Thank you for sharing!

Your article was successfully shared with the contacts you provided.

CHICAGO-Tenants have another year to take advantage of an office market that’s in their favor, according to Delta Associates. Meanwhile, investors should take advantage of a strong sales market by selling “tuned-up” assets while keeping an eye out well-leased class-A buildings in strong submarkets that are offered for sale, the Alexandria, VA-based firm recommends.

Overall vacancy Downtown hit 16.6% in the third quarter, according to Delta Associates, up 1.3 percentage points from the same time in 2004. Asking rents have dropped 1.5%, the researchers add. However, the research arm of Transwestern Commercial Services predicts vacancy will decline, fueled by space demands of professional and business services tenants.

For now, the 28-million-sf East Loop is Downtown’s softest submarket with an 18.4% vacancy rate when sublease space is included, according to Delta Associates. At the other end of the spectrum, the 12-million-sf River North submarket boasts a 12.9% vacancy rate. However, Hines Interests’ 1.35-million-sf building at 300 N. LaSalle St., set to begin construction next year, will represent more than 10% of the submarket’s total.

Capitalization rates for sales of Downtown buildings have dropped from above 8% to below 7%, Delta Associates reports. “We expect cap rates to stabilize this year,” the company’s report predicts. “Cap rates may begin rising in the period ahead if interest rates move up.” The third quarter saw two Downtown properties trade for less than $200 per sf, according to Delta Associates, noting the $154 per sf paid by Broadway Partners for 300 S. Wacker Dr., a $79-million acquisition; and $139 per sf paid by Hamilton Partners for the Santa Fe Building, a $53-million deal.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.