Cushman & Wakefield is reporting the following commercial real estate stats as of the second quarter of 2020.
As you can imagine, Illinois’ professional cleaning industry is very closely tied to the commercial office market. If more companies are moving into the area or leasing more space, that’s good news. If the opposite is happening, that can suggest some challenging times ahead.
Before we discuss what is happening in our neck of the woods, we should say that what is taking place in Illinois reflects what is occurring in many parts of the country, at this time. In an earlier post and a news story, “Millennials Fleeing Cities: Its Impact on the Illinois Professional Cleaning Industry,”
we highlighted that many younger workers are leaving cities and workplaces, now that they can work remotely.
we highlighted that many younger workers are leaving cities and workplaces, now that they can work remotely.
However, this news story also pointed out that according to MetLife, the holding corporation of Metropolitan Life Insurance, this may only be temporary. According to their studies, among other reasons, remote worker productivity tends to go down when people work full-time at home. Over time, we will have to see if Illinois employers find this to be true.
As for an overview of the commercial real estate market in Suburban Chicago, Cushman & Wakefield, the largest commercial real estate company in the world, is reporting the following as of the second quarter of 2020:
· The Chicago area’s unemployment rate increased to 15.6 percent. Some of this was the result of mandated government shutdowns. Higher unemployment rates typically translate into a reduced need for office space.
· New leasing of office space decreased by more than 56 percent compared to 2019, which, we should add, was a particularly good year for commercial real estate in the Chicago area.
· The bright spots in office leasing were areas west of the city, starting with Hinsdale, Elmhurst, and Oak Brook, out to Aurora and St. Charles. North and south of these areas did not do as well.
· While new leasing declined, leasing renewals were up by more than 23 percent, indicating many businesses were staying put.
The vacancy rate of Class “A” buildings in the Chicago area was close to 20 percent. The vacancy rate of Class “B” buildings was 25.5 percent, which was actually an improvement.
As to rent increases, most of these increases were in Chicago and surrounding areas and were mainly due to property tax increases.
The Cushman study also pointed out that many organizations that are leasing space are asking for shorter terms. Instead of five-year leases, which have traditionally been about average, two-year lease terms were the norm in 2020.
According to the report, the reason for this is that many organizations want to be able to make changes quickly, if necessary, and not be bound by a long-term lease. This, of course, reflects the uncertainties we are all facing due to COVID.
What was considered a moderate bright spot in the report was that sublease activity increased during the first part of the year. After seven quarters of decline, there was a modest but welcomed increase of five percent in subleases.
As to the commercial office market in the Chicago suburbs, the study concluded with the following:
•With uncertainty in the market, subleases, renewals, and short-term deals will allow tenants to remain nimble as they look to reevaluate long-term workplace strategies.
•Shifting office real estate demand will place pressure on vacancy and rental rates.
•Right now, there is renewed interest in the Chicago suburbs, [due to the] the higher quantity of smaller offices in suburban locations.
We are infection control experts, here to help building managers keep their facilities cleaner, healthier, greener, and safer, in the most cost-effective ways possible. To learn more about Secure Clean, contact us at 888-609-1410.
