Commercial Chicago Real Estate Improving

April 21, 2011

There has been plenty of good news this week about the Chicago housing market, and now there’s positive news to report involving the commercial Chicago real estate industry.

We all know that with the recession came a high unemployment rate, which equated to an inflated office vacancy rate throughout the nation.

Today, the office market is showing signs of recovery and those vacancy rates are falling across the country and in Chicago.

man and woman outside a sublease available sign and smiling.According to a report from Grubb & Ellis, the commercial vacancy rate in the Chicago Central Business District fell 40 basis points to 17 percent in the first quarter of 2011. That equals nearly 130,000 square feet of positive net absorption.

On top of that, Grubb & Ellis reports that the average asking rental rate actually fell 31 cents a square foot during that quarter.

According to the report: “The Chicago commercial real estate industry has endured a tumultuous market during the past few years. 2010 ended with most submarkets reflecting negative net absorption numbers. However, even though vacancy remains at elevated levels, the first quarter of 2011 indicated a possible turnaround with some submarkets enjoying positive absorption.”

Some, but not all. The Chicago suburbs did not fare as well as the city. In the first quarter of 2011, the office vacancy rate increased 20 basis points from the last quarter of 2010 to 25 percent. That suburban market experienced a negative net absorption of 110,000 square feet.

To make matters worse, average asking rents in Chicago’s suburbs rose 38 cents from the previous quarter to $24.14 a square foot.

Grubb & Ellis’ report forecasts that the commercial industry will see modest improvements over the next few quarters while no new major office construction will be done in 2011.

“The economy is improving but job creation remains stagnant. Companies are focused on current staff productivity rather than on adding new employees. Yet, the consensus is that activity in the commercial marketplace is improving with large corporation activity, such as U.S. Bank, recently signing a lease downtown and Aon touring the marketplace.”

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