Suburban Office Vacancies Keep Hitting New Record Highs As Chicago Industrial Market Booms

LAKE COUNTY, IL — The market for office space in the Chicago suburbs continues to face tough times as it continues to adjust to changes associated with the coronavirus pandemic and the rise of remote work.

In the second quarter of this year, the suburban office market saw a loss of 180,000 square feet of occupied office space, according to a new report from real estate services firm Jones Lang LaSalle, or JLL. Even though almost 500,000 square feet of leases were signed in the past three months, that comes out to 46 percent less than in the first quarter of 2024.

According to JLL, the amount of empty office space in the suburbs hit a record high of 31.3 percent, up from 28.9 percent a year ago, marking the 14th straight quarter of record-high vacancy rates.

That is significantly above the pre-pandemic vacancy rate of 22.1 percent. Although there are a lot of offices available for sublease, the available square footage has decreased by 15 percent due to more deals being made.

The suburban office market has shed nearly 4 million square feet of leased space since the start of 2020, a more significant reduction than the Great Recession period following 2008. The decline in demand has come along with rising increase rates, leading to lower property values and more foreclosures.

Notable losses include medical equipment maker Vyaire filing for bankruptcy and vacating 63,000 square feet in Mettawa, Aon cutting its office footprint by more than 550,000 square feet as it moves from Lincolnshire to Bannockburn and Advocate Aurora Health emptying out 185,000 square feet in Downers Grove after merging with Atrium Health.

Downtown Chicago is also facing challenges in its office market. The central business district saw a loss of 2.2 million square feet of occupied office space so far in 2024 — 70 percent lower than the same time last year. And only 1.5 million square feet of new leases were signed, a quarter of last year's volume.

According to JLL, the overall vacancy rate downtown is 23.1 percent, with occupancy on peak days still below 66 percent of pre-pandemic levels.

Use of the Chicago Transit Authority is up to 82 percent where it was before COVID-19, while Metra use reached 73 percent.

The market for industrial real estate in the Chicago area did significantly better during the second quarter, according to JLL Three large leases of 1 million square feet each were signed — Samsung’s 1.6 million square feet in the I-57 Corridor, Post Consumer Brands’ 1 million square feet in the I-80 Corridor, and Amazon’s 1 million square feet in Northwest Indiana — bringing the total leasing volume to 10.2 million square feet, up from 7.4 million square feet in the first quarter.

Rents listed for Chicago area industrial properties reached a new high of $7.50 per square foot, up from $7.06 in the first quarter of 2024. The increase in demand for large warehouse space led to a net absorption of 4.3 million square feet in the second quarter, a huge improvement from 47,000 square feet in first three months of the year.

Earlier: Suburban Office Vacancies Hit Record High In First Quarter Of 2024