CHICAGO—Office tenants in Chicago's CBD were quite active during the third quarter, and it looks like 2017 will be as healthy for the market as 2016. Year-to-date, tenants have leased about 7.5 million square feet, or roughly the same as last year, according to a new report from Savills Studley. The overall availability rate fell 60 bps this year, down to 15.5%, although it's also a 20 bps increase in the past 12 months. And all this activity has helped keep rental rates swinging upward. The overall asking rate increased from $38.34 to $38.83 in the last quarter, and in the Far West Loop/Fulton Market neighborhood, rents went from $42.19 to $43.99, a 4.3% spike.
But in addition to all of these incremental improvements, big changes are afoot across the CBD. And the strong possibility of a giant new Amazon facility somewhere downtown or on its periphery is only the most notable.
“The third quarter brought some substantial moves by tenants,” says Eric Feinberg, senior vice president of Savills Studley. “These were accompanied by significant changes in building ownership. Tenant demands for the workplace and landlord investment strategies both continue to shift.”
Several key tenants are on the verge of moving from spaces they have occupied for decades, Savills Studley points out. The Chicago Tribune, for example, is reportedly planning to move to Prudential Plaza after nearly a century at the Tribune Tower, which new owners CIM Group and Golub & Co. will soon redevelop. And the Chicago Sun Times has decided to leave 350 N. Orleans in River North, and instead occupy the former Harpo Productions building at 30 N. Racine in the West Loop.
And even though year-to-date property sales total just $1.3 billion, a 55% decline from one year ago, significant trades are underway, Savills Studley says. Sterling Bay, the local firm at the center of many pending deals and projects, is under contract to buy Prudential Plaza for about $680 million. The seller, 601W Cos., in turn can presumably use the proceeds for its recently-unveiled redevelopment of the Old Main Post Office. The New York-based investor also just agreed to buy the historic Sullivan Center at 1 S. State St. for $175 million.
Sterling Bay, meanwhile, was just selected by the city as the winning bidder of 18 acres on Goose Island. The $105 million purchase gives the firm an additional 60 acres of land west of its planned redevelopment of the former A. Finkl & Sons plant, which some see as a contender for Amazon's proposed HQ2.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
