McDonald’s is the latest in the string of high-profile moves from the suburbs to Chicago’s Central Business District (CBD), following in the footsteps of Motorola Solutions, Kraft Heinz, Hillshire Brands,...
Rising Rental Rates? Not so fast ...
Will the suburan migration and growing technology sector impact asking rental rates in downtown Chicago? The obvious answer is “YES!” but not in the direction most would expect. Based upon a glut of new and old office space hitting the market between 2018 and 2020 and taking into account average absorption rates seen in the CBD over the past 10 years, the market will begin to reflect a reduction in asking rental rates as early as 2017. I have identified the following key market events that support this statement:- As of June 30, 2016, Colliers International researchers have indicated that there are a whopping 71 contiguous blocks of available space 50,000 square feet or greater in the CBD.
- In December 2015 The John Buck Company announced a new lease with CNA Insurance to anchor a new 820,000-square-foot building at 151 North Franklin. 450,000 square feet remain available with completion date of 2018.
- As part of CNA lease, The John Buck Company took ownership of CNA’s existing 1.1-million-square-foot building at Wabash and Van Buren, which will be 100 percent vacant when CNA relocates in 2018.
- In May of 2016 White Oak Realty Partners announced construction on a new 432,000-square- foot spec office development at 625 West Adams to be completed in 2018.
- There are strong rumors Tishman Speyer has landed a 400,000- to 450,000-square-foot anchor tenant for its 1.1-million-square-foot development at 130 North Franklin to be completed in 2019.
- Union Station and the old Post Office renovations /additions are looming and could add significant amounts of additional CBD space in 2019 and 2020.