The suburban office market has suffered for a long time from obsolete buildings, corporate migration into the CBD and the need for many businesses to shrink office footprints. But according to a new study on the fourth quarter by the Chicago office of Studley, many tenants and investors remain attracted to the relatively cheaper rents and prices found in the suburbs, and drove down the vacancy rates among class A product.
“The regional class A [availability] rate fell from 25.9% to 24.8% during the fourth quarter,” the study noted. “Leasing activity totaled 1.6-million-square-feet, the largest quarterly total since the third quarter of 2012.” Furthermore, rents in the region increased by 2.6% over the past year, ending 2013 at $21.77-per-square-foot. By comparison, overall asking rent in the CBD stood at $33.15-per-square-foot. Class A rents in the suburbs stood at $24.35, and $37.51 in the CBD.
The suburbs remain a tenants’ market, Studley adds. “Despite the robust quarter, annual leasing volume totaled approximately 5.0-million-square-feet in 2013, a 22.2% drop from the 6.4-million-square-feet leased during 2012.” And with 15.3-million-square-feet of class A space still available, “landlords remain eager to fill vacant space.”
The end of the year saw several big deals that helped boost the region’s overall numbers. As reported in GlobeSt.com, for example, Illinois Tool Works acquired Kraft’s 49-acre, 503,000-square-foot headquarters in north suburban Glenview, and Kraft did a sale-leaseback of its campus in Northfield. But too many corporations have either decided to move out or downsize. Office Depot, which recently merged with Office Max, recently decided, for example, to consolidate operations at its Boca Raton, FL headquarters, which will eventually open up a huge block of space in Naperville, where Office Depot has a 354,000-square-foot lease...Read more - Studley: Suburbs Showing Signs of Life
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