Chicago CBD Q2 2020 Market Report
The conclusion of Q2 2020 marked the first full quarter of business during the COVID-19 pandemic. The downtown Chicago office market ended its run of positive net absorption by posting a negative figure of 917,804 square feet. Nearly 40% of negative absorption was due to large blocks of sublease space that continue to flood the market since the onset of the pandemic. Additionally, total availability has increased to its highest levels since the end of 2015, currently at 15.1%. Despite a spike in vacancy, however, average gross rental rates for class A & B buildings have increased over 2.5% to $42.00, indicating that Landlords are optimistic about a streamlined path to recovery. Vacancy was also impacted by the delivery of 4 new buildings during the quarter, bringing 455,397 square feet to the market. Development is still strong with 11 buildings currently under construction, including the 1.2M square foot Salesforce Tower. While office investment sales transactions have slowed even further during the pandemic, deals are still being completed; most notably, the Mondelez HQ at 905 W Fulton was purchased from Thor Equities for $86.5M by Deka Immobilien. This transaction was completed at a 4.9% cap rate - well below the average cap rate of 6.3%.
To learn more, download the Chicago CBD Q2 2020 Market Report.