February 11, 2019
Chicago slipped year over year in the rankings of Institutional Property Advisors’ U.S. Office Index, in common with New York, Los Angeles and Boston. For Chicago, the two-rung drop in IPA’s index measuring the investment outlook is due to an influx of new product keeping vacancies elevated.
The 4.8 million square feet of completions slated for this year is up significantly from 2018’s 3.2 million square feet, according to IPA, a division of Marcus & Millichap. Nonetheless, IPA’s 2019 prediction is that the Chicago market’s vacancies will decline by 10 basis points by year’s end, as demand outpaces supply.
“A healthy pace of net absorption of office space, and stable asking rent growth, continues to sustain investor demand for office properties throughout Chicago,” according to IPA’s latest Office Investment Forecast. Properties downtown and in the surrounding neighborhoods are trading with average first-year returns between 4% and 6%.
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