The suburban office market continued its struggles at the end of 2019, amid a trend that has seen companies relocate to the city in part to help capture more of the millennial workforce.
The vacancy rate ticked up to almost 18.7 percent from October through December, compared to nearly 18.2 percent at the same time in 2018, according to a fourth quarter report from NAI Hiffman.
Four firms that signed leases in the fourth quarter helped mitigate the loss, however. Edward-Elmhurst Health inked a 190,000-square-foot lease in Warrenville, Centene Corporation signed a 90,000-square- foot lease in Burr Ridge, the NPD Group took 20,000 square feet in Rosemont, and Elkay Manufacturing signed a deal for 18,000 square feet in Downers Grove.
Positive net absorption of Class A buildings hit a two-year high, at just under 293,000 square feet. Both Class B and C buildings saw negative absorption, signaling that owners are finding it more difficult to fill space in older complexes.
For the fifth consecutive quarter, leasing activity surpassed 1 million square feet.
At the start of last year, a Colliers International report found the overall vacancy rate remained flat in 2018
Since 2015, the migration of companies to Downtown Chicago has created more than 5.6 million square feet of vacancy in the suburban office market.
“Pockets of the suburban market are very stable and healthy; the overall suburban vacancy rate has been hovering in the mid-18 percent range for the past few years,” NAI Hiffman executive vice president Patrick Kiefer said in a statement.
Meanwhile, an area that includes Oak Brook and Oakbrook Terrace was the best performer, with a vacancy rate of 10 percent, and record-high rents of $23 per square foot, according to the report.
The former headquarters of McDonald’s in Oak Brook added 332,000 square feet of office inventory in the fourth quarter, according to NAI. More than a year after the company moved its headquarters to Fulton Market, different pieces of the massive suburban campus are already speeding toward redevelopment. Houston-based Hines Interests is preparing a $500 million mixed-use development on an 18-acre slice of the property, which could spur other developments designed to attract younger people to the suburbs, Kiefer said.