Chicago’s skyline too close for comfort

Chicago’s top office towers are becoming overcrowded, with companies compressing their working space within the cities key buildings, according to the latest Chicago vacancy rate report by Jones Land LaSelle, the real estate consultancy firm.

The report, titled Chicago Skyline Review, analyses the stacking plans of Chicago’s central business district business centres; giving an overview of the city’s leasing climate, and uncovers a tale of two cities in the process.

Instead of looking at the whole of Chicago’s office market, the report takes an innovative annual look at the downturn of 54 prominent office buildings within the city, deemed to be reflective of market conditions by virtue of their scale or prominence.

The report clearly details the amount of available space within each of the key office buildings analysed, revealing a market in equilibrium, with a relatively small amount of large floor space available and tepid demand at the top end of Chicago’s office market.

Overall, vacancy and rental rates within Chicago’s central business district have increased incrementally, which Jones Lang managing director Steve Smith attributed to companies targeting greater efficiency in their working space, as a main factor.

[caption id="attachment_13294" align="aligncenter" width="567"] In red: Vacant space[/caption]

Commenting, Mr Smith said: “Last year, large tenants such as Foley & Lardner, Grant Thornton and AECOM took reduced space when they negotiated new or renewal leases in these premier properties.”

Robert Kramp, Jones Lang research director for Midwest and Great Lakes noted that: “10 years ago, it was common for companies to allow 220 square feet per employee. Today, office tenants are down to the 140-to-150 square feet per worker range in Chicago and in other densely populated markets, such as New York, San Francisco, Boston and Washington D.C.”

Overall, Chicago still remains a tenant's market for office space with a floor size of 25,000sq ft or less. However, the market is significantly tighter on the top end, with a shortage of large scale floor spaces over 100,000 sq ft available; putting the ball squarely in the landlord’s court.

According to Jones Lang LaSelle, there is an influx of suburban, out-of-state and international companies planning to relocate to the city in 2013, which will give rise to an eventual squeezing of the bottom end of Chicago’s office market, and giving landlords more leverage.

Photo courtesy of Jones Lang LaSelle.