Chicago CBD Office Insight Report - Q2 2021 - Avison Young
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Chicago CBD
Office Insight
Report
Q2 2021
1
Key takeaways
Economic conditions Recovery rate Office demand
− Reopening efforts and higher − The overall post-COVID rate of − Leasing activity has paused, decreasing
vaccination rates have allowed the recovery based on extrapolated cell by 59.5 percent compared with
Chicagoland unemployment rate to phone data is 35.7 percent. long-term historical averages.
rebound from a high of 16.5 percent to
7.5 percent. − Chicago office occupiers have − However, Memorial Day was a key
navigated their return-to-work turning point in assessed tenant
− Office-using job losses have totaled strategies differently, with banking demand as COVID-era renewals are set
4.1 percent compared with 11.0 and media firms returning more to expire.
percent for other industries’ job losses, quickly than tech and law firms. The
underscoring the disproportionate overall rate of recovery is a − The Class A segment accounts for a 60
impact the pandemic had on the comparatively low 19.7 percent, percent share of post-COVID
discretionary segments of the local though bellwether companies are sublease supply.
economy. beginning to mandate that their
employees return to the office.
2
01.
The deeper dive
Here we take a look at key return-to-
work metrics, including vaccination
rates, office occupation recovery rates
in Chicago and key markets, as well as
general market KPIs such as large
activity and sublease supply pipelines.
3
Vaccination rates
50.0
47.5
47.5%
45.0 46.1
40.0
35.0
Fully vaccinated %
Share of total Cook County 30.0
population that is fully vaccinated 25.0
20.0
Chicago-area proportionate vaccination rates have 15.0
remained in line with U.S. averages, an important metric 10.0
Cook County
that allowed the city to expedite reopening plans and 5.0 U.S.
loosen restrictions. 0.0
3/15/2021 3/30/2021 4/14/2021 4/29/2021 5/14/2021 5/29/2021 6/13/2021
Source: CDC, Includes Cook County only
4
Employment and unemployment rate
7.5%
20.0 Employment 5,000,000
18.0 4,500,000
16.0
4,000,000
Chicago MSA unemployment rate as 14.0
3,500,000
of April 2021, dipping below the 12.0
12.2 12.8
height of the financial crisis 10.0
3,000,000
8.7
2,500,000
Historically tightened labor market conditions were 8.0 7.2
7.5
2,000,000
halted by the pandemic with nearly 860 thousand job 6.0
losses from February into May 2020. Preparation for 4.0
1,500,000
4.5
4.1
reopening efforts allowed the economy to add 14.7% jobs 2.0 3.2 1,000,000
since May 2020. 0.0 500,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Note: Not seasonally adjusted data.
Source: Bureau of Labor Statistics
5
Office-using job gains and losses
Total change in Chicago MSA* job
-4.1%
Change in office-using employment
gains/(losses)
February 2020 to April 2021
Federal
Government
2.2%
State Government
during the pandemic -0.2%
Financial Activities
-0.7%
Chicago MSA job losses have declined by 6.5% since the start
Professional and Business
of the pandemic, though office-using jobs contracted by just Services
-3.8%
4.1%. This recession’s impact on the office-using labor market Local Government
-7.3%
has been less severe than the global financial crisis, when
Information
Professional and Business Services job losses totaled 12%. -11.0%
-15.0% -10.0% -5.0% 0.0% 5.0%
VIEW DASHBOARD
Note: Not seasonally adjusted data. Metropolitan statistical area.
Source: Bureau of Labor Statistics
6
Chicago recovery index
35.7%
2,500K
COVID-19
lockdown
2,000K
Post-COVID rate of
1,500K
recovery based on
representative locations
through 6/13/2021 1,000K
The rate of recovery is most 500K
significant in healthcare, currently
63.1% of pre-COVID visitor volume, 0K
27-Oct-19
12-Apr-20
18-Oct-20
25-Apr-21
1-Mar-20
2-Jun-19
5-Jul-20
14-Mar-21
6-Jun-21
23-Jun-19
14-Jul-19
4-Aug-19
9-Feb-20
22-Mar-20
25-Aug-19
8-Dec-19
14-Jun-20
26-Jul-20
16-Aug-20
6-Sep-20
21-Feb-21
15-Sep-19
29-Dec-19
19-Jan-20
3-May-20
20-Dec-20
10-Jan-21
31-Jan-21
17-Nov-19
24-May-20
27-Sep-20
8-Nov-20
29-Nov-20
16-May-21
6-Oct-19
4-Apr-21
as elective procedure regulations
ease and vaccination rates increase. Transit Office Residential Hospitality, Recreation & Tourism Healthcare Government Education
Note: Representative areas of interest. Weekdays only.
Pre-COVID period measured as 12/1/2019 to 3/8/2020.
