Leasing and new construction breaks record at downtown office market

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Chicago’s downtown office market recorded decade highs in leasing and new construction during 2019, according to a report from the real-estate brokerage Cushman & Wakefield.

The brokerage reported the downtown market completed leasing deals for 10.4 million square feet and construction deliveries of 2.6 million square feet during the year.

Both statistics were their highest recorded in the decade and increases pushed average asking rents over the $40-per-square-foot mark, to $40.70. That’s a 3.4 percent annual jump, the report said.

Downtown office vacancy rates rose by just a tenth of a percent to 14.1 in 2019, but that is being attributed to the massive Old Post Office development that opened last year, Cushman said. Analysts predict downtown vacancy rates will drop in 2020 and 2021 as new tenants such including Uber and PepsiCo occupy the refurbished space.

Demand was weaker in the suburbs, but the report noted that the most modern buildings in “inner-ring” towns received sharply higher rents. Overall, the suburban vacancy rate stands at 23 percent, up 0.5 percent from last year. And average asking rent was $24.16 per square foot, up 4.2 percent, Cushman reported.

Overall leasing activity in the suburbs fell 8.5 percent from 2018.

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