Vacancy Hits 14.8%, Will Rise Further in CBD

CHICAGO-Vacancy hit 14.8% in Chicago’s Central Business District in Q3 – up from 14.4% at mid-year and 12.6% a year ago – and is expected to increase a bit more before stabilizing next year. According to Transwestern’s Q3 office market report, Q3 net absorption was negative 1.3 million square feet. That brings the CBD to a total of negative 3.3 million square feet absorbed since the beginning of the year.

“With the severity of the downturn we saw last year, the obvious trend is very clear,” Tamara Kos, EVP for Transwestern’s Midwest region, tells GlobeSt.com. “We think vacancy is going to peak at about 15% as more vacancy hits us in the near term because of lease expirations. That probably translates into rental rates and concessions.”

Sublease space too increased to more than 4 million square feet during the third quarter, but according to Jones Lang LaSalle’s research, the pace at which space is hitting the market has slowed. “Despite the prevalent amount of attractively priced sublease offerings, deal velocity remained below historical norms, with many tenants continuing to opt for extensions in place including short-term renewals,” JLL’s research report says. It showed that the CBD class A overall gross asking rate has declined by 5% since the beginning of the year, and projects that activity will increase as tenants look to take advantage of market conditions.