Demand remained relatively unchanged as the direct vacancy rate rose to 13.6 percent. Albeit at a much slower pace, vacancy increased for the ninth consecutive quarter in the CBD’s second largest submarket.
As was the case last quarter, a slight gain in occupancy in Class A buildings was countered by occupancy decreases in Class B and C buildings. Tenants in the market with space requirements greater than 50,000 square feet continue to have considerable options in the Central Loop. Fifteen direct large blocks (contiguous blocks of vacant space over 50,000 square feet) are available for lease while five sublease large blocks, which typically offer above-average quality existing conditions and lower rental rates than direct counterparts, are on the market with varying expiration dates.
While the net change in occupied space was slight, a few tenants leased significant amounts of space for future occupancy. Project Leadership Associates signed an 11-year lease for 20,068 square feet at 120 South LaSalle as they will relocate from 200 West Adams. Digitas extended its lease until 2021 and expanded by 21,000 square feet for a total of 81,000 square feet at 180 North LaSalle.
The Central Loop, which is mainly occupied by government offices, financial organizations and law firms, will likely continue to see a gradual decline in office occupancy in the near-term. Recent job growth in the financial services sector is not nearly equivalent to employment losses experienced over the past two years. Law firms continue to cut their space requirements as they opt for more efficient workspaces at reduced costs.
The Central Loop’s boundaries are defined by the Chicago River (North), Wells Street (West), State Street (East), and Van Buren Street (South).