Despite lack of activity, rents proving resilient especially in CBD

As markets begin to emerge from the COVID-19 pandemic, landlords are faced with tenants revaluating long-term office needs and are offering attractive packages to retain or grow leased space. What does this mean in the short- and longer-term for both tenants and landlords? In the broad Class A Chicago market, base rents have increased on lower activity, currently at $43.20 psf, and $46.50 psf in CBD. From 2018 - March 2020, the average free rent period was 9.3 months, which has jumped to an average of 10 months both broadly and in the CBD. In that same period, tenant improvement allowances rose broadly to 11.7% and 17.9% in CBD to an average of $92 and $99 psf respectively. This has driven down net-effective rents to 2.1% broadly, and 5.4% in CBD since the start of the pandemic All this has put market conditions at a crossroads. What portion of tenants will be permanently lost to the market? Will companies and their workers seek a return to the office to maintain productivity and culture?