There has been a lot of doom and gloom regarding suburban office space in Chicagoland. The business situation in Illinois, demographics, and the rise of part-time office workers has had a significant impact on the commercial real estate market. This summer the Chicago suburban office market saw “unexpectedly strong” growth with a 1.25% decrease in overall vacancy. Moreover, besides vacancy decreases, average rent prices increased 1% to 20.51 per square foot.
Why is the Chicago suburban office market growing? Chicago is simply following the growth trends of other states. Outside of Chicago, most suburban office markets are increasingly attractive to both investors and tenants. Large corporate tenants and cost-conscious small businesses are exploring reduced rents, operating and purchasing costs outside of the urban core.
The force, in particular, driving the tend is older millennials looking to start families. Older millennials are finding the suburbs a great value in comparison to urban living. However, besides demographic shifts, increased cost and economic stratification within America’s cities are increasingly pushing both millennials, small businesses, and corporate headquarters into exploring opportunities in the suburbs.
Although some investors are cautious, the high cost of living continues to make entering the urban real estate market as both a tenant and investor a challenge. Thus, despite some in the real estate industry describing suburban and urban office as a tale of two markets, both continue to see growth. Because the suburban office market has been struggling for many years some of the best opportunities to buy or lease office space exists in suburbia. Still, while suburban real estate growth remains slower, suburban office space continues to offer greater growth potential and value than its expensive urban counterpart. Therefore, the Chicago suburban office market will likely remain attractive, especially for those in high cost-of-living markets and companies catering to workers with families.