Top Office Vacancy Hits Single Digits

vacancyCHICAGO—Landlords of the thirty newest class A office buildings in downtown Chicago saw the direct vacancy rates for their properties decline over the last quarter from 10.8% to 9.9%, and the overall direct vacancy rate for the CBD sank by 30 bps, to 13.2%, according to the latest market index report published by MBRE. It marks the first time in two years that the direct vacancy rate for the index buildings went below 10%. “Leasing activity at the index buildings has decreased in recent months as the amount of available space begins to tighten,” the researchers note.

Still, several notable developments concerning these thirty structures, all built between 1989 and 2009 and ranging from 372,000 square feet to 1,845,460 square feet, illustrate the significant changes in the CBD since MBRE’s last report in September. Above all, the announcement that Amazon is in advanced negotiations with Tishman Speyer Properties to take over about 30,000 square feet in The Franklin at 227 W. Monroe illustrates the growing importance of tech firms.

Furthermore, “the deal would validate the $30 million in renovations that were recently completed in the building in order to attract premium tenants after losing two anchors, law firm McDermott Will & Emery and investment firm William Blair, to the newest towers under construction,” according to the report.

These two new developments had the most leasing activity in October and November but won’t join the index until 2017. John O’Donnell’s Riverside Investment and Development, the developer of 150 N. Riverside, was in advanced negotiations with Navigant Consulting for 110,000 square feet. A deal was reached in December. And developer Hines completed three leases for its River Point at 444 W. Lake: 20,000 square feet with Water Street Healthcare Partners, 40,000 with Balyasny Asset Management, and 40,254 square feet with Harrison Street Real Estate Capital.

The two largest recent renewals in index buildings have been law firms. Holland & Knight signed a 100,000 square foot short-term lease renewal at Citadel Center, 131 S. Dearborn. As reported in, Mayer Brown recently decided to stay at Hyatt Center, 71 S. Wacker, and reduce their space from 394,406 square feet to 265,000 square feet. Index buildings currently have only three blocks of available space over 200,000 square feet: 347,034 square feet at 515 N. State; 269,962 square feet at 500 W. Monroe, and 231,414 square feet at 311 S. Dearborn.

In another possible sign of change, outside of MBRE’s index the largest new deal was also outside the CBD. Global logistics company C.H. Robinson signed a 15-year lease with Sterling Bay for a 207,000 square foot build-to-suit located at 1511 W. Webster Ave. along the Clybourn Corridor and help tranform the former industrial site.

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