Market conditions continued to worsen in the East-West submarket in the 1st quarter, with the direct vacancy rate rising to 20.5 percent, just shy of the record 20.7 percent rate reached in 2002. With land costs near the lowest in the metropolitan area, especially in the west side of the submarket, it has been subjected to high levels of construction creating an oversupply situation. Decreased demand combined with additions to supply led to 189,550 square feet of negative absorption from the end of last year.
Like much of the country, new construction has plummeted and should allow the East-West submarket to regroup. However, vacancy will likely continue to rise next quarter as leases roll and tenants reduce space requirements. But a large new tenant will help demand in the second quarter. Dover Corporation will move its headquarters to Downers Grove from New York, taking 68,000 square feet. While most leasing activity in the suburbs has been from relocations, this represents new demand in the market.
For MB Real Estate's Outlook on the East-West Submarket and the rest of the Chicago Market, reference our Submarket Snapshots, our new companion piece to the MB Real Estate Chicago Market Overview.
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