Contrary to the common “wisdom” that everyone is moving downtown, Chicago’s suburban office market continues to experience positive growth. Accordingly, in the second quarter of 2019 the Chicago suburbs witnessed 61,569 square feet of positive net absorption. Moreover, direct vacancy moved downward to 18.4 % demonstrating an increasingly stable recovery in the suburban office marketplace. Overall, several noteworthy trends are driving growth in the marketplace.
Cost Sensitive Healthcare Industry IS Driving Growth
Four of the five largest leases this spring and summer were healthcare tenants. In the second quarter this year, healthcare companies committed to over 400,000 square feet of new office in the Chicago suburbs. Leasing was also robust in class B buildings as tenants took advantage of the lower occupancy costs offered by such spaces.
Demand is Growing in the North Suburban Office Market
Furthermore, the North Suburban Submarket led to greater Chicagoland’s commercial real estate growth. Class B office in the North Suburban market saw vacancy rates decline 129 basis points year-over-year. This growth pattern is likely the result of tenants finding great value in the north suburban market. As the north suburban market continues to be lower priced and talent-rich.
Rising Demand for Class A and B Office Space Across Suburban Markets
While class B space saw the greatest growth in occupancy, most suburban markets enjoyed positive absorption in both class A and B buildings. The Class B office market saw positive absorption of 53,711 square feet in the second quarter. Suburban Class A office experienced 20,893 square feet of positive absorption. As Millennials age and form families demographers are starting to project a re-suburbanization of this young, tech-savvy workforce. Employers seeking the best human talent will inevitably mirror this movement as they chased Millennials to the city years ago.
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