Suburban Chicago Real Estate Poised to Respond to as COVID-19’s ‘Dense Fog’ Lifts, Report Says

A report focusing on the greater Chicago metro area is seeing a lot of potential in the suburbs, despite growing jitters over the effects that the COVID-19 pandemic is likely to have on the broader real estate market.

A report from Colliers International entitled “Signs of Life in the Suburbs“ has found that the suburbs around the windy city are well positioned to meet the changing needs of tenants, landlords and businesses in the wake of the COVID-19 pandemic. Specifically, the report said the suburbs are becoming more desirable as milennials entering the market are increasingly looking to the suburbs, and large companies are also increasingly looking to open satellite offices in less densely populated areas.

All sides of the real estate equation have also worked together in making sure the markets stay viable despite the COVID-19 related shocks, the report said.

“COVID-19 led to an all hands-on deck approach from landlords, tenants, property managers, brokers, as well as local and federal government in order to complete transactions,” the report said. “All rallied together to accommodate tenants by delaying commencement dates, adding concessions or government subsidies that allowed tenants to continue pay rent. It is also led to new lease provisions as landlords have begun adding pandemic language to new lease agreements.”

In terms of overall trends for the area, the report said vacancy in the suburbs remained relatively flat, dropping 10 basis points to 22.2 percent since the previous quarter. The report also said the Colliers suburban office team completed 12 new and renewal lease transactions, totaling more than 250,000 square feet, and that five new leases, or lease expansions of 15,000 square feet or more were signed throughout the suburbs during the second quarter of 2020.

The report also forecasts that spec space will continue to be in demand, rental rates will remain flat while landlords offer additional concessions, and more subleases will be coming to market throughout the year as tenants reconsider space needs and seek cost savings.

Delving into several sections of the metro area, the report said that, because of its reputation as a transportation hub, the O’Hare market is well-positioned to capture tenants coming from the central business district. The Northwest is also primed to absorb additional space due to its concentration of financial services, healthcare and pharmaceutical companies, the report said, also adding that landlords in the Oak Brook area will be looking to capitalize on satellite offices moving to the suburbs.

The report also said the Lisle-Naperville section will continue to provide low-cost relocation options, and the Northwest is also set to draw large employers looking for lower density areas.