Facebook has expanded its Chicago presence by taking about 260,000 square feet at 151 N. Franklin, the latest class A development in Chicago's CBD.
CHICAGO—Tech companies and co-working firms continue to fuel the downtown market as office activity remained high in the third quarter. The metro area's vacancy rate dropped to 16.6%, a decline of 30 bps quarter-over-quarter and 120 bps year-over-year, according to a new report from NKF. Rental rates also grew, increasing to $29.75 per square foot from $29.12 in the second quarter. Downtown vacancy fell half a percentage point to 13.0%.
Facebook signed the largest lease of the quarter, agreeing to take more than 260,000 square feet at 151 N. Franklin. This brings the new trophy building to 91.8% leased. And WeWork also made headlines by signing leases to open two more locations. The co-working giant will open a 100,000-square-foot office at 515 N. State, which has a large vacant block, and take nearly 70,000 square feet of space at 330 N. Wabash.
“The trend of suburban companies moving downtown persisted through the third quarter, although at a less dramatic rate,” according to NKF. FTD Companies took 53,000 square feet at 1 N. Dearborn and McGraw Hill closed its Burr Ridge headquarters and took 50,000 square feet between 10 and 120 South Riverside. The falling vacancy rate propelled rents to a new record high of $36.62.
Absorption has remained steady according to NKF stats.
Many suburban firms, however, remain attached to their locations, especially the class A properties in Oak Brook, Downers Grove, or the submarket around O'Hare Airport. This helped push down the overall suburban vacancy rate another 30 bps to 21.7%. “This is the lowest vacancy has been since mid-2016, the result of 240,000 square feet absorbed after a series of moves,” according to NKF.
Recent actions include Paylocity expanding at Schaumburg Towers, Assertio Therapeutics moving into 100 South Saunders in Lake Forest, T-Mobile moving into 1411 Opus in Downers Grove and Elkay Manufacturing moving into the renovated 1333 Butterfield, also in Downers Grove.
Suburban landlords have found that spending a few million on renovations for the right class A properties can have a big impact. Stanton Road Capital purchased 1333 Butterfield last October when it was 48% leased, but the Elkay lease brought that up to 93%.
The strength of these class A locations helped boost overall rental rates $0.23 to $23.01. “These are the highest rents ever recorded in the suburbs and represent a 7.0% increase year-over-year,” NKF says.
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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.
