Newer Chicago Office Spaces Outshine with 5.6% Vacancy Rate Amidst Downtown Leasing Slump

Introduction: A Shift in Chicago's Downtown Office Market

Despite the ongoing challenges in Chicago's downtown office market, a new trend is emerging. Modern office buildings, particularly those with more than 300,000 square feet, are outperforming their older counterparts in the Central Business District (CBD). This shift signifies a flight to quality, with businesses favoring the amenities and collaborative spaces offered by these newer establishments.

Direct Vacancy Rates: A Tale of Two Building Types

The CBD's overall direct vacancy rate has reached almost 20 percent in the third quarter. However, a closer look reveals a stark contrast between older and newer office buildings. The last 20 Class A office buildings constructed in the district, each exceeding 300,000 square feet, have a direct vacancy rate of just 5.6 percent. This data, sourced from Transwestern's latest Office Market Index, highlights the increasing appeal of modern office spaces.

New Buildings: The Lure of Amenities and Collaborative Spaces

Newer office buildings, such as the Salesforce Tower Chicago, are proving to be a major draw. These establishments offer a range of amenities and collaborative spaces designed to support hybrid work models. This trend sets them apart from older buildings, which may lack these modern conveniences and flexible workspaces.

Leasing Activity: A Dip in Numbers

While newer buildings are faring better, overall leasing activity in Chicago remains subdued. The third quarter saw 1.3 million square feet directly leased, a significant drop from the 2.6 million square feet quarterly average of previous years. Furthermore, a recent Transwestern report reveals a record high of 389 sublease spaces available, totaling over 8.2 million square feet.

Conclusion: The Future of Chicago's Office Market

While the overall leasing activity in Chicago's downtown office market faces challenges, the success of newer buildings offers a glimmer of hope. The flight to quality, characterized by the preference for modern, amenity-rich office spaces, is a trend that could shape the future of the city's office market.