Downtown Chicago Office Market
Source: Colliers International
Average asking rent
Chicago office market
per square foot
Total vacancy rate
Downtown Chicago’s office market had a 12. 3 percent vacancy rate during fourth-quarter 2017, only 110 basis points above the low point of the
current real estate cycle, according to a Colliers International report. The
average lease rate in 2017 increased year over year from $37.97 to $39.37
per square foot. Office-investment sales in the central business district
declined year over year, however, from $2.4 billion in 2016 to $1.8 billion
in 2017, Colliers reported.
A separate fourth-quarter 2017 report from Colliers on the suburban Chicago office market indicates that there was a slight decline in vacancy
rates and a slight uptick in lease rates, compared to fourth-quarter 2016.
Suburban neighborhoods saw 25 new lease transactions of more than
25,000 square feet last year, compared to 19 such transactions in 2016.
The O’Hare and Oak Brook submarkets are seeing the most demand,
Colliers said, with office owners focusing on building improvements to
attract and retain tenants.
What the locals say
“Illinois is a great transportation hub with an ever-present
focus on faster and cost-effective distribution in the greater
economy. Therefore, I would expect the distribution and
warehousing sector to be strong for some time. Additionally,
the expansion of O’Hare International Airport should be a
boon for that submarket and the state as a whole. … Chicago
and Champaign have become technological hubs with great
universities, including some of the best engineering schools
in the country, which is evident by the recent influx of tech
By Neil Pierson
The Prairie State’s economy faces some big hurdles.
Illinois, also known as the Prairie State, welcomed its first European visitors
in the latter half of the 17th century when famed French explorers Louis Jol-liet and Jacques Marquette arrived. It became a state in 1818 and quickly established itself as a key shipping and railroad hub for the Great Lakes region.
Although its population has declined recently, Chicago is the state’s largest city
— and the third-largest in the U.S. — with 2.7 million people. It attracts more
than 50 million visitors annually. The Windy City is wrapping up a five-year
affordable-housing plan this year in which it aims to invest more than $1.3
billion to construct, rehabilitate and preserve more than 40,000 housing units.
Illinois’ post-recession economy lags behind that of neighboring states and
much of the U.S., a Moody’s Analytics report from this past February said.
Labor-force contractions, rather than employment gains, are responsible for
the state’s falling unemployment rate as Illinois’ population has declined in
each of the last four years. Illinois’ fiscal instability may be discouraging some
private businesses from entering the state and growing costs for state-worker
retirement benefits are projected to constrain public-sector employment
growth, according to the Moody’s report.
Despite these struggles, there are positive signs. Fifty companies with ties
to Illinois landed on last year’s Fortune 500 list. Fourteen of the world’s
500 largest companies were headquartered in the Prairie State as of 2016,
including Walgreens Boots Alliance, Boeing, State Farm and Archer Daniels
Midland. And the state approved a plan this past August to increase funding
for public schools, while also allowing tax credits for private-school
scholarship donations and giving wealthier school districts the option to
reduce property taxes.
The state’s workforce is projected to increase by nearly 6 percent by 2024,
according to the Illinois Department of Employment Security. Industries such as health care and social assistance; accommodation and food
services; and professional, scientific and technical services — each of which
currently employ more than 380,000 people — are expecting double-digit
percentage growth in employment between 2014 and 2024.
The Prairie State’s per-capita personal income of $52,808 in 2017 ranked 15th
among all states, according to U.S. Department of Commerce figures. Illinois’
gross domestic product (GDP) grew 1 percent in 2016, compared to the
national average of 1.5 percent. Despite having the nation’s fifth-largest
GDP and adding $175 billion to its economy from 2006 to 2016, the state’s
compound annual growth rate of 0.5 percent over the period was less than
half the national average, according to Commerce Department data. n
President, Inland Mortgage Capital LLC