Economy improving, but Delta variant could challenge Chicago
Chicago's unemployment rate lowered to 8.5% in June 2021, from 12.8% one year prior, as the impacts from COVID lessen in the Chicago metro area.
Chicago added 158,500 jobs over the past year, mostly in the leisure/hospitality services sector.
Despite this growth, only 71% of jobs lost since the start of the pandemic have been recovered. Recovery will likely be challenged by the Delta variant, which could pause some reopening of businesses.
Vacancy rate rises during first half
The overall Chicagoland (CBD & Suburban) vacancy rate increased to 17.9% from 16.7% at year-end 2020.
The rise in vacancy was due to several new construction projects hitting the market with vacant space as well as tenants pausing major lease decisions until the path forward with COVID-19 is clear.
Most tenants are opting to renew and sign short-term extensions. Despite this, asking rents continue to rise, up 0.3% for all classes of space and 0.7% for prime space, supported by high concessions.
Office investment slows
Chicagoland, with its inevitable future tax liabilities are causing select investors to pause on Chicago investment due to the uncertainty.
Office investment sales slowed during the first half of 2021, totaling $592 million, which accounted for 42% of the total CRE transaction volume.
The most notable office transaction during the first half was 1000 W Fulton Street trading hands to Office Properties Income Trust for $355 million, or $668 PSF. This asset was 99% leased, primarily to Google, at the time of sale.