CHICAGO—Due to its large numbers of obsolete buildings and office parks, the suburban office market has historically experienced much higher vacancy rates than downtown. That disparity will remain for a very long time, but over the past year, the gap has closed a bit, according to a recent report from Cushman & Wakefield. Yesterday, GlobeSt.com reported that overall vacancy in the CBD increased to 14.8% by the end of 2013, a 0.7% boost. But in the suburbs, C&W notes, “overall vacancy ended 2013 at 21.3%, a decline of 1.2 percentage points over the past 12 months.”
The class A market led the way in 2013 with overall vacancy declining 1.3% in the past year to 20.2%. Furthermore, in 2013 class A net absorption totaled 1.2-million-square-feet, about 84% of the overall total. Rents for class A also ended 2013 with a relatively strong gain, growing 2.0% since 2012 to $24.36-per-square-foot. Other classes fared worse, and rents in the entire suburban market increased only 0.4% to $21.60-per-square-foot.
C&W cite Zebra Technologies’ recent 230,000-square-foot sublease at Three Overlook Point as the largest suburban leasing deal of the year. And the suburban region saw a total of 5.5-million-square-feet of leasing activity in 2013, 3.5% more than in 2012.
Suburban buyers were also quite active. More than 7.8-million-square-feet were sold during 2013. The Canada-based REIT Adventus was the biggest buyer in 2013, acquiring almost 1-million-square-feet. “Surprisingly, only 62.7% of all space sold was class A, bucking the trend of the past few years,” C&W notes.