Many Chicagoans are posing the same question asked this time last year – how much longer can this rally last? For now, there is no empirical evidence to show a slackening in demand. A few larger pending leases have spilled over into Q1 2016, setting Chicago up for a strong start to the year. Beyond 2016 though, the outlook becomes somewhat less clear; significant move-outs coupled with the delivery of new product may increase options for tenants.
The most dynamic growth in this market is still coming from new sectors that will inevitably encounter some adjustment, either through mergers and acquisitions or through the creative destruction that is at the heart of the tech sector.
The mainstays in Downtown Chicago’s office market, including larger law firms and banks, continue to shed space as they renew or relocate. Corporate tenants may have become willing to spend on newer space, but their desire to right size and achieve greater space efficiency – doing more with less – has not dissipated.
As more area firms are expanding as they plan for future growth and scramble to recruit talent, it would be wise for larger corporate tenants with 2019 and 2020 lease rollovers to begin their searches next year. Coupled with new entrants to the market – either by suburban Chicago or out-of-market firms – the tightening witnessed in 2015 is likely to carry into 2016.