Report shows Lake, Porter vacancies dip
Pandemic’s wrath takes it easier on NWI office space
The negative impact of the COVID-19 pandemic on office space seen around the country in 2020 as many companies downsized and employees began working from home appears to be have bypassed Northwest Indiana.
The total office vacancy rate in Lake and Porter counties decreased from 19% on Jan. 1, 2020, to 14% on Jan. 1, 2021, according to the annual Class A office market report conducted by Commercial In-Sites of Merrillville.
By comparison, CoStar, a provider of commercial real estate data, reported that the entire suburban Chicago office market vacancy rate at the end of 2020 was 15%.
David Lasser, principal at Commercial In-Sites, said 13 of the 26 office buildings comprising a total of 1,350,598 square feet included in the survey reported being 100% leased last year. “I think we weathered the storm,” Lasser said.
The total average vacancy rate on buildings tracked in Lake County decreased from 19% to 17%. Porter County vacancies dropped from 3% to 2%, which Lasser attributed to comparatively no new construction.
The scarcity of new office construction, as well as creative use of space by employers, may have been contributing factors to the drop in vacancies. Lasser said he expects the vacancy rates will continue to go down again this year, based on current active leasing prospects and the fact that no new multistory office buildings will be ready to lease in 2021.
“Demand hasn’t changed much, but inventory is low,” said Anthony Sindone, economics professor at Purdue University Northwest. “We’re not building new commercial structures at the level that was anticipated. Several projects were put on the back burner.”
Lasser said there are a few projects that could create available space in 2022: a 3- to 4-story building proposed at 45th Street and Calumet Avenue in Munster, a 3-story building being considered in Crown Point and the possibility of building four more office structures in Highland’s Cardinal Campus.
Sindone said while it’s hard to know for a fact what future commercial space will look like, he expects it to be more of a hybrid work environment, with one company working in a specific office for part of a week and another company working in that same space the remaining days of the week.
Lasser said one trend that could be growing is for a tenant to lease and pay for a space, but will sublease that space to a different tenant. Sindone said while the Region continues to be home to
several significant local businesses, such as Centier Bank and Monosol, both with offices in Merrillville, that are established and growing, it could also attract companies now located in Illinois with the West Lake and Double Track expansions of the South Shore Railroad moving forward.
“We’ll see a need for more residential and commercial as far as Michigan City,” Sindone said.
Lasser agreed. He said the Region continues to have a normal pace of local tenants either renewing their leases, expanding or contracting in place and some relocating within the market.
“We expect to see more new tenants entering the (Northwest Indiana) market, some relocating from Illinois and other states, as (Northwest Indiana) is increasingly recognized as a true Chicago suburban submarket. The advancement of commuter rail West Lake and Double Track expansions for the South Shore Railroad are beginning to play an increasing role in office space demand,” Lasser said.
Lasser said the single greatest activity in 2020 regarding office space came from engineering companies. He said some are specific to the local market, contracting with NiSource or the state. Some are headquartered in Chicago and want a Northwest Indiana presence.
“The steel industry draws a lot of engineer companies here,” Lasser said.