7 Source: Orbital Insights, AVANT by Avison Young
Office recoveries in gateway U.S. cities
Washington, DC 58.0%
43.9%
San Francisco 57.0%
Philadelphia 56.0%
New York 55.0%
Nashville 54.0%
Post-COVID rate of recovery for Miami 53.0%
representative Chicago office Los Angeles 52.0%
occupiers through 5/30/2021 Houston 51.0%
Dallas 50.0%
Chicago office employers are still solving return-to-work
Denver 44.9%
strategies as the city’s reopening plan continues. Transit
Chicago 43.9%
services have yet to see ridership recovery from office Boston 29.6%
commuters. Austin 22.3%
Atlanta 14.3%
Note: Select, representative occupiers only. Weekdays only.
Pre-COVID period measured as 12/1/2019 to 3/8/2020.
8 Source: Orbital Insights, AVANT by Avison Young
Chicago recovery index for select office
occupiers
21.9%
19.7%
20.2%
17.4%
Post-COVID rate of recovery for 12.4%
representative Chicago office
occupiers through 6/13/2021
Office employers have taken unique approaches in their
return-to-work efforts. While tech firms have adopted
remote working solutions, legal and financial services Law firms Banking, finance, Tech Food & beverage
insurance, real production
have returned to work most regularly. estate
Note: Select, major occupiers only. Weekdays only.
Pre-COVID period measured as 12/1/2019 to 3/8/2020.
9 Source: Orbital Insights, AVANT by Avison YoungOffice leasing activity
-59.5%
15.0M sf
13.6
12.8
13.0M sf
11.7 11.8
11.2
11.0M sf 10.6
9.9 9.9
2020-pro-rated 2021 vs. 9.0M sf 8.7
9.1
9.6 9.5
9.0
prior 20-year annual 7.9
Millions, sf
7.5
7.0
average leasing activity 7.0M sf
5.6 5.7 5.5
5.1 4.8
5.0M sf
There is no modern precedent for
the post-COVID slowdown in leasing 3.0M sf
1.8
activity—not 2001 nor 2008—due to 1.0M sf
the sudden change in office
-1.0M sf
occupiers’ future workplace
strategies and the 2020 recession.
Source: AVANT by Avison Young
10Vacancy rate
Sublease vacancy rate Direct vacancy rate
18.0%
14.3%
16.0%
14.0%
12.0%
Record high Chicago CBD
vacancy as of Q1 2021 10.0%
8.0%
The Q1 2021 vacancy rate was recorded at 14.3%- up 170
6.0%
basis points (bps) from pre-pandemic level of 11.2%. This
4.0%
current spike in vacancy is higher then the all time high of
2.0%
12.6% in 2010.
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2Q21
Source: AVANT by Avison Young
11Vacant sublease space
Vacant sublease space % of total vacant space
5.4 msf
6.0M sf 18.0%
16.0%
5.0M sf
14.0%
4.0M sf 12.0%
Record levels of sublease
vacant space 3.0M sf
10.0%
8.0%
The share of sublease-to-total vacant space stands at 2.0M sf 6.0%
15.1% as subleases continue to drive supply across 4.0%
1.0M sf
Chicago CBD. 2.0%
0.0M sf 0.0%
Source: AVANT by Avison Young
12Sublease supply pipeline
Building classification Asking rent per square foot
Trophy $50-54 1
1 blocks
2%
$45-49 1
$40-44 3
64 blocks
Class B $35-39 3
3.1M sf
25 blocks
39%
Class A $30-34 8
38 blocks
59%
$25-29 4
$20-24 2
Source: AVANT by Avison Young
13Chicago’s aging inventory
10.0M sf
35 properties 9.0M sf
proposed or under 8.0M sf
construction
7.0M sf
12.9 msf 6.0M sf
proposed or under 5.0M sf
construction
4.0M sf
7.7% 3.0M sf
2.0M sf
share of office
inventory 1.0M sf
0.0M sf
1945 2016
2017
2018
2019
2020
2021
2022
2023
2024
average delivery date of Proposed
existing Chicago CBD offices
Source: AVANT by Avison Young
14Office investment dollar volume
Trophy Class A Class B Class C
$7B
$2.4B
$6B
$5B
Chicago CBD office dollar volume $4B
2020 to present $3B
Office sales activity has temporarily paused during the $2B
risk-pricing crisis, decreasing by an annualized rate of $1B
46.9% compared with the prior five-year average dollar
$0B
volume.
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
YTD 2021
Source: AVANT by Avison Young, RCA
1502.
Contact us today
With around-the-corner knowledge,
multi-national expert insights and data-
driven intelligence, our team is ready to
help you unlock economic, social, and
environmental value.
16Get in touch
Jeff Lindenmeyer Danny Nikitas
Principal Principal
Tenant Representation Landlord Representation
+1 312 273 4510 +1 312 940 8794
jeff.lindenmeyer@avisonyoung.com danny.nikitas@avisonyoung.com
Peter Kroner Tommy Maday
Central Region Manager, Insights Central Region Lead, Data
Innovation and Insight Advisory, U.S. Innovation and Insight
+1 312-273-1494 +1 773 945 5837
peter.kroner@avisonyoung.com tommy.maday@avisonyoung.com
17Let’s talk
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was obtained from sources which we deem reliable and, while thought to be correct, is not
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