Chicago, Illinois’s commercial real estate market is constantly evolving and changing, reflecting the economic and social trends of each city and region. Every year, there are new and exciting developments, transactions, and opportunities in the commercial real estate sector, as well as challenges and risks.
How We Identified the Top Commercial Property Sales in Chicago
We used a multitude of data sources, including public records, news articles, and industry reports, to identify some of the top commercial property sales in Chicago, as well as the office vacancy rates and trends in the market. Our team analyzed this data to provide a comprehensive overview of the commercial real estate landscape in Chicago. Whether you are looking to buy, sell, lease, or invest in commercial real estate in Chicago, this post will provide you with valuable insights and information to help you make informed decisions.
A major factor impacting the commercial real estate market in Chicago and other cities are rising interest rates and economic uncertainty. Higher interest rates increase the cost of borrowing and financing for commercial real estate transactions, as well as reduce demand and affordability for buyers and investors. Economic uncertainty can also create volatility and risk in the market, as businesses and consumers may postpone or cancel their plans to lease, buy, or sell commercial properties. Commercial real estate stakeholders closely monitor interest rate and economic trends and adjust their strategies accordingly.
Here are a few of Chicago’s most significant property deals of the year so far:
- The sale of the 1.5 million-square-foot Prudential Plaza office complex in downtown Chicago for $680 million to Sterling Bay, a local developer that plans to renovate and reposition the property
- The sale of the 1.3 million-square-foot One South Wacker office tower in downtown Chicago for $471 million to Starwood Capital Group, a global investment firm that also owns several other office buildings in the city
- The sale of the 1.2 million-square-foot 500 West Monroe office building in downtown Chicago for $412 million to CBRE Global Investors, a real estate investment management firm that acquired the property from KBS Realty Advisors
- The sale of the 1.1 million-square-foot 300 North LaSalle office tower in downtown Chicago for $850 million to Beacon Capital Partners, a private equity real estate firm that bought the trophy asset from Hines Interests
- The sale of the 1.0 million-square-foot 550 West Washington office building in downtown Chicago for $370 million to Ivanhoé Cambridge, a Canadian real estate company that partnered with Callahan Capital Properties to purchase the property from Tishman Speyer
The Latest on Chicago Office Vacancy Rates
One of the indicators that reflects the impact of interest rates and economic uncertainty on the commercial real estate market is the office vacancy rate. The office vacancy rate measures the percentage of office space that is unoccupied or available for lease or sale in a given market or submarket. A high office vacancy rate can signal a weak demand or oversupply of office space, while a low office vacancy rate can signal a strong demand or undersupply of office space.
Another factor that is currently impacting office vacancy rates and the commercial real estate market across the nation is the continuing impact of work-from-home. The COVID-19 pandemic has accelerated the adoption of remote and hybrid work models, which allow employees to work from home or other locations instead of commuting to a central office. This has reduced the need and demand for office space, as well as changed the preferences and expectations of tenants and landlords. Some of the trends that have emerged from the work-from-home phenomenon are the increased demand for flexible workspaces, suburban offices, and amenities that support health and wellness.
Using data from various sources such as Cushman Wakefield and Commercial Edge here are the office vacancy rates year over for Chicago starting in 2021:
- In Q1 2021, the office vacancy rate in Chicago was 18.4%, up from 15.4% in Q1 2020. Chicago’s office occupancy rates fared better than New York City (21.5%) but didn’t perform as well as Los Angeles (14.9%) during Q1 2021.
- In Q1 2022, the office vacancy rate in Chicago was 21.4%, up from 18.4% in Q1 2021
- In Q1 2023, the office vacancy rate in Chicago was 22.6%, up from 21.4% in Q1 2022
Here’s a closer look at office space trends and vacancy rates in Chicago’s submarkets:
|Submarket||Q1 2021||Q1 2022||Q1 2023|
Looking Ahead: Chicago Commercial Real Estate Outlook
The commercial real estate market in Chicago has experienced some notable property sales and transactions in 2023, as well as some challenges and opportunities in terms of office vacancy rates and trends. Looking ahead, the outlook for 2023 for Chicago property deals is cautiously optimistic as the market faces some uncertainties and risks, such as the potential oversupply of office space, the changing demand for flexible workspaces, and the competition from other cities and regions.