A mix of crime, high costs, and poorly run governments have ignited a flight from downtowns in America, and one of the worst-hit cities is Chicago. Commercial real estate is facing a crisis downtown as office vacancy rates hit an all-time high of 23.7% over the last three months. Danny Ecker reports in Crain’s Chicago Business:
The office vacancy rate in the heart of the city during the past three months rose to an all-time high of 23.7% from 22.6% midway through the year, according to data from brokerage CBRE. The share of available space is up from 21.3% a year ago and 13.8% when the public health crisis began, and has now hit a new record high for the 10th time in the past 12 quarters.
It’s an unprecedented stretch of pain for office building owners in the urban core, where a steady stream of companies have scaled down their footprints amid the rise of remote work. While that problem has been whittling many landlords’ bottom lines since the COVID-19 pandemic began, higher interest rates over the past year have dealt a more severe blow to those with maturing debt. The combination of weak demand and decimated property values has fueled a wave of foreclosures and owners surrendering properties to their lenders rather than putting any more money into them.
Supply and demand fell further out of balance recently from a handful of remote work-related downsizes. Bankers Life & Casualty left behind 139,000 square feet at 111 E. Wacker Drive for just less than 33,000 square feet at 303 E. Wacker Drive. Yelp shuttered its 131,000-square-foot office at the Merchandise Mart when its lease expired in July. Net absorption overall in the central business district — which measures the change in the amount of leased and occupied space compared with the prior period — fell by more than 278,000 square feet, the worst quarter of demand in two years, according to CBRE.
“We’re still not through that slow burn” of companies shrinking their footprints when they have lease expirations or options to reduce space, said CBRE Vice Chairman Kyle Kamin, who negotiates leases on behalf of downtown office tenants.
Action Line: After crime and lawlessness were given the green light by politicians in America’s big blue blob cities in the Summer of 2020; residents began looking for a better America. Commercial real estate has been a victim of the policies driving residents and companies out of the big cities. In times like these you need to take care with your investments. Try not to make too many mistakes. To get started, click here to download a free copy of Your Survival Guy’s latest special report, the Top 10 Investing Mistakes to Avoid.
E.J. Smith - Your Survival Guy
Latest posts by E.J. Smith - Your Survival Guy (see all)
- Wellesley Fund: “Balanced Investing Is Dead” (Please Stop) - December 8, 2023
- Do You Have a Plan to Protect Your Personal Data? - December 8, 2023
- DIRTY JOBS: America Needs Mining Engineers - December 8, 2023
- Investing Habits of the Fairly Wealthy: #2 Coach - December 7, 2023
- Have All of New Jersey’s Workers Already Moved to Florida? - December 7, 2023