For eight straight months the Chicago Suburban Office market as experienced a positive net absorption leading the vacancy rates decreasing. The third quarter net absorption was the largest gain since second quarter 2006 at 682,177 square feet. Nearly half of the net absorption came from the Northwest and North Suburban submarkets at 300,000 square feet. The Northwest submarket has actually lowered its vacancy rate by 370 basis points since first quarter 2012.
Even though the net absorption year-to-date has increased, leasing activity has slowed. The third quarter experienced only a few large scale deals with many larger corporations opting to go the route of build-to-suits. Only two-thirds of the deals are over 500,000 square feet compared to this time last year. This said, there is real concern over the sluggish leasing activity.
With the year totaling 1,265,947 square feet of net absorption, the direct vacancy rate has declined from 20.4% to 19.9% in the third quarter. When sublease space is accounted for the total vacancy rate for the Suburban Chicago office market is 20.8%. Which is still a far cry from where it was in the early 2000's. Will the market every get back to those levels? We all continue to wait and see.
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Eight quarters of steady net absorption, but with sluggish lease activity this trend could come to an end