Fourth Quarter 2019 Market Peek
NAI Hiffman is pleased to present the Fourth Quarter 2019 Market Peek, a first look at the market statistics for the Chicago metropolitan office and industrial real estate markets.
Industrial: Net Absorption Increased Year-Over-Year and Remains Poised for a Strong 2020
- Year-end net absorption increased 17.3 percent over 2018 to total more than 17.1 million square feet at the end of 2019. Net absorption, however, was relatively stagnant during the fourth quarter and totaled just 1.7 million square feet. Comparatively, the quarterly average for the first 9 months of the year was 5.1 million square feet. Absorption is expected to rebound in 2020 as 27 tenants signed leases during the fourth quarter greater than 50,000 square feet, and are set to occupy more than 4.6 million square feet in the coming year.
- More than 3.0 million square feet of industrial product was delivered during the last three months of the year, bringing the year-end total to 20.2 million square feet. Forty percent of buildings completed during the fourth quarter were build-to-suit projects, including S&S Activewear in the I-55 Corridor; Daifuku Wynright in Northwest Indiana; and Pharma Logistics in Lake County. 20.6 million square feet remain under construction, with the majority of those buildings (65.8 percent) to be completed on a speculative basis.
Office: Suburban Office Posts Positive Net Absorption During the Fourth Quarter; Downtown Fundamentals Remain Strong
- The overall suburban vacancy rate increased 13 basis points over the 18.55 percent recorded in the previous quarter to measure 18.68 at the end of the year. The largest increase occurred in the East-West Corridor where vacancy increased 39 basis points to 16.00 percent, primarily due to the addition to the market of the former 332,000-square-foot McDonald’s headquarters building in Oak Brook.
- Net absorption measured positive during the fourth quarter and totaled 94,356 square feet. The year-end total, however, remained negative at -341,688 square feet. A number of large tenants moved into new spaces during the quarter including Edward-Elmhurst Health in Warrenville (190,000 square feet), Centene Corporation in Burr Ridge (90,000 square feet), The NPD Group in Rosemont (20,000 square feet), and Elkay Manufacturing in Downers Grove (18,000 square feet).
- Year-end new leasing activity totaled 9.8 million square feet, with 2.2 million square feet leased during the fourth quarter. The West Loop submarket led the charge, with 1.6 million square feet leased during the last three months of the year. For the second consecutive quarter, significant leases were signed at the Old Post Office including PepsiCo (192,000 square feet), Cisco (143,000 square feet) and TrueBlue (86,000 square feet).
- The overall vacancy rate in the Central Business District decreased 55 basis points from the third quarter, to measure 11.52 percent at the end of the year. Net absorption totaled nearly 194,000 square feet during the fourth quarter, bringing the year-end total to more than 1.1 million square feet. Tenants contributing to fourth quarter absorption included Walgreens (212,000 square feet), WeWork (92,000 square feet), and WR Berkley (71,000 square feet), all in the West Loop submarket.
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