CHICAGO—Landlords of the 30 newest buildings in downtown Chicago saw the direct vacancy rates for their properties decline for a second straight quarter, according to data just published by MBRE. The buildings, all built between 1989 and 2009, ended the last quarter with a direct vacancy rate of 10.0%, a decline of 70 basis points and the lowest in two years. The direct rate for the CBD overall, however, was stagnant at 15.1%.
MBRE researchers consider these 30 buildings, termed the MBRE Index, which range from 372,000-square-feet to 1,845,460-square-feet, a landlord's market. Demand for large blocks of space in the Class A downtown buildings outstrips supply, MBRE found, since only “four buildings in the MBRE Index can accommodate a tenant greater than 100,000-square-feet. Yet on the demand side there are currently 18 tenants in the marketplace seeking space greater than 100,000-square-feet.” Still, these tenants have been reluctant to move and seem largely content to “wait for their ideal location.”
Developers have a considerable number of projects slated for the CBD sitting on the drawing board. And for now at least, the large users seem inclined to see which ones get the needed financing. “While tenants will not and cannot wait forever,” MBRE researchers note, “this dynamic is increasing the likelihood that more than one new development will be built as financiers ease pre-leasing requirements due to the excess demand seen in Class A space.”
But those owners of the proposed buildings that do get off the drawing board and added to the skyline “will have the upper hand with large tenants (especially those in excess of 200,000-square-feet) who, with only three blocks of contiguous space greater than 100,000-square-feet currently in the MBRE Index, have relatively few options of high profile Class A space.”
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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.
