This story from today’s Wall Street Journal suggests that a nationwide dearth of new office construction could foreshadow rising rental rates in the near term if employment levels continue their slow but steady climb.
In Chicago, rental rates have held relatively steady since about 2009. But with no new office inventory to hit the market since Q1 2010, vacancy rates have fallen for the past four quarters.
Even if construction on a new building started today (a long-shot given the challenges associated with financing), it would be at least 2014 (possibly 2015, depending on the size of the building) before tenants could occupy that space.
Translation: with more and more anecdotal evidence that downtown Chicago office users are looking to hire, landlords may soon be emboldened to hike rates until new construction can meet some of the demand.
For tenants looking to lock in favorable lease terms, now may be the time to act.