Tech Fueling Downtown Office Market
The city’s youthful and talented labor pool is what brings the firms downtown.
CHICAGO—As reported in GlobeSt.com, even though the downtown office market faces some headwinds, including the desire among many users to boost efficiency, it has many other strengths. Those have kept leasing volume up and are likely to have long-term impacts.
“Most core office-using sectors remain squarely focused on space efficiency, enhancement of the workplace environment and cost containment,” says Robert Sevim, vice chairman, Savills Studley. However, “tech firms in Chicagoland continue to be much more aggressive in their pursuit of talent and attractive space in trendy locations to house them.”
The city’s youthful and talented labor pool is what brings the firms downtown, he points out. And of these companies many are not strictly tech. Walgreens, for example, as part of its effort to compete and modernize, recently leased 200,000 square feet on the fourth and fifth floors of the soon-to-open Old Post Office. The firm will relocate 1,300 workers, many from suburban Deerfield to its new Technology Center of Excellence.
But downtown, much like most major US metros, is also getting its share of West Coast tech giants. According to Savills Studley, Facebook is reportedly close to taking 200,000 square feet at 151 N. Franklin St., the city’s newest trophy property, as it expects to significantly increase its local payroll. Google will likewise further boost its presence in Fulton Market by grabbing another 14,000 square feet at 1000 W. Fulton. Furthermore, “the software giant is in talks with Sterling Bay to take more than 100,000 square feet at 210 N. Carpenter St.”
According to a new report from Savills Studley, several larger leases boosted CBD volume in the second quarter, pushing it from 3.0 to 3.2 million square feet. “Tenants leased 12.0 million square feet in the four most recent quarters, exceeding the long-term market average by 29.6%.”
Other trends are also going in the right direction. The market’s overall availability rate fell by 20 bps from 15.7% to 15.5%, Savills Studley says, and the class A rate fell more sharply, declining by 80 bps to 15.5%. Rental rates are also stable. The class A gross asking rent inched higher, ticking up by 0.6% to $44.97. And the overall downtown asking rent rose by 0.2% from $39.91 to $40.01.
“Heading into 2018, chief information officers surveyed in Chicago said they would be active,” according to the firm. “Whether they can find enough talent is another story. According to the last Robert Half Technology IT Hiring Forecast – 21% of area CIOs said they expected to add tech talent in the first half of 2018, a 10% point jump from 2017.”