CHICAGO—CBD direct vacancy has continued its steady decline with overall vacancy falling to 13.59% going into 2015, down from 13.75% in December, according to MBRE's latest report. And direct vacancy in the MB Real Estate Index, which is comprised of the CBD's 30 newest class A buildings, has remained low at 10.8%, a slight uptick from December. The difference between the index buildings and the overall CBD fell 27 bps to 2.75%, the lowest spread rate since 2008.
There were few notable leases in the index buildings in the last quarter, but Cornerstone Research did take 17,697 square feet at 181 W. Madison.
However, multiple key leases were signed for two of Chicago's new developments which will join MBRE's index in 2017. Developer Hines' River Point at 444 W. Lake saw 115,000 square feet in new leases signed in the first quarter with nutrition company Mead Johnson, and capital management firm The Duchossois Group, taking significant space in the trophy tower. Hines plans to finish the building in December 2016 and it now stands at 50.3% leased.
Meanwhile, venture capital firm the Pritzker Organization will join William Blair & Co., Hyatt Hotels Corp. and Victory Capital Partners as the first occupants of the O'Donnell project at 150 N. Riverside. The Goettsch Partners-designed building now stands at 61.4% pre-leased.
“The strength of demand for this high quality inventory in combination with the diminishing supply of out-dated low quality class C buildings, which are being converted to new use, have created a sense of growth throughout the market,” according to MBRE.
The largest new deals outside the index buildings included law firm Freeborn & Peters signing for 82,000 square feet at 151 N. Franklin, and digital advertising group Centro, taking 67,000 square feet at the Sullivan Center.
The largest renewals included futures broker RJ O'Brien re-signing at 222 Riverside Plaza for 53,000 square feet, and the University of Illinois recommitting to space at 200 S. Wacker for 40,000 square feet.
“This first quarter leasing activity, and the underlying demand, is subdued compared to the same period in 2014,” MBRE notes. “However, with continuing strong occupancy from the index, and premium rental rates ever increasing, there is much to be optimistic about in Chicago commercial real estate.”
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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.
