Chicago CBD office market report

Q2 2023

Q2 2023 saw a continued rise in overall availability rates across the CBD, reaching 23.4% direct availability and 5.1% sublease availability. Vacancy and availability rates in Trophy assets remain significantly lower than in A, B and C towers. After two quarters, leasing activity throughout the city remains 44% lower than pre-pandemic averages. For activity that is getting done, average term lengths are growing but are still behind historical norms. Concession packages offered to entice much of this activity has stretched the spread between base rents and net effective rents.

Vacancy rate in trophy buildings

In terms of vacancy, quality remains king. Across the CBD, vacancy rates of the trophy asset segment remain significantly lower than Class A and B segments, which both sit above 20%.

Trophy/Class A spread between base and net effective rent

Large concession packages offered by landlords continue to be the norm in order to entice tenants to transact. The spread between base rents and net-effective rents sit at a wide 17.8%, although this spread has contracted slightly in previous months.

Total balance of CMBS loans maturing before 2027

With the combination of decreasing office demand and dramatically rising interest rates, significant pressure has been put on many buildings with CMBS debt maturing over the next few years. $2.9B of this amount has been watch-listed or transferred to special servicing.
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