Year-End 2021 Market Watch

The suburban Chicago office market recorded 1,387,293 square feet of new leasing activity in the fourth quarter, a marked 41.2 percent increase year-over-year from the 982,446 square feet of new deals tallied in the fourth quarter of 2020. With that strong finish, full-year 2021 new leasing activity outpaced 2020 by 10.2 percent overall, moving from 4,992,616 square feet to 5,501,573 square feet. Full-year new leasing activity is now only 11.3 percent below the pre-pandemic pace of 2019.

• The East-West Corridor led the way with 396,654 square feet of new deals, while the North Suburban submarket placed a strong second overall with 390,714 square feet – a 33.6 percent increase compared to the same period last year.

• Suburban Chicago office recorded a 25.28 percent total vacancy rate in the fourth quarter, driven in part by tenants moving out of their spaces, such as Intuit’s exit of nearly 25,000 square feet at 95 W Algonquin Rd in Arlington Heights. The vacancy rate increased 72 basis points quarter-over-quarter from the 24.56 percent rate tallied in the third quarter. Year-over-year, the total vacancy rate increased 374 basis points from the 21.54 percent rate tallied at year-end 2020.

• There was -304,212 square feet of net absorption in the suburban office market in the fourth quarter. The Northwest Suburban submarket’s net absorption figure accounted for 62.4 percent of the quarterly total. The I-55 Corridor was the only suburban submarket to tally occupancy gains in the fourth quarter, a modest 7,350 square feet. At 53,910 square feet, the Class A portion of the North Suburban submarket led its suburban peers in net absorption on the quarter. Overall there was -2,159,775 square feet of net absorption for the full year.

• While the Delta and Omicron variants of COVID-19 added uncertainty to the market and scrambled untold return-to-work plans across the second half of 2021, the heightened pace of new leasing activity throughout the year offers a silver lining and the potential for decreasing vacancy rates in 2022.

Downtown Office: Multiple New Deals Signed to End the Year Strong

The fourth quarter brought signs of life to the downtown area despite the emergence of Omicron COVID variant in November.  There was roughly 1,849,765 square feet of new leasing activity downtown during the fourth quarter. The quarter’s activity included the signing of seven deals over 50,000 square feet.

• The total vacancy rate for the downtown office market in the fourth quarter was 17.71 percent; the rate increased 4 basis points quarter-over-quarter from the 17.67 percent rate recorded during the third quarter of 2021. Additionally, the rate increased 274 basis points year-over-year from the 14.97 percent rate tallied at year end of 2020.

• The quarter’s activity included the signing of seven deals over 50,000 square feet. Fulton Market continues to attract new tenants as two deals totaling over 180,000 square feet were signed in the fourth quarter: HAVI Global Solutions leased 96,000 square feet at 345 N Morgan St and MoLo Solutions leased 93,000 square feet at 167 N Green St.

• Overall downtown net absorption totaled -25,603 square feet, with the marginal dip into the red marking the seventh consecutive quarter that downtown has recorded negative net absorption. Despite the negative number, the quarter’s result broke the trend of two consecutive quarters recording more than -1.0 million square feet. Year-over-year net absorption increased 96.6 percent from the -1.0 million that returned to the market in the fourth quarter of 2020.

• Although the downtown office market’s vacancy rate went up once more and net absorption was negative for the seventh consecutive quarter, strong ongoing downtown leasing activity indicates an office market searching for a light on the horizon to spark its recovery.