CHICAGO—Even before Chicago's two new trophy office towers opened earlier this year, rental rates in the CBD's trophy spaces hit historical highs and had grown faster than in any other city in North America, according to CBRE Group, Inc.'s new Global Prime Office Rents survey. These top office properties, generally those constructed since 2000, contain about 14 million square feet, and saw rents rise 19.9% from 2015 to 2016, faster than every major market in the world except Belfast.
“When you dig into the data it's really a simple supply and demand issue,” Kyle Kamin, a Chicago-based executive vice president with CBRE, tells GlobeSt.com. “The overall vacancy rate for class A properties is about 10%, but within this subset it's about 4%.”
And much of the increase is driven by an even smaller subset of offices, he adds. “The vacancy rate for high-rise spaces within the prime office properties is less than 2%.” CBRE “typically defines high-rise spaces as those with great light, air and unencumbered views,” which for some buildings starts on the 30th floor and for others on the 40th. Therefore, this big increase is “really driven by a subset of a subset at the very top end of the market.”
The city's two new towers at 444 W. Lake St. and 150 N. Riverside Plaza, which won't be a part of the prime office rent survey until next year, are unusual in that both sit along the riverfront and have unencumbered views from top to bottom.
Chicago, of course, at $38.84 per square foot net was a very long way from being the world's most expensive market. That spot was taken by Hong Kong with $264. London's West End at $146 was the top European market and Midtown Manhattan, number six on the global list, came out on top of the US with a prime office rent of $144.
The opening of 444 W. Lake and 150 Riverside should ease supply constraints, and Kamin does not expect prime office rents in the CBD to continue increasing at 2016's pace, but prices will most likely go up due to the demand for such high-quality spaces.
CHICAGO—Even before Chicago's two new trophy office towers opened earlier this year, rental rates in the CBD's trophy spaces hit historical highs and had grown faster than in any other city in North America, according to
“When you dig into the data it's really a simple supply and demand issue,” Kyle Kamin, a Chicago-based executive vice president with CBRE, tells GlobeSt.com. “The overall vacancy rate for class A properties is about 10%, but within this subset it's about 4%.”
And much of the increase is driven by an even smaller subset of offices, he adds. “The vacancy rate for high-rise spaces within the prime office properties is less than 2%.” CBRE “typically defines high-rise spaces as those with great light, air and unencumbered views,” which for some buildings starts on the 30th floor and for others on the 40th. Therefore, this big increase is “really driven by a subset of a subset at the very top end of the market.”
The city's two new towers at 444 W. Lake St. and 150 N. Riverside Plaza, which won't be a part of the prime office rent survey until next year, are unusual in that both sit along the riverfront and have unencumbered views from top to bottom.
Chicago, of course, at $38.84 per square foot net was a very long way from being the world's most expensive market. That spot was taken by Hong Kong with $264. London's West End at $146 was the top European market and Midtown Manhattan, number six on the global list, came out on top of the US with a prime office rent of $144.
The opening of 444 W. Lake and 150 Riverside should ease supply constraints, and Kamin does not expect prime office rents in the CBD to continue increasing at 2016's pace, but prices will most likely go up due to the demand for such high-quality spaces.
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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.
