NAI Hiffman’s Office Market Review: Q1 2016

Suburban Office Market

The overall suburban office market experienced negative absorption due to a weakened start to the year in the North Suburbs while the balance of the suburban office submarkets remained relatively unchanged.

Suburban Office Market

The first quarter vacancy rate of 18.00% rose 26 basis points from last quarter yet remains below the rate of 18.19% recorded one year ago.

Combined Insurance signed the largest new lease in the suburbs, committing to 68,048 SF in the O’Hare submarket.

Some of the more significant first quarter lease transactions throughout the suburban office market were driven by companies in the healthcare sector, including AIM Specialty Health, Healthcare Financial Resources, AMITA Cardiology and IKS Health.

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*Premier Class A Gross Rents

Local Economy

  • The unemployment rate for the Chicago metropolitan area measured 6.8% as of February 2016, according the Bureau of Labor Statistics, and posts the highest rate among large metropolitan areas.
  • The Federal Reserve Bank of Chicago released February 2016 figures for its Midwest Economy Index (MEI), a weighted average of 129 indicators designed to measure non-farm business activity in the Midwest, and it moved up to +0.07 in February from -0.09 in January.
  • The positive MEI indicates that the Midwest economy grew at a faster pace in February compared to the historic growth rate and indicates that the Midwest economy grew at a faster rate than the growth of the national economy.
  • Construction, services and consumer spending sectors were the greatest contributors to the growth.
  • The local housing market is showing improvement with moderate increases in annual sales levels.
  • Median home prices in the Chicago area are estimated to post year-over-year gains in the 6% range.
  • The pending home sales index, a leading indicator based on contract signings, registered at 249.7 in March, up 20.3% from last year.
  • The Consumer Price Index for All Urban Consumers (CPI-U) for the local area increased 0.1% in March.
  • Non-farm employment of 4,542,000 is down quarter over quarter yet is up 1.7% year-over-year.
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