Friday, August 27, 2010
A Capital Constrained Environment: Why Have Deal Terms Stayed Steadier Than Expected?
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Friday, August 13, 2010
O'Hare Submarket: Highest vacancy rate in the suburbs, but performer in second quarter
The O’Hare submarket’s vacancy rate has been elevated since 2002 and continues to top the Suburban submarkets at 27.5 percent. Proximity to one of the busiest airports in the nation and excellent highway access make the O’Hare submarket appealing to office tenants, but a surplus of inventory has plagued the area. However recent figures and events suggest that demand may be stabilizing.
With roughly 132,000 square feet in positive absorption, O’Hare was the only suburban submarket that experienced increased demand in the second quarter. Each building class saw a slight increase in occupancy. Tenants who moved into significant amounts of space during the second quarter include Deerfield Capital Management (25,470 square feet at One O’Hare Centre) and U.S. Foodservice (23,841 square feet at 6133 North River Road).
Early in the third quarter, U.S. Cellular renewed their lease at Citicorp Plaza and expanded from 197,506 to 212,000 square feet Retaining large clients such as U.S. Cellular is crucial to the health of the submarket, as tenants with similar space requirements have recently left the suburbs to take advantage of falling rental rates in downtown Chicago.
Adding to the supply of office space during the second quarter was the delivery of the 119,000 square foot Rosemont Corporate Center. Two tenants currently occupy the building: Cisco Systems is leasing 81,000 square feet while Skyline Advanced Technology Services is 7,000 square feet. The entire fourth floor remains available for lease.
Although the general outlook remains bleak the O’Hare submarket will benefit from a lack of new construction. For positive absorption to continue, landlords will need to offer aggressive lease packages to attract new tenants. Unfortunately with more and more businesses staying put, it is unlikely that the submarket can generate enough demand in the short-term to significantly increase occupancy.
For MB Real Estate's Outlook on the O'Hare submarket and the rest of the Chicago Market reference our Submarket Snapshots, our companion piece to the MB Real Estate Chicago Market Overview.
With roughly 132,000 square feet in positive absorption, O’Hare was the only suburban submarket that experienced increased demand in the second quarter. Each building class saw a slight increase in occupancy. Tenants who moved into significant amounts of space during the second quarter include Deerfield Capital Management (25,470 square feet at One O’Hare Centre) and U.S. Foodservice (23,841 square feet at 6133 North River Road).
Early in the third quarter, U.S. Cellular renewed their lease at Citicorp Plaza and expanded from 197,506 to 212,000 square feet Retaining large clients such as U.S. Cellular is crucial to the health of the submarket, as tenants with similar space requirements have recently left the suburbs to take advantage of falling rental rates in downtown Chicago.
Adding to the supply of office space during the second quarter was the delivery of the 119,000 square foot Rosemont Corporate Center. Two tenants currently occupy the building: Cisco Systems is leasing 81,000 square feet while Skyline Advanced Technology Services is 7,000 square feet. The entire fourth floor remains available for lease.
Although the general outlook remains bleak the O’Hare submarket will benefit from a lack of new construction. For positive absorption to continue, landlords will need to offer aggressive lease packages to attract new tenants. Unfortunately with more and more businesses staying put, it is unlikely that the submarket can generate enough demand in the short-term to significantly increase occupancy.
For MB Real Estate's Outlook on the O'Hare submarket and the rest of the Chicago Market reference our Submarket Snapshots, our companion piece to the MB Real Estate Chicago Market Overview.
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