The Chicago commercial real estate market is enjoying a 15-year low in its downtown vacancy rates, hitting 11.7 percent during the second quarter of 2016. This is the lowest Chicago has seen since 11.6 percent in 2001. The surge of businesses moving downtown has been a driving factor in reducing the vacancy rates and contributing to a healthy Chicago market.
Downtown Chicago is Trending
Chicago’s historic architecture, lively nightlife, accessible public transportation, renowned restaurant scene and robust housing options make it a highly sought after location for companies to call home. Chicago is a great city – that is no secret. Businesses realize this as well as that tremendous amounts of young talent live in the heart of this bustling city. As businesses move towards a more employee-centric focus, it becomes a logical decision for them to be in the core of sweet home Chicago.
The Landlord Advantage
Low vacancy rates are the prelude to a tight rental market. Tenants aren’t going anywhere, which means when a space becomes available, it won’t remain on the market for long. In economic terms, there is a high demand for spaces in downtown Chicago with a limited supply. Those who already have their spot reserved in these coveted spaces are holding on to them with a strong grip causing a lower turnover. The low vacancy rates and high desire for downtown locations give landlords the advantage of raising their rents while enjoying a boom in tenants.
New Developments to Come Online in 2017
The city of Chicago is expecting a significant number of new developments to open in 2017. This new increase in office inventory will throw some slack into the tight commercial real estate market. Chicago will see a rise in office vacancy rates, but to a more normal, sustainable level over the course of the coming year.
It will be interesting to follow the natural ebb and flow of Chicago’s commercial real estate market in 2017. With vacancy rates nearing a record low and a plethora of new projects looming in the near future, there should be some natural fluctuations throughout the market with it eventually settling into a vacancy rate more favorable for tenants. The high-level forecast previews a healthy 2017 for the Chicago commercial real estate market.