Office Market May Hit Plateau in 2018

Year-to-date absorption hit 2.1 million square feet, sending the vacancy rate down 40 bps to 17.4%, the lowest rate of the year.

CHICAGO—As reported in GlobeSt.com, the Chicago region’s industrial market has slowed down a bit, and it looks like the office market may also tap the brakes in 2018 as well. According to a fourth quarter report from Newmark Knight Frank, year-to-date absorption hit 2.1 million square feet, sending the vacancy rate down 40 bps to 17.4%, the lowest rate of the year. And rental rates went up 1.1% to $27.47. But NKF also says other trends are becoming visible.

“While the statistics show positive movement and tenant demand, a significant amount of the leasing activity was made up of consolidations or contractions as companies continue to economize workspace,” the firm says. This was particularly true of law and marketing firms, and NKF expects the amount of “shadow space” on the market to tick up throughout the coming year. “The new buildings being delivered to the Central Business District market have contributed to this trend as they have larger, open floor plates, which allow tenants to be more efficient with their employee-per-square foot ratios.”