Positive Absorption Witnessed in Both Suburbs and Downtown
Suburban Office Market Vacancy Rate: 20.13%
Demand returned to the suburban office market during the third quarter as 142,628 SF of vacant space was absorbed through new leasing activity. This activity resulted in the overall vacancy rate dropping by 16 basis points to 20.13% by the end of September. This rate is more than a full percentage point below the 21.14% rate recorded a year ago, and more than 3.5% below the 23.66% peak recorded during the third quarter of 2010.
Downtown Office Market Vacancy Rate: 12.74%
The downtown office market continued its recovery trend unabated during the third quarter, as 238,376 SF of vacant space was absorbed through new leases and tenants expanding. This elevated activity caused the vacancy rate to continue its decent, dropping 26 basis points between July and September to 12.74%, the lowest level the downtown office market has witnessed since the end of 2008.
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Industrial Vacancy Improves, Speculative Construction Picks Up
Industrial Market Vacancy Rate: 8.5%
Demand for industrial space increased during the third quarter, as more than 4.2 million SF of vacant space was absorbed through continued leasing activity and user sales. This activity pushed the overall vacancy rate down 20 basis points to end the quarter at 8.51%. Since this rate peaked at 12.1% more than three years ago, it has improved by about 3.6%. Year-to-date net absorption totals nearly 11.4 million SF, suggesting that if the current rate of absorption continues through the end of the year, Chicago's industrial market will absorb more than 15 million SF over the course of 2013, the highest annual tally the market has seen since 2007.
Speculative construction continues to expand in the Chicago industrial market, now accounting for 46% of the ongoing construction activity. The I-55 Corridor is seeing the most speculative development, with four buildings totaling just over 1 million SF currently underway.
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