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BOMA Chicago study: Office buildings continue to drive economy

BOMA Chicago releases study: Office buildings drive economics,ph01

Chicago's office market is changing—traditional borders of CBD are pushing west, tech tenants are searching for office space and corporations are migrating from the suburbs. Those findings and more were released in Building Owners and Managers Association of Chicago's 2017 Economic Impact Study in partnership with JLL Chicago Research.

“BOMA/Chicago members understand the important role our real estate market plays in fueling the economic engine of Chicago,” said Robert Quast, President of BOMA/Chicago in a statement. “The overall make-up of Chicago is changing quickly. From the way we do business to the global companies that now call downtown home, this evolution will continue to have immediate and long-lasting impacts on the steady growth and momentum of our City.”

BOMA and JLL investigated market trends, employment, operating expenses, sustainability and taxes contributed by the organization's member buildings. They also examined underlying dynamics, stability and economic vitality of Chicago. The results are based on reports from 235 BOMA Chicago member buildings as well as data sourced by JLL.

The study found that 12,733 businesses housed within Chicago's office buildings continue to drive the economic growth. In total, commercial office buildings spent nearly 2.2 billion in operating expenditures in 2015, which means about $4.6 billion gets into the local economy. That's an increase of over 31 percent since 2012.

New personal earnings, labor income generated as a result of jobs supported both directly and indirectly by this spending, reached $1.4 billion which is more than 33 percent increase from 2012.

The study also found that the average vacancy in Chicago's CBD has dropped more than 34 percent, averaging 10.3 percent in 2016. Rents have also increased by 23.5 percent, averaging $38.20. Chicago also remains a corporate headquarters hub with Fortune 500 companies expanding two-fold and the number of businesses increasing by 25 percent since 2012.

Some of the key trends driving demand for Chicago office space include a robust tech hub. Many of the largest tech companies have headed to Chicago and over the past five years this sector has absorbed over 9-million-square-feet of real estate.

Another trend is the migration of corporate tenants from the suburbs into Chicago. A stream of employers have been relocating in order to attract the best talent and keep them there. From 2012 to 2016, 75 companies have relocated nearly 4.29-million-square-feet downtown from the suburbs.

Shared space companies have doubled their footprint annually since 2011 in Chicago's CBD bringing the total size of the industry to more than 2.38 million square feet. In comparison, most of the largest shared space operators did not exist in Chicago when the last study was completed.

According to the study, Chicago’s office buildings also continue to be national leaders in sustainability. In 2016, office buildings across the Chicagoland area led the nation with the greatest total square footage of buildings with Energy Star or LEED certifications, increasing its percentage of green stock by 6.5 percent from 2015 for a year-end total of 66 percent.

Despite all the positive indicators, there is still some hesitation due to the current economic climate, according to BOMA. The state, county and city continue to face pressure from massive pension funding issues and long-standing budget stalemate in Springfield. These issues impact Chicago Public Schools, social and city services and various county pension systems. Since 2012, operating expenses increased nearly 19 percent with the majority of increases driven by labor costs and other regulatory requirements. Property taxes for commercial real estate, which already pay more than 36 percent of all property taxes in Chicago, increased 35 percent.