Central Loop snapshot: Pricing power returns to Class A landlords

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The Central Loop continues to add occupancy as the recovery spreads eastward from the West Loop. Positive absorption of 215,000 square feet during the quarter led to a yearly occupancy increase. Direct vacancy now stands at 13.8 percent, while Class A vacancy is 9.6 percent. By surpassing the crucial 10 percent equilibrium threshold, Class A Central Loop landlords will be able to be more demanding with lease economics.In the Class A segment, U.S. Bank’s move into 65,000 square feet at 190 South LaSalle was counteracted by Claro Group and Sara Lee vacating 70 West Madison to move to other submarkets. Class B occupancy grew by the largest margin driven by move-ins at 120 South LaSalle. Leases commenced for Private Bank and the Legal Assistance Foundation for 57,000 square feet and 56,000 square feet, respectively.

One new large contiguous block of sublease space became available during the quarter. Accenture is listing 61,000 square feet at 180 North LaSalle for sublease. Additionally, a new large block of direct availability was listed during the quarter at 222 North LaSalle. Although not available for occupancy until June 2014, its nearly 200,000 square foot size makes it a viable option for large tenants that have faced limited options.

The sale of the office portion of the Block 37 development at 22 West Washington represented the highest per square foot transaction of the CBD during the quarter, reaching $418 per square foot. Additionally, the sale of 35 West Wacker by Piedmont to UBS Realty equated to $346 per square foot. These types of sales demonstrate the robust investment activity for Chicago’s CBD.

The Central Loop’s boundaries are the Chicago River (North), Wells Street (West), State Street (East), and Van Buren Street (South).

For more information on the Chicago office market, please reference our 4th Quarter 2011 Chicago Market Overview and Submarket Snapshots.

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