East Loop Submarket: Vacancy Historically Higher than CBD

The direct vacancy rate in the East Loop submarket climbed from 16.3 percent at the end of 2009 to 18.3 percent in the first quarter of 2010. The East Loop's vacancy rate is the highest of the CBD submarkets. The East Loop is at disadvantage compared to other submarkets in the CBD due to its distance from Union and Ogilvie stations. Tenants who wish to be closer to public transportation can take advantage of falling rental rates and increased concessions in other submarkets when evaluating their office needs, implying that landlords must be even more aggressive in the East Loop. Buildings such as Michigan Plaza offer shuttle services to and from the train stations as an extra amenity to tenants.

Until this year, lackluster demand in the East Loop prevented increases supply. However the completion of an 860,000 square foot addition at 300 East Randolph (Blue Cross Blue Shield Building) earlier this year may add to the submarket's vacancy woes. While much of the newly added space has been occupied by the owner or preleased, four full floors totaling 130,920 square feet remain vacant. Only 367,920 square feet of the addition was put on the market, with the rest occupied by the owner, Blue Cross Blue Shield. Further increases to vacant space stemming from the addition depend on whether or not Blue Cross Blue Shield will vacate space when their leases expire in other East Loop buildings to occupy the space they already own at 300 East Randolph.

For MB Real Estate's Outlook on the East Loop and the rest of the Chicago Market reference our Submarket Snapshots, our new companion piece to the MB Real Estate Chicago Market Overview.

Up Next: East-West Corridor