East Loop: Slew of new deals helps ailing submarket

After experiencing positive absorption at the end of 2010, the East Loop witnessed its direct vacancy rate increase by 0.6 percent. The reversal in the submarket’s recovery was largely due to lease expirations at 200 East Randolph. Currently, 20.8 percent of office space in the East Loop is vacant: the largest percentage of the CBD’s submarkets.

Despite a negative quarter, the East Loop was home to the largest lease transaction in the CBD. Groupon expanded by 150,074 square feet by signing a short-term lease at 303 East Wacker. Evraz North America leased 34,000 square feet at 200 East Randolph as it relocates its headquarters from Portland, OR. Additionally, Robert Morris College will expand by 34,000 square feet at 401 South State.

On the other hand, several tenants decided to reduce their footprint in the submarket. GolinHarris will vacate 66,000 square feet when it joins fellow Interpublic Group firm Weber Shandwick at 875 North Michigan. Crain Communications will cut its space requirement by more than 22,000 square feet when it vacates its long-time headquarters at 360 North Michigan and relocates to 150 South Michigan.

The East Loop has 10 blocks of contiguous, direct space greater than 100,000 square feet available, including the largest contiguous space in the CBD: a 415,000 square foot block at 200 East Randolph. The building also has a 296,000 square foot sublease block that will become direct space in January 2012 when Kirkland & Ellis’ lease expires.

Considering large block availability across the CBD and speculation regarding a new office development, it remains likely that the East Loop will continue to have the highest vacancy rate of the CBD’s submarkets.

The East Loop is bordered by the Chicago River (North), State Street (West), Lake Shore Drive (East), and Van Buren Street (South). It is inhabited mostly by advertising and media firms and corporate tenants.

For our complete outlook on the Chicago Office market, please reference the MB Real Estate 1st Quarter 2011 Chicago Market Overview and Submarket Snapshots.

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