Chicago & Midwest + Downtown + Office | April 11, 2023

Vacancies and Rents Both Rise in Downtown Chicago Office During Q1

Vacancy rates and rental rates rose in Chicago’s downtown office market during 2023’s first quarter, Bradford Allen reported. The CBD’s direct vacancy rate reached a record-high 19.8%, above the 18.9% seen in Q4 of 2022. The average gross asking rate neared $43 per square foot.

Gross rents are rising primarily due to increasing property taxes and operating expenses “more so than anything to do with rising demand,” according to Bradford Allen’s report. In pre-pandemic times, net rents accounted for more of the overall rental payment.

Now, Bradford Allen, said, “rising costs of materials & labor coupled with elevated inflation levels have led to an increase in operating expenses, and changing economic conditions in the city have resulted in higher real estate taxes for commercial buildings.”

Against this backdrop and a rising supply of sublease inventory, owners of dated office product have struggled to lease up their buildings, leading to a rise in distressed assets and foreclosures. The net result in Q1 was negative absorption levels that more than doubled year-over-year.

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Bradford Allen

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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