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Suburban Migration Continues to Drive CBD Occupancy Gains

CHICAGO—Although all of the CBD's submarkets are healthy, the East Loop so far has been this year's standout.

By Brian J. Rogal | brianjrogal | | Updated on July 19, 2016

 

chi-600 west chi (2) Echo’s decision to consolidate operations at 600 W. Chicago helped bring the building to full occupancy.
CHICAGO—Vacancy in the CBD hit a historic low of 11.0% by the end of the second quarter, but with developers getting ready to add millions of square feet of new space to the market, and with another 2.1 million square feet proposed for the Old Main Post Office , the market will have to maintain near record absorption levels over the next two years to match the current construction pipeline, according to a report on the second quarter by JLL . The CBD does, however, have several sources of strength that should keep demand for space quite robust. Corporate relocations and consolidations from the suburbs, for example, continue at roughly the same pace seen since 2012. McDonald’s agreement to occupy Sterling Bay’s redevelopment of the former Harpo Studios at 1045 W. Randolph St., taking about 470,000 square feet, was only the most notable of the quarter. Echo Global Logistics’ 135,000-square-foot lease expansion at 600 W. Chicago will bring many of its Skokie employees downtown, and Beam Suntory decided to relocate its corporate headquarters to the Merchandise Mart in late 2016. “With no slowdown in sight, large suburban companies are relocating into the perceived millennial hotspots of River North and Fulton Market,” JLL says. The company considers all of the downtown submarkets to be either rising or peaking, but the East Loop has been 2016′s standout. It recorded more than 600,000 square feet of positive absorption this year, “and the leasing momentum around Prudential Plaza, Aon Center, and the Illinois Center is the strongest in a decade,” JLL finds. “Next quarter, we anticipate even stronger absorption results as several tenants will move in to space that has been leased this year.”

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