Chicago & Midwest + Office | March 6, 2020

Investors in Chicago Office Favor Mid-Tier Properties

Even as office leasing in Chicago skews toward Class A properties, it’s a different narrative when it comes to investment sales, according to Marcus & Millichap’s 2020 outlook for the market.

“Deal flow for mid-tier properties increased as a percentage of total transactions last year, a trend that should continue in the upcoming months,” according to the report. That being said, “investors are drawn to stabilized Class B properties with tenants secured under multiyear leases rather than value-add acquisitions.”

At the lower end of the spectrum, says Marcus & Millichap, “Class C buyers remain active, particularly in areas where mid-tier properties also transact. Average first-year returns for these deals are above 8%, proving investors with an elevated risk tolerance significant potential upside. Class A properties in major office-using districts transact at an average cap rate in the mid-7% area,” compared to the high-7% range on Class B.

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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