Despite low unemployment and a booming economy, economists forecast suburban office vacancy rates increasing this quarter. According to data from real estate broker Jones Lang LaSalle, suburban office vacancy may increase in the third quarter to 23.7 percent. The uptick in suburban office vacancy rates would break a three-quarter streak of declining vacancy and growth in the suburban office market. Some commenters suggest negative growth is a continuation of suburbs struggles to compete for millennial talent living in urban areas.
There are major indications that the doom and gloom assessment by major business journals based on quarterly data is an oversimplification of the office market. Panic and fear sell papers. The Illinois commercial real estate market is more than the simplified urban vs suburban market. The suburban market itself is split between growing and declining markets. Factors like location, transportation, and amenities heavily influence vacancy rates.
Another miscalculation by forecasters results from a small sample of large real estate transactions which skews office space data trends. The Illinois exit by Takeda Pharmaceuticals and Sear’s bankruptcy misrepresents large and diverse positive market trends.
The largest shift currently occurring the marketplace is the growth of premium amenities in the suburbs. Commercial real estate developers in the north and west suburban office market are modernizing existing office space. Because vast amounts the market is outdated or lacks necessities of the modern office market these remodels are driving growth in several micro-markets. As suburban office space begins to mimic downtown energy and vibes, companies are increasingly looking to the suburbs as a realistic site for corporate relocation.
The final change occurring in Illinois suburban office market is coming from more millennials moving to the suburbs. Delayed marriage has contributed to suburban office vacancy. As Millennials grow older and begin to raise families they are reigniting demand in the suburban office market. Still, until the evidence is overwhelming to the contrary, expect to see doom and gloom from Chicago’s news outlets.