CHICAGO—The Chicago region's office market seems poised to finish 2016 on a strong note. The overall vacancy rate has remained at 13.3% since the end of last year, but the CBD did record a slight uptick during the second quarter, and the suburban markets posted a 20 bps decrease year-over-year to 15.6%, according to stats just published by Avison Young.

Furthermore, average asking rental rates continue to trend higher – up 1.1% at mid-year 2016 from one year earlier, the company found. Class A properties, both in the CBD and in the suburbs and, have been the standouts, increasing 7.6% and 5%, respectively.

And certain submarkets, such as the West Loop, “have experienced a significant boost in leasing activity,” said Avison Young. In the first half of the year, Leo Burnett renewed its 642,000 square foot lease at 35 W. Wacker Dr., for example, and CNA Financial inked a 272,000 square foot lease at 151 N. Franklin, one of the CBD's new developments, and US Cellular expanded its headquarters at 8420 W. Bryn Mawr in the O'Hare submarket by 119,000 square feet, bringing its footprint to 331,000 square feet.

Developers now have four major projects underway in the West Loop submarket, and have not had much trouble securing tenants. CNA Financial and law firm Hinshaw & Culbertson have pre-leased 47% of 151 N. Franklin, an 806,953 square foot tower to be called the CNA Center. Perhaps most significantly for the CBD, Richard Blum's White Oak Realty Partners and CA Ventures have just started developing 625 W. Adams, a 432,000 square foot office tower, on a speculative basis.

“As a rare occurrence of speculative development, 625 West Adams verifies developer/investor commitment to the market,” Avison Young notes. “Once the projects are completed, second-generation space vacated by large tenants migrating into the new product will become available, negatively affecting both vacancy and absorption until the space is reoccupied.” Still, “leasing demand should pick up throughout the remainder of 2016, prompting vacancy to shift downwards.”

Instant Insights /

Chicago Office Market Continues Upward Momentum

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