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Commercial
Chicago

Chicago’s office leasing market is all about the new new thing

More tenants are upgrading to Class A office space to attract and retain employees, according to a Q3 Savills report

For office leasing in Chicago, it’s all about the new construction and about the amenities that go with it.

The demand for newer, Class A office space in the city has been siphoning leases from older, Class B properties, according to ReJournals, citing a third quarter Savills report.

Vacancy rates for newer office properties fell to 13 percent from July through September, while the older office properties remained at 18 percent, according to the report.

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Savills’ Robert Sevim said the disparity comes from a rise in the number of tenants who want the more modern features and amenities — like open-air space and day care services — that Class A office spaces offer, hoping it will help attract and retain more employees.

For the third quarter, a total of 2.5 million square feet of Class A office space was leased, almost 75 percent all total office space, according to the report.

Not surprisingly, the trendy West Loop and Fulton Market areas were home to eight of the 10 largest Class A leases in the third quarter. Three of those were for 601W Companies’ $800 million Old Post Office building. Recent high-profile tenants like Uber and Walgreens have inked major leases there. WeWork and PepsiCo may also take a combined 320,000 square feet at the building, according to recent reports.

And where demand has spiked, construction of Class A offices has grown. Many of those new construction buildings have been absorbed into the market over the past year. While vacancy rates have risen slightly, industry pros say they are keeping up with the flood of new development. Migrating or expanding companies also promise to gobble up much of the new space — as demonstrated by the big leases by Salesforce, BMO Financial and Walgreens announced for those three buildings last spring. [ReJournals] — Kelsey Neubauer

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