Chicago posts world's second-highest office rent growth in 2016

Dive Brief:

  • A CBRE survey of prime office space in major markets found that lease rates for the newest properties in Chicago increased 19.9% in 2016, a pace second only to Belfast, Northern Ireland, according to the Chicago Tribune. Average rents in the Windy City rose $6.44 per square foot from 2015 to $38.84 per square foot in 2016.

  • CBRE credited the growth to the recent return of new office space to the city since the recession as well as to a 16-year low in vacancy rates and demand created by companies relocating downtown. Drew Nieman, CBRE executive vice president, said companies are often willing to pay higher rates to widen their worker pool with an attractive and accessible downtown location.

  • While Chicago's growth was high, its rates were still seven times less than the most expensive market, Hong Kong. That city's average lease rate in 2016 was $264.27 per square foot. Manhattan posted an average lease rate of $144.37, the highest in the U.S.

Dive Insight:

Chicago has become a magnet for companies wanting to take advantage of the city's relatively lower cost of living — and of doing business — as well as its proximity to O'Hare International Airport.

McDonald's, Conagra and Kraft Heinz have all moved either their corporate headquarters or a major business division to Chicago, and heavy-equipment company Caterpillar announced in January that it would be leaving Peoria, IL, its home of almost a century, in order to make the move to the Windy City.

Caterpillar said that one of the most appealing factors about Chicago is the supply of younger, skilled workers, echoing the sentiment of other firms making the move. Many of these individuals graduated from area universities and colleges and have developed an affinity for the city's cultural scene, as well as for the low rents and home prices compared to its East and West Coast counterparts.

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Filed Under: Commercial Building