CHICAGO—The vacancy rate among the CBD's top office properties has finally started to tick up as many tenants left behind empty spaces after moving into downtown's newest trophy buildings. That was the conclusion of researchers from MB Real Estate, who just released their latest index report, which examines the CBD's 30 newest class A buildings with more than 300,000 square feet. This set of buildings, which contains some of the CBD's most desirable space, serves as a leading indicator of office market conditions.
Direct vacancy in the index buildings increased by 83 bps to 11.4% percent. Meanwhile, the CBD's overall direct vacancy increased to 12.2% at the end of the third quarter of 2017, a 67 bps increase from the previous quarter.
The opening of 444 W. Lake in the fourth quarter of 2016, and the January delivery of 150 N. Riverside, added two new structures to the company's index. The properties, where leasing has been quite robust, replaced 227 W. Monroe and 35 W. Wacker, both of which were built in 1989. This also decreased the index's total square footage to 26,906,233 out of the CBD's 135,391,152.
The largest tenants moving into 444 W. Lake and 150 N. Riverside are relocating from other index buildings and leaving significant vacancies in their wake. For example, Hyatt Hotels Corp. vacated approximately 250,000 square feet at 71 S. Wacker and William Blair & Co. vacated 296,275 square feet at 222 W. Adams when they moved to the Riverside building.
There are currently six blocks of directly available space larger than 100,000 square feet at index buildings, the largest of which is 246,872 square feet at 71 S. Wacker.
The largest lease signed for space at an index building in the last three months was Quantitative Risk Management's renewal of 89,000 square feet and expansion of 17,000 square feet at 181 W. Madison. Facebook also signed a deal to expand their office at 191 N. Wacker by about 75,000 square feet.
There have not been any recent sales of index buildings. However, two index buildings are currently on the market, 161 N. Clark and 1 S. Dearborn.
Outside of MBRE's index, the largest recent new deal was Peapod's lease of 53,000 square feet at 300 S. Riverside. The online grocery delivery company has decided to join the many firms migrating into the CBD and relocate its headquarters from the suburb of Skokie.
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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.
