Chicago’s Demand for Office Space Heats Up Going Into 2016
Office vacancy in Chicago’s downtown core has been steadily declining in recent years, and it looks like this trend will continue into 2016.
By fourth quarter of the previous year, overall downtown vacancy had fallen to 12%: the lowest it’s been in over seven years. Large Chicago companies, many of which are in the tech sector, have been steadily expanding their spaces and pulling in new employees. At the same time, businesses originally based in the suburbs have been either moving downtown or setting up satellite offices in the city’s core.
At the same time, Chicago’s supply of offices is scheduled to increase within the year. Two new office towers are under construction, and both are predicted to be completed within 2016. Meanwhile, another 35-story tower will begin construction this year, opening up hundreds of thousands more square feet by 2018.
With all of these new developments in such a short span, building owners will have to compete to fill their space. In the next three years, it is predicted that there will be roughly six million square feet of office space that will be up for grabs once the current tenants move out. Despite Chicago’s demand for office space, its supply looks like it will more than match it.
But in the meantime, supply remains tight and rent remains high. With demand showing no sign of stopping, it’s difficult to say whether new tenants in the coming years will have an easier time finding space, even with the projected supply surplus.
Looking at net absorption, 2016 will likely be a year of booming demand for Chicago’s real estate. The fourth quarter of last year let to almost 800,000 square feet of space being absorbed, which is the most in a quarter since 2015. If this trend continues, there will be plenty of demand to meet the newly opened spaces in 2016.