Even as the fourth quarter of 2021 represented the first with positive absorption in downtown Chicago office, Cresa reported that occupiers with lease expirations in the next 18 to 24 months are entering a market that has seen “a swift shift from a landlord to a tenant market.”
CBD deal velocity has slowed to one-fifth of the 10-year average. “With a large amount of sublease space coming on the market, landlords are coming under pressure to provide more incentives to attract tenants,” according to Cresa. “From providing more concessions, to offering or waiving termination fees, landlords have started to be creative to retain or attract tenants.”
However, despite the downturn in leasing activity, there is concern that rental rates in some buildings will go up. “Some landlords, while increasing concessions, are justifying increases resulting from the cost of construction that is spiking due to material and labor shortages,” Cresa reported.