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Market Research - Chicago
USA

United States: Chicago office market - Q4 2019

Total 2019 sales volume was over $3.04 billion

Chicago unemployment down

Chicago unemployment fell below the national average to 3.1% as of November 2019. Low unemployment, however, is only a reflection of economic growth in specific sectors. As reported by the U.S. Census, the state of Illinois reportedly lost over 51,000 residents in 2019, thus marking the 6th consecutive year of worker exodus. Though office-using jobs have increased in city centers, much of the data contributing to the low unemployment rate is citizens moving to other states to find work in construction and manufacturing which has declined in Chicago year over year. An exodus of workers is not a cause for alarm for the office sector as all office-using industries seem to continue to expand their headcounts. 
 

Vacancy increased with new supply

The overall Chicagoland (CBD & Suburban) vacancy rate increased to 15.7% from 15.3% quarter over quarter. CBD total vacancy increased a dramatic 80 basis points to 12.6%, despite high activity due to large amounts of new office inventory delivered with over 50% not preleased prior to opening its doors. 
 

Investors move to more conservative mindset

 

In 2019, real estate investors had been in search of yield. Value-add funds were a top priority over core investments that had a lower return. As investors seek higher yields, as investment capital allocated to real estate continues to increase, the challenge becomes that these value-add properties are becoming scarce in the Chicagoland area. Additionally, Chicagoland, with its inevitable future tax liabilities are causing investors to pause on Chicago’s investment due to the uncertainty. Total quarterly sales volume reached over $1.0 billion during the fourth quarter of 2019 which is the highest volume reported quarterly this year. Total 2019 sales volume was over $3.04 billion. Yet, looking at a year to year comparison, this is less than half of the $6.5 billion total office sales reported in 2018.

 

AAG Chicago office market Q4 2019
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