The Post-2015 Office Sales Slump Is Ending
Direct office vacancy in Chicago's Central Business District rose in Q3, according to MB Real Estate's Q3 2017 CBD market overview. But strong leasing between July and September was more than enough to maintain a bullish office market.
The direct vacancy rate rose 1.1% to 12.2% in Q3, which was expected: 2.65M SF of new office inventory was added to the market this year, highlighted by the deliveries of 150 North Riverside and River Point. But there were some blockbuster leases signed in Q3. Northern Trust inked a 462K SF lease at 333 South Wabash, a deal that comes with naming rights for "Big Red" and the option to expand to 750K SF. Sterling Bay's Fulton West is complete and tenants are moving in. In total, there were 12 large new deals and 11 large renewal, expansion or sublease deals in Q3.
The office sales market is beginning to rebound after a record-shattering 2015 and sluggish 2016. Seven buildings changed hands in Q3, highlighted by Beacon Capital Partners' $165M purchase of the Continental Bank Building, and Beacon selling 300 South Wabash to a joint venture of Golub and Alcion Ventures for $155M. Five more buildings are under contract. The biggest price tag: Sterling Bay's $680M bid for Prudential Plaza.
