Research Report - Chicago Office Sublease

WHAT IS THE QUALITY AND COST OF SPACE LEFT BEHIND? With the substantial quantity of sublease space on the market, there are a variety of space conditions available, from great built-out to shell space. 19 of the 56 subleases (1.2 million sf) are considered to have great built-out conditions. Seven of those subleases are TAMI tenants, known for having creative and collaborative spaces, like Punchkick at 55 E. Monroe. On average, great built-out subleases are demanding the highest rental rates of $27.67 per sf. On the opposite end of the spectrum, 765,000 sf of sublease space or 11 firms have dated office conditions and have the lowest average asking rental rate of $21.00 per SF. One of those firms, AT&T at 225 W. Randolph, holds 210,300 sf of that dated space. Tenants looking for a middle of the road option, can find move-in ready conditions, with average rental rate of $25.00 per sf, among the 23 subleases or 991,000 sf in this category.

WHAT IS THE AVERAGE SUBLEASE TERM REMAINING? The average of all sublease terms remaining in the data set is 5 years, 6 months. Bucking the trend, TAMI tenants have the longest average term remaining on their leases, 6 years, 11 months. Moreover, 75% of TAMI tenants with subleases on the market began their leases in the last two years, a figure higher than any other industry examined. TAMI tenants likely signed long-term leases expecting rapid growth that was not realized.

30

20

23

19

10

11

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0 # OF SUBLEASES

SHELL / RAW

GREAT BUILT-OUT

DATED

MOVE-IN READY

SPACE CONDITION CRITERIA

Great Built-Out Space Recently built space with top-of-the-line infrastructure, finishes and furniture Move-in Ready Space with adequate infrastructure, finishes and furniture Dated Space with old furniture, finishes and/ or inefficient infrastructure Shell or Raw Vacant space that requires construction

SPACE CONDITION

SPACE CONDITION

AVG. RENTAL RATE

Great Built-Out Space

$27.67 / SF

Move-In Ready

$25.00 / SF

Dated

$21.00 / SF

Shell/Raw

$27.50 / SF

Key Takeaways • Not all companies have the same growth strategy – several firms are rethinking their workplaces in order to become more efficient while simultaneously planning for internal growth • Several office spaces are available now with move-in ready and / or high-quality conditions, allowing tenants in the market to move quickly and mitigate rising construction prices • Tenants should be cautious to whom they sublet their space since they remain financially liable to the original lease • Once the sublease space is given back, landlords have the opportunity to relet the space at higher rents (in a growing market) • The best way to avoid costly sublet commitments is to negotiate termination rights or give- back provisions in initial leases, so tenants have flexibility with their real estate footprint For more information, please contact: Simone Schuppan Regional Research Director simone.schuppan@cushwake.com +1 312 470 1891 Daniel Schack Junior Research Analyst daniel.schack@cushwake.com +1 312 754 3346

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CUSHMAN & WAKEFIELD CHICAGO

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