January 2018

Fourth Quarter 2017 Market Peek

NAI Hiffman is pleased to present the Fourth Quarter 2017 Market Peek, a first look at the market statistics for the Chicago metropolitan office and industrial real estate markets.

Industrial: Construction Deliveries Outpace Absorption in 2017

  • Construction deliveries totaled 21.7 million square feet (msf) in 2017, just nominally below the 22.4 msf posted in 2016. Net absorption in 2017, on the other hand, was recorded at 18.3 msf, a drop of 25.2 percent from 2016, and more than 15 percent lower than the amount of space added to the marketplace. Fourth quarter deliveries totaled 3.9 msf, with the General Mills 1.5-msf build-to-suit project in Wilmington being the largest project completed during the quarter.
  • As of January 1, 2018, an additional 12.3 msf is under development, with 74.1 percent of those projects under construction on a speculative basis. The concern that the Chicago industrial market is close to being over-built is of increased interest as the recovery is now approaching nine years since the Great Recession. Based on our research, it appears that developers have shown a bit of restraint with their new building starts, as the amount of projects under construction on January 1 of 2015, 2016 and 2017 was 15.5 msf, 13.7 msf, and 19.5 msf, respectively.
  • Net absorption totaled 4.7 msf fourth quarter, bringing the year-end total to 18.3 msf. Aside from the General Mills delivery, the largest contributors to absorption fourth quarter included Expeditors in Franklin Park (310,000 sf), Menasha Packaging in Bolingbrook (270,000 sf) and XPO Logistics in Aurora (247,000 sf).

Office: Suburban Absorption is Strongest in Years; Downtown New Leasing Activity Remains Encouraging


  • The overall vacancy rate for the suburban office market decreased 20 basis points to 19.54 percent as tenants continue to find value in suburban leases. Average gross asking rental rates for Class A properties decreased by 2.4 percent due to lease volume being more distributed across submarkets.
  • Fourth quarter’s net absorption of more than 600,000 square feet was stronger than it has been in over 3 years. US Cellular’s expansion of 119,000 square feet near O’Hare had the single the most significant impact. Although each submarket contributed, O’Hare and the East-West Corridor accounted for approximately two-thirds of the total suburban demand.


  • The overall vacancy rate for the downtown office market measured 12.28 percent fourth quarter, marking a 30 basis point decrease from the previous quarter. The drop in vacancy signaled a first for the year, and the first time in five quarters. As companies continue to gravitate towards trophy buildings, large firms, including Facebook and Sprout Social continued to expand their footprint in the city fourth quarter, with more firms set to expand in the coming quarters.
  • Leasing activity remained healthy and totaled 1.8 million square feet during the fourth quarter. Notable leases signed during the last three months of the year included Chicago Tribune’s 139,000 square feet relocation to 130 E Randolph Street, Facebook’s 83,000 square feet expansion at 191 N Wacker Drive, and Sprout Social’s 64,000 square foot expansion at 131 S Dearborn Street.

For further information regarding the content of this market peek or if you are interested in attending a custom market overview presentation, please contact:

Director of Research

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