Over the last few years, business models have been changing dramatically. Because of this, so too have the requirements for office buildings.
This Chicago office space research highlights key trends in the city’s commercial real estate market and their potential impact on future CRE performance.
Chicago office sector in 2022
With a vacancy rate of 10%, Chicago still has some office spaces available for investors looking to enter the market.
Here are some highlights from Chicago’s office market:
- The Chicago, real estate market has recorded some of the highest prices.
- The industrial sectors in Chicago are outperforming the office sectors.
- The office market in the city of Chicago has been negatively affected by the rise of remote working and hybrid jobs due to the COVID-19 pandemic.
- Some office landlords have defaulted.
Before investing in Chicago’s office real estate, you should know how you intend to profit from the situation regardless of low office rents.
Office space rents changes in Chicago
As of July 2022, the Chicago real estate industry is changing and recovering. Vacancy rates in the United States are at an all-time low, and Chicago has seen a considerable drop from its peak.
However, several significant reasons for the current economic slowdown include:
- “Space-Shedding,” which is outpacing new lease activity.
- Rents have dropped 2.8% during the last year.
- Rents in Chicago start at $37.56 per sq ft.
Currently, rent prices are low, so companies may consider expanding their offices.
However, there is little demand for space. As a result, it’s difficult for investors to get a return on their investments. According to Crain’s Chicago Business, commercial real estate vacancies continue to rise in Chicago.
Office space for rent in Chicago
Commercial office space rents in Chicago are declining because of several reasons.
There has been a departure from the city, and Chicago has been badly affected by the coronavirus outbreak. As a result, there is plenty of vacant commercial real estate in the city.
This means that rents will remain low even though there may be vacancies.
The most significant rent changes will probably be due to new developments in premium office space.
Companies are looking for new offices in the city because they’re rumored to be interested in high-quality commercial real estate.
As healthcare facilities continue to develop, there will be an increased need for high-quality office space.
Near-term outlook of Chicago office space
Short-term rental prices in Chicago are down.
As a result of the struggle to get workers into offices and many large companies leaving the city, there is still plenty of office space available even though the vacancy rate has dropped significantly.
This is driving down prices for office spaces.
Demand for commercial real estate in Chicago, coupled with development projects, is expected to keep property prices low in the short term.
Companies are looking to develop new spaces within the cities they operate in.
Over time, this could be an advantage for those who want to create premium offices.
Rest of the year Chicago forecast
Since the recession hit, commercial real estate in Chicago has been facing an uncertain future.
Property owners who default on their loans could face bankruptcy by the end of next year.
At present, investors are putting their money into the industrial sectors in Chicago.
Investors will look for companies that can command high rents and have a good business case for recovering their investments even though office rental prices are lower than they used to be.
Closing thought on Chicago office space
It’s hard to get new tenants into existing office spaces when major corporations leave town.
One of the most significant risks investors may face when buying real estate in Chicago is the risk of not finding suitable tenants for their properties.
Be careful when buying property; don’t buy without doing proper research. Consider working with an experienced commercial property agent.
