CHICAGO—After dropping significantly in the first quarter, the vacancy rate for Downtown Chicago moved up by 80 bps to 13.3% in the second, according to a new report from Colliers International on the top office markets in the US. It was the greatest increase among the 10 markets studied.
Other key indicators for Chicago’s CBD were mixed. Average asking rates moved up slightly to $40.70 per square foot and net absorption was barely positive at 50,800 square feet. Only Downtown Atlanta, the only city to see negative absorption, recorded a lower number.
“All but one of the top 10 US office markets posted positive absorption in Q2 2018 — an encouraging shift from Q1 2018 when four markets registered negative absorption,” Colliers says. “Rents rose or held firm in nine out of 10 markets, though vacancy rose in four of the markets.”
The second quarter numbers for Chicago’s CBD could end up being a blip to a market with a lot of demand drivers. “Three trends are driving the Chicago office market: continued relocations to the CBD from the suburbs, the rapid growth of co-working and the emergence of former fringe locations,” Colliers says.
Both Fulton Market and River North, for example, can now be considered genuine competitors to the Central Loop, partly due to the proliferation of tech firms in each. River North now has the second highest asking rates of any submarket in Chicago at $42.75 per square foot, according to Colliers’ data.
The company also found that the amount of co-working space in Chicago’s CBD has risen to 2.6 million square feet, an increase of 250% over the past four years. And in Chicago, this segment remains quite competitive. WeWork is the largest player but its market share is just 23%, followed by Regus and Regus’ Spaces with a combined 21%.