CHICAGO—In 2015, the Chicago office market experienced a historic year when it came to investment sales. And when coupled with nearly two million square feet of absorption, some observers began to wonder if the market was endangered by an unsustainable bubble. But according to MBRE, which has just published its overview of the first quarter, the pace of activity has been relatively slow and steady, a sign that the Chicago office market remains strong and headed in the right direction.

“The first quarter's measured growth is a reassuring sign that the market is neither over-heating nor bursting,” the report states. “The most important test of the market this year will be whether or not new occupants can be found for the numerous shadow spaces left by the tenants that will be moving to 150 N. Riverside and 444 W. Lake in 2017.”

Counting those buildings and several other projects, developers will add about three million square feet of class A space to the market through new construction in the next several years. “Vacancy levels should remain low but are unlikely to decrease significantly,” MBRE reports.

The firm also calls the CBD's 325,447 square feet of positive absorption in the first quarter a “respectable” start to the year, certainly a significant improvement over last year when the market saw 90,726 square feet of negative absorption in the first three months. Furthermore, “positive absorption was seen across all classes.”

A few submarkets did land in the red, but are poised to make up lost ground. Google moved out of 150,000 square feet at 20 W. Kinzie, for example, giving River North 136,409 square feet of negative absorption. However, shared office provider WeWork will soon occupy the Google space and create positive absorption later this year.

The East Loop submarket led the way with 265,235 additional square feet occupied. Kraft Heinz's move into 169,696 square feet at the Aon Center was largely responsible for the East Loop gains.

Other tenant move-ins that contributed to absorption include Avant Credit's occupation of 82,761 square feet at 222 N. LaSalle; Perkins+Will's occupation of 61,465 square feet at 410 N. Michigan; Pandora's occupation of 32,500 square feet at 130 E. Randolph; Akuna Capital's occupation of 28,000 at 333 S. Wabash; and 1871's expansion into an additional 41,046 square feet at the Merchandise Mart.

Instant Insights /

CBD Office Market Likely to Absorb New Vacancies

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