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The overall fundamentals in Chicago’s office and retail sectors declined in 2018 when compared with 2017, according to Avison Young’s new annual review and 2019 forecast, but both the industrial market and the CBD’s office sector were standouts, and saw significant growth in leasing velocity and construction. The employment picture was also bright last year, which could set the stage for expansion in several sectors in 2019. As of September 2018, employers in the Chicago metropolitan area had added approximately 35,100 jobs year-over-year, Avison Young said. Activity in the metro area’s office market was moderate during 2018, with much of it concentrated within the city’s central business district, which recorded a total of 9.4M SF leased through the first three quarters — compared with 5.6M SF in the suburbs. “Facebook, Google, Pinterest, Salesforce, Career Builder and Madison Capital have all recently announced major expansions in the CBD, which will increase local workforces as well as real estate footprints,” Avison Young said.
That growth has kept builders active in the CBD, and new developments garnered record-setting rents in 2018. Avison Young projects that downtown will see another 3.4M SF open up this year, 87% of it in the West Loop. The pace of construction will boost the amount of shadow space throughout much of the CBD as tenants sign deals for new spaces. Avison Young also projects that the vacancy rate, which had eased in the past year from 14.1% to 11.8%, will rise to 12.4% in 2019. Chicago’s industrial vacancy rate should keep falling, even as the pace of new construction picks up in 2019. Avison Young said 18M SF of industrial will be added in the next 12 months, much of it on spec, but it forecasts healthy leasing will sink vacancy to 5.9% next year, after hitting 6.3% in 2017.
Chris Coleman, VP of Development at Wingspan, periodically shares his thoughts and observations on property development news.