Suburban Chicago office may be the tortoise, not the hare, from the old fable, but the market is steadily trending up with healthy fundamentals and tenant demand. More than 50 suburban business leaders joined JLL, the Schaumburg Business Association and the Federal Reserve Bank of Chicago, along with additional sponsors Andigo, the Village of Schaumburg, CP Apparel and Guaranteed Rate, last week to discuss the local commercial real estate climate and the impact of economic conditions on the Northwest suburbs.
Northwest rental rates continue to rise for the third straight year
The average rental rate in the Northwest submarket had risen steadily over the last three years and is currently hovering at the highest point since 2011, JLL Research Director Christian Beaudoin said. Landlords’ confidence to push rates in the submarket is a good sign, even as the vacancy rate increased by one percent in the first quarter of 2017. We expect that their confidence comes from strong market activity, with nearly a million square feet of active requirements in the market.
Northwest submarket maintains largest percentage of large leases
The Northwest submarket has accounted for roughly 31 percent of leases over 20,000 square feet in the last 10 quarters. This trend confirms tenants’ confidence in the area and their commitment to locate and grow their businesses there. While there are still many remaining large blocks to fill, active tenant requirements in the Northwest exceed one million square feet, which contributes to a favorable outlook.
Suburban vacancy sits below pre-recession levels
Total suburban office vacancy has stayed below 20 percent for four straight quarters, which is below pre-recession levels. Vacancy has not fallen below 19 percent in 15 years, according to Christian.
So what can we expect going forward? Continued slow and steady growth in tenant demand, increased interest from large, out-of-town corporations and rapidly rising rents in the O’Hare, North (Cook County) and Eastern East West submarkets. That’s a winning combination.
View the entire presentation, including Chicago Fed senior economist Rick Mattoon’s economic outlook, below: