CHICAGO- The newer office markets west and north of the city's center have seen a good deal of activity but other downtown submarkets suffered in the first quarter, according to data just released by MBRE. The direct vacancy rate in the River North submarket, for example, although it sank to 9.1% in 2012, even lower than in 2008, sank even further during the first quarter, the data show. It now stands at 8.8%, a drop of 30 basis points. But the lack of large blocks of available direct space meant the district had no major leasing deals so far this year.
Still, MBRE says large sublease availabilities remain. AT&T, Level 3 Communications and the Career Education Corporation have begun marketing spaces with more than 50,000-square-feet at 350 West Mart, 600 West Chicago and 222 Merchandise Mart.
The West Loop also had noticeable gains. “With positive absorption of 159,000 square feet, West Loop Class A buildings continue to lead the recovery in the submarket and the CBD in general, experiencing the largest decline in vacancy across all submarkets,” MBRE notes in their report. However, negative absorption in Class B and C buildings wiped out these positive gains and the overall direct vacancy remained largely unchanged at 13.9 percent.
MBRE expects great things in the neighborhood. “With its proximity to major transportation, relatively low vacancy, and developable parcels, the West Loop submarket has become the focus of new development speculation.” Ground was broken at 444 West Lake, the firm notes, and McDermott Will & Emery signed a letter of intent to occupy 225,000-square-feet.
And although it still has a high vacancy rate, the East Loop had 177,000-square-feet of net positive absorption, more than in all of 2012. As a result, direct vacancy fell 70 basis points to 19 percent, the largest decrease of any CBD submarket.
Other submarkets had a tough time in the first quarter. North Michigan Avenue, for example, saw its direct vacancy rate increase 30 basis points to 20.8 percent. Likewise, the Central Loop did not do well. For the first time in two years, direct vacancy increased across all building classes, and the overall rate increased 60 basis points to 13.8 percent. “In its worst quarter since the recession,” MBRE notes, “the Central Loop was one of two submarkets to experience net negative absorption, erasing the net occupancy gain from the previous quarter.”
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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.
