Chicago Commercial Rental Market Overview for 2023
Chicago’s commercial rental market is expected to remain steady in 2023, with a slight increase in demand for office and retail space. The city’s central business district is likely to see a higher demand for Class A office space as more companies look for modern and well-located spaces. The West Loop and River North neighborhoods have been the most active areas for office leasing, and as a result, the rents in these areas are among the highest in the city.
Suburban office markets have also seen increased demand for commercial space and steady rental growth, driven by companies looking for more cost-effective options and the trend of companies moving out of the city center to the suburbs to support hybrid work arrangements.
Recent years saw the opposite trend. A spike in prime commercial rental rates followed the completion of construction on a number of new high-end office towers in downtown Chicago, some of the first new buildings in a decade. This boosted the area’s desirability to potential tenants, including several well-known companies like McDonald’s, Motorola Solutions and ConAgra, which relocated to the city from the surrounding suburbs or from other cities.
City or suburbs, the ongoing pandemic may have an impact on rental prices as some companies choose to downsize or continue to operate remotely. Others may be more cautious about committing to long-term leases and seek more flexible options such as co-working spaces. Overall, in 2023 landlords are expected to be more flexible in their lease terms and may offer concessions, such as rent abatements and tenant improvement allowances to attract and retain tenants.
Want to learn more about Commercial Real Estate?
Request Information | or Call Us at 312-329-8400
Long-Term Changes in Chicago Office Space Rent
Chicago’s commercial office space rent has undergone some long-term changes in recent years. One change is the shift in demand from the Loop and nearby areas to more suburban areas. As companies look for more cost-effective options, many have moved out of the city to suburban locations, leading to increased demand for office space in these areas. Additionally, there has been a trend towards more flexible lease terms, with landlords offering shorter leases and much more flexible options such as co-working spaces.
This trend has accelerated over the past few years as a result of the ongoing COVID-19 pandemic, as companies have become more cautious about committing to long-term leases. Finally, technology and evolving work habits have led to a change in how office space is designed and used. Employees are more likely to divide their work time between the office and home. The result is an increase in unassigned workspaces, allowing employers to reduce their office footprint. Employees reserve workspaces in advance or space is occupied on a first-come basis.
Short-Term Changes in Chicago Office Space Rent
One can also expect to see some short-term changes within the commercial office space market. One of which is the increased availability of sublet spaces. Companies that have downsized, gone out of business or left behind excess space has created more options for companies looking for flexible and cost-effective office space. Another change is a greater demand for Class A spaces.
There has been an increase in demand for Class A office space. Class A buildings are considered the cream of the crop in their market, boasting the latest and greatest in design, construction and infrastructure. They are typically the most visually appealing, well-built, and well-maintained properties, situated in prime locations with easy access and professional management. Due to their superior quality, these buildings attract top-tier tenants and command the highest rental rates. This has also led to landlords upgrading their existing properties to meet this demand.
