NAI Hiffman is pleased to present the First Quarter 2020 Market Peek, a first look at the market statistics for the Chicago metropolitan office and industrial real estate markets.
Industrial: Over 10 M SF of Leasing Activity in Q1 Kicks Off 2020 with a Strong Start
Chicago Industrial continued its run of strength to start 2020. Nearly 3.3 M SF of new supply was delivered in the first quarter, with the I-55 Corridor accounting for over 1.1 M SF. These deliveries resulted in the vacancy rate inching up 10 basis points from the fourth quarter of 2019 to 5.89%. Looking further into the pipeline, nearly 16.9 M SF of product remains under construction at the start of the second quarter. Five submarkets have over one million square feet on the way, led by over four million square feet in the I-55 Corridor.
Leasing activity topped 10.0 M SF for the second consecutive quarter, led by the I-55 Corridor and I-88 Corridor. 19 new leases were signed on the quarter in excess of 100,000 SF, topped by Pactiv’s nearly 788,000 SF lease at 1101 W Airport Rd in Romeoville, Illinois. Chicago Industrial additionally saw nearly 1.5 M SF of move-ins in the first quarter, capped by Amazon’s nearly 750,000 SF absorption at 23700 W Bluff Rd in the I-80/Joliet submarket.
With over 20 M SF of new leases signed in just the last two quarters, heightened absorption activity will continue well into 2020. In fact, 16 of the 100,000+ SF leases signed in the first quarter are scheduled to move into their spaces later this year.
Office: Suburban Class B Leads Positive Net Absorption During First Quarter of 2020; Strong Downtown Activity in West Loop Lowers Vacancy Rate Across the Overall Market
The suburban office market tightened 21 basis points to 18.47% to start off 2020. The largest positive change in vacancy occurred in Class B overall, dropping over 40 basis points to 18.11% from 18.53%, in large part due to Northwest Community Urgent Care coming online fully occupied. While the first quarter results are favorable, owners and operators of second-generation office product found in the Class B space continue to face pressure to reposition or renovate their assets to attract tenants or otherwise consider redevelopment possibilities.
Notable major movements in the first quarter included:
IlliniCare Health moved out of 999 Oakmont Plaza to 1333 Burr Ridge Parkway, moving 90,000 SF from the East-West Corridor to the I-55 Corridor.
Crown Castle moved into 38,687 SF at Highland Landmark II in Downer’s Grove.
PDT, an Astronics company, completed its move-in to 34,260 SF at 1 Corporate Drive in Long Grove.
AveXis moved into 28,260 SF in Deerfield at Three Parkway North
Downtown vacancy tightened to 11.11% for Q1 2020, the large swing contributed to by 333 N. Green coming online in the West Loop at 92.7% occupancy. The Central Loop change in vacancy increased 34 basis points to 12.93% as the CBD boundaries keep migrating westward towards Fulton Market, and newer Class A product attracts a wellspring of tenants from comparatively lower-profile spaces.
Of the top five move-ins this quarter, four are in the West Loop, totaling 667,316 SF. These moves more than offset the influx of newer Class A developments as vacancy tightened in the West Loop by 260 basis points to 9.52%.
The Post Office benefited in Q1 from its pre-leasing strength as several move-ins were realized, including: AbelsonTaylor and Walgreens, vacating 80,000 SF in the Central Loop and 76,613 SF in the East Loop, respectively. Additionally, Amazon moved in to a super-floor comprising 71,081 SF at The Franklin (227 W Monroe/222 West Adams), and Vi Technologies and Freddie Mac moved into 30,000 and 27,216 SF, respectively, at Willis Tower.
NAI Hiffman is pleased to introduce Mike Morrone as our new Research Director, with this report representing his initial contribution to our history of comprehensive market analysis. Mike brings a wealth of experience and fresh ideas to his new role, and we look forward to making a more personal introduction to our many valuable and trusted clients in the weeks and months ahead.
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