After years of struggles that followed the financial crash of 2008, Chicago’s economy is finally starting to get into gear. According to a report issued by the Illinois Department of Employment Security in September, the Illinois unemployment rate fell from 9.2 to 6.7 percent in just one year, marking the largest year-over-year decline since 1984. Preliminary data released by the IDES and the Bureau of Labor Statistics show there are also 40,600 more jobs this year than in 2013, most of them in leisure and hospitality, trade, transportation and utilities, and professional and business services.
In the context of this economic resurgence, Chicago’s real estate industry is also experiencing a revival, as office vacancy has now dropped to pre-recession levels, according to most recent data collected by Marcus and Millichap. The demand for office space is primarily driven by tech companies seeking downtown locations, mostly in the River North and River West submarkets. California-based Google, Inc. is one of many tech companies set to move to downtown Chicago. The company will occupy about 360,000 square feet in a 10-story building at 1000 W. Fulton Market by early 2016.
Job growth in the tech sector helped boost the office market this year, while strong rental demand in suburban office space brought rents higher. Marcus and Millichap reports that a total job growth of 1.6 percent is expected in 2014, with 70,000 new jobs added to the market. More than 2 million square feet of office space is currently underway in Chicago, with another 8 million square feet still in the planning stages. The largest project currently under development is the 1 million-square-foot River Point tower in the West Loop, a 52-story building slated for completion in 2017. According to Marcus and Millichap, developers are expected to add roughly 400,000 square feet of office space in 2014, after no new office space was completed during the last four quarters.
Chicago is also performing well when it comes to the retail industry, as the jump in employment and rising incomes are driving consumers to spend more. The retail market encountered a significant halt with the closing of 72 Dominick’s grocery stores in December 2013, but as of now all but one of the former stores have been purchased and are in the process of re-opening. Marcus and Millichap reports that more than half of the space vacated during 2013’s final quarter has been absorbed, as the market is attracting buyers from Canada, Europe and South America, and demand for retail properties surpasses the supply. The boost in employment is another factor in the rise of retail sales, and builders have nearly 500,000 square feet of space under construction to be delivered throughout 2015.
The drop in unemployment and the rising number of tech jobs in the region are also contributing to a growing demand in apartments in the downtown area. Roughly 6,000 rental units are currently underway, most of them located in the West Loop, the city’s tech core. Developers are expected to bring 3,100 multifamily units online in 2014, including 130 units of student housing, 80 senior apartments and 96 affordable rentals. The largest project finalized in the first quarter of 2014 was the 450-unit Hubbard Place apartment community at 360 W. Hubbard in the Streeterville/River North submarket.
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