Is Chicago office dead? I had the opportunity to attend the first Bisnow Art of Tenant Attraction and Retention conference and glean some market insights that continue to make a strong case for investment in Chicago office, the 3rd largest market in the US.
As Stream Realty Partners Jordan Decker laid out, Chicago has a diverse workforce, available labor, relatively low-cost of living and office lease rates. Combined with the city’s beautiful architecture, large airports, same luxurious amenities as tier one cities and unparalled office concession packages it is extremely attractive to employers.
While demand for Class A office is extremely high, Class B and B- buildings are also seeing traction. Tony Coglianese, CBRE, noted that buildings with great existing conditions, lower rents, particularly those with new and highly motivated owners are a garnering new tenants. Chicago has recently seen it’s first month of near neutral absorption since the pandemic, further demonstrating the positive trend.
Parking continues to be a crucial selling point, driving companies into areas like Lincoln Park that have up to 10x the spots that Downtown buildings provide. Matt Pistorio, Madison Rose, noted that some buildings have even chosen to convert street level retail into additional spaces to attract tenants.
Pistorio further explained that despite Chicago’s almost 30% vacancy rate, our 160M sf of office means that any given year, tenants in 8-10M sf must take action, moving into a new space or extending their lease, supporting the notion that Chicago is and will continue to be a strong market.
While delivery of new office buildings will continue to be slow, with only one in development in Chicago at present, investment in the $7.2B of distressed buildings in the city will give companies new options as they re-evaluate their needs.
Do any of these insights align with your impression of the Chicago office market?
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