Metro Office Market Sees Big Jump in Vacancy Rate

Hines’ River Point development at 444 W. Lake St. just opened, bringing another 1.1 million square feet to the CBD’s inventory.

CHICAGO—The metro region’s office market ended the quarter with a big jump in its vacancy rate, a striking contrast to the last six quarters of positive growth, according to a new report by commercial real estate firm Newmark Grubb Knight Frank. One year ago, the rate stood at 16.2%, before falling to 15.7% by the end of the third quarter, but now stands at 17.1%. Net absorption was a negative 2.4 million square feet during the fourth quarter, wiping out gains earlier in 2016 and bringing the year-end total for the region to negative 744,000 square feet. That’s a big change from 2015, when the market absorbed around two million square feet.  

But although the overall numbers don’t look good, researchers say demand remains steady, and attribute the declines to long-awaited changes in both the suburbs and the CBD. Zurich North America, for example, vacated its one million square foot campus in Schaumburg in favor of a new headquarters nearby with 783,800 square feet. In addition, developers finished 444 W. Lake St., adding 1.1 million square feet of trophy space to the CBD’s inventory.