a portfolio sale totaling $793 million during the second quarter. This included three suburban buildings, two in the North submarket and one in the Western East-West submarket, which will now be owned by Lone Star Funds. Additionally, Blackstone acquired GE’s portfolio this quarter causing 17 Chicagoland buildings to undergo ownership changes. The total value of the international portfolio is $23 billion in assets, including 4.2 million square feet of property.
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- Q2 2015 net absorption (s.f.) – 160,498
- YTD net absorption (s.f.) – 292,849
- Total inventory (s.f.) – 97,000,000
- Total vacancy – 20.3%
- Direct average asking rent – $23.91
- 12-month rent growth – 2.5%
- Total under construction (s.f.) – 753,000
- Total preleased – 100%