Downtown office vacancy has reached another new high

Many companies are taking advantage of the soft market. Net absorption, which measures the change in the amount of space leased and occupied compared to the prior period, rose by nearly 300,000 square feet in the fourth quarter, CBRE data showed. That was the fifth consecutive quarter of positive net absorption and brought total net absorption for 2022 to about 1.5 million square feet — a big rebound from 2021, when downtown lost a staggering 2.1 million square feet of tenants — the worst year on record. has CBRE ever followed . Refrigerated logistics company NewCold, mobile app company Fetch, proprietary trading firm Chicago Trading and cybersecurity software provider Coro are among the companies that have recently signed leases for new, larger offices.

But many others have tried to free up space while embracing remote work. There were 6.8 million square feet of downtown office space available for sublease, about 900,000 more than a year ago and double what it was at the start of the pandemic, according to CBRE. Social media management software maker Sprout Social, consumer lender OppFi, banking technology firm Amount and recruitment firm TrueBlue are among those that have recently sublet large blocks of office space.

And there are buyers: logistics company TransLoop, public relations services provider Cision and Twin Brook Capital Partners all subleased new downtown space late last year.

All that competition—especially from move-in ready sublease offerings—is forcing landlords to get creative with perks to attract tenants, Houze said. Flexibility in parking options, credits for ride-hailing apps like Uber, and agreed-upon rent increases during the lease are examples of concessions that have come up in his conversations with potential tenants.

“Landlords and tenants are working together more than before to be creative and find what works,” Houze said.

Still, more landlords were pushed to the financial brink during the fourth quarter. The owners of the Chicago Board of Trade Building handed over the keys to a lender last month rather than face a possible foreclosure lawsuit, following the lead of other owners on and near the vacant LaSalle Street corridor. The owners of commercial buildings at 30 N. LaSalle Street and 19 S. LaSalle Street were recently hit with foreclosure, while the owners of commercial properties at 10 S. LaSalle Street and 1 N. LaSalle Street had their loans transferred to special servicers, usually a sign that they are at risk of default. .

Several business owners last month proposed converting some derelict properties along LaSalle into condos in response to a new city initiative offering public subsidies for such projects. They could get a boost in the next few years as Google plans to renovate and occupy the James R. Thompson Center.

Newly constructed commercial buildings may also prompt owners of outdated ones to consider residential conversions. CBRE is monitoring six downtown office buildings under construction totaling 2.7 million square feet, of which 57% is pre-leased.

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