NAI Hiffman is pleased to present the Third Quarter 2019 Market Peek, a first look at the market statistics for the Chicago metropolitan office and industrial real estate markets.
Industrial: Construction Completions Totaled 9.0 Million Square Feet in the Third Quarter
More than 9.0 million square feet of industrial product was delivered during the third quarter, with 80.3 percent of those deliveries completed on a speculative basis and 9 of those buildings are larger than 300,000 square feet. Build-to-suit projects are still in demand, however, as nearly 3.0 million square feet of the 7.0 million square feet of new projects that broke ground in the third quarter were build-to-suits. Of the 23 total projects started in the last quarter, 5 of them were on a build-to-suit basis, reflecting an average building size of nearly 600,000 square feet.
Year-over-year net absorption increased 37.4 percent over third quarter 2018 and now totals nearly 15.4 million square feet through the third quarter of 2019, compared to 11.2 million square feet through the same period last year. Fourteen companies took occupancy of spaces larger than 200,000 square feet during the quarter, including four tenants moving into recently-constructed facilities: Suncast Corporation in West Chicago (782,000 square feet), Kellogg’s in Minooka (706,000 square feet), Thermoflex Corporation in Waukegan (228,000 square feet) and Bolke-Miller Co. in Waukegan (400,000 square feet).
Office: Suburban Leasing Increased Over Previous Quarter; West Loop Absorption and New Leasing Activity Continues to Dominate Activity in the CBD
The overall suburban vacancy rate decreased 14 basis points from the 18.70 percent recorded in the previous quarter to measure 18.56 at the end of the third quarter. Average asking rents increased for all asset classes in the third quarter, with Class A rents inching over $27.00 for the first time this year.
Suburban new leasing activity has steadily increased each quarter this year and totaled 1.5 million square feet, to bring the year-to-date total to 4.4 million square feet. Some of the largest new leases signed during the third quarter included Centene Corporation in Burr Ridge (90,000 square feet), Stericycle in Bannockburn (36,000 square feet) and AveXis in Deerfield (28,000 square feet).
New leasing activity increased 60.3 percent over the 2.0 million square feet leased during the second quarter and totaled nearly 3.1 million square feet third quarter. Both the East and West Loop submarkets hit significant numbers in leasing, doubling over the previous quarter. The West Loop increased by 129 percent and totaled 2.1 million square feet, supported by new leases signed at the Old Post Office including Uber (466,000 square feet), CBOE Global Markets (185,000 square feet) and Federal Home Loan Bank of Chicago (130,000 square feet).
The overall vacancy rate in the Central Business District decreased 17 basis points from the second quarter, to measure 12.24 percent at the end of the third quarter. Net absorption was positive for the third consecutive quarter and totaled 350,111 square feet. Tenants contributing to third quarter absorption included Intrinsic 2 Charter High School at the Bell Federal building (76,000 square feet), Industrious at 231 S LaSalle (53,000 square feet), and WeWork at One S Dearborn (53,000 square feet).