The suburban Chicago office market had a few shining moments in the final months last year, but demand remains weak as remote-work trends and other challenges persist.
Tenants are shifting from large spaces in older Class B and C offices to smaller spaces in Class A buildings with enhanced amenities, the Daily Herald reported, citing Savills.
Notable lease signings at the end of last year include the Federal Aviation Administration’s 108,000-square-foot lease in the O’Hare Gateway Office Center in Rosemont, and Culligan’s 66,000-square-foot expansion at Riverway West.
Suburban office vacancy declined slightly from 31.2 to 31 percent, but the O’Hare area witnessed a more significant drop, from 28.9 to 27.1 percent, largely due to commitments from tenants like the FAA.
Interest in repurposing underused office spaces for industrial and data center purposes is exemplified by NTT Global Data Centers’ redevelopment plans in Itasca. Compass Datacenters has similar plans for the 2.4 million-square-foot former Sears campus in Hoffman Estates.
Schaumburg, a northwest suburb that’s historically been a bustling economic hub, faces oversupply of outdated office buildings. The local economic development corporation is taking inventory of properties best suited for conversion. They include the 45-year-old office building 1699 East Woodfield Road, near Woodfield Mall, which could be turned into apartments, the outlet said.
Zurich North America’s decision to sublease part of its Schaumburg headquarters, with its prime location and amenities, signifies ongoing market adjustments. While some Class A buildings show modest improvement, the overall suburban office market lacks signs of recovery, with available office space being repurposed or permanently withdrawn from the leasing market.
The office vacancy rate in Chicago’s suburbs jumped to a record-high of 30.2 percent in the fourth quarter, according to JLL. The year-end figure marks an increase from 29.7 percent in the third quarter, and 27.9 percent in the fourth quarter of 2022. The suburban vacancy rate was at 22.1 percent when the pandemic started.