SECTION TITLE SECTION SUBTITLE
FOURTH
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2013
R
CENTRAL BUSINESS DISTRICT
SECTION #
CHICAGO
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FIRST QUARTER 2013 | CHICAGO MARKET OVERVIEW
1
F OU RT H Q UA RT E R
2013 CHICAGO
MARKET OVERVIEW
TABLE OF CONTENTS SE CT ION ONE
CHICAGO ECONOMY 01 Economic Analysis
SE CT ION T WO
CHICAGO CENTRAL BUSINESS DISTRICT
MARKET OVERVIEW
02 Chicago CBD Executive Summary SUPPLY 03 New Development 04 Sublease Space 05 Large Blocks of Direct Availability DEMAND 06 Vacancy Rates 07 Large Deals 08 Absorption FEATURES
2013
09 10 11 12 13
Lease Comparables Investment Sales Forecast Submarket Map Market Statistics
SE CT ION T H RE E
SUBURBAN CHICAGO 14 Suburban Chicago Executive Summary SUPPLY
The Chicago Market Overview is published quarterly by MB Real Estate.
15 New Developments 16 Sublease Space 17 Large Blocks of Direct Availability
To obtain additional copies or for further information, please contact:
181 West Madison Street, Suite 4700 Chicago, Illinois 60602 (312) 726-1700 www.mbres.com
DEMAND 18 Vacancy Rates 19 Large Deals 20 Absorption FEATURES 21 22 23 24 25
Gross Asking Rents Investment Sales Forecast Submarket Map Market Statistics
SE CT ION FOUR
ADDITIONAL INFORMATION 26 Glossary 27 About MB Real Estate
CHICAGO ECONOMY ECONOMIC ANALYSIS Uncertainty is a word that has been creeping back into the dialogue surrounding the country’s economic status. Chicago is still experiencing one of the highest unemployment rates across the country but at the same time, steps are being made in the right direction. Moody’s Analytics predicts that Chicago’s economic output will expand at 2.9 percent which is slightly higher than the 2.6 percent pace set in 2013.
CHICAGO ECONOMIC ANALYSIS
SECTION ONE
From 2008 through 2010, Chicago eliminated more than 264,000 jobs. Since then only about 155,000 jobs have been regained. Chicago ended the year at 9.2 percent unemployment which is significantly higher than the nation’s average of 6.6 percent. While Illinois economists do see improvement, it is happening at a slower rate than elsewhere across the nation. Unemployment is predicted to fall into the 8.5 percent range during 2014. While unemployment stats are weak, many companies still view Chicago as a desirable location to conduct business. Mayor Rahm Emanuel has played an integral part in attracting new business to Chicago. Archer Daniels Midland announced mid-December their plan to move headquarters from Decatur, Illinois to a downtown location. Although this does not affect Illinois’ overall economy since the company is remaining in the same state, the name recognition of a Fortune 100 company is beneficial to the CBD. From the previous quarter, Moody’s continues to label Chicago as a “recovering” economy. The employment growth rank improved from last quarter and Chicago falls into the 3rd quintile as opposed to the 4th previously. The budding high-tech center in River North continues to attract attention and the West Loop is emerging as one as well. The technology industry provides strength to the CBD, and Illinois overall, as the job multiplier indicates the potential for five new jobs for every one tech position created. Chicago has long been considered the tourism center of the Midwest. 2013 tourism statistics will not be released until May, but 2012 was a recordsetting year for Chicago. The city saw 46.37 million people with the biggest gains in international visitors from Asian and Latino countries. Additionally, employers have extracted as much efficiency out of their workers as possible and are now looking to expand. This creates a demand for larger office spaces and will create movement within the industry. It takes many years to rebuild an economy that has been hit with so much uncertainty, but Chicago is well on the road to recovery. Most economists are predicting a growth year for Chicago with new jobs emerging in all sectors from professional and business services to hospitality and industrial. Sources: MBRE Research, BLS, Crain’s Chicago Business, World Business Chicago, Manpower, Moody’s Economy.com
CHICAGO EMPLOYMENT WELL BELOW PEAK AND RECOVERING SLOWLY Chicago MSA Employment (thousands, SA)
4,700 4,600
4.593 million
Peak: 4.569 million
4,500 4,400 4.390 million
4,300
Peak-toTrough -7.46%
4,200 Trough: 4.228 million
4,100 4,000 Oct-98
Current: 4.525 million Jun-00
Feb-02
Oct-03
Jun-05
Feb-07
Oct-08
Jun-10
Feb-12
Oct-13
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
1
CENTRAL BUSINESS DISTRICT EXECUTIVE SUMMARY The Chicago Business District (CBD) experienced just under 133,000 square feet of negative absorption in the fourth quarter. This was largely lead by Class C buildings contributing 148,000 square feet of negative absorption. Class B buildings in the CBD were the only category to see positive absorption in the fourth quarter of 43,000 square feet. With year-end positive absorption for the CBD coming in at 720,000 square feet, the fourth quarter is not exactly indicative of the strides that the CBD has made this year.
CHICAGO ECONOMIC ANALYSIS
SECTION TWO
Key Indicators: •
Compared to 2012’s year-end direct vacancy rate of 15.11%, 2013 ended with 14.54% which is a decrease of 57 basis points. The direct vacancy rate did increase slightly from the third quarter by only five basis points. This is due in part to the third quarter’s near record high performance; however trends are hard to maintain quarter to quarter.
•
Beitler Real Estate is no longer going to deliver the 23-story, $140 million development at 200 West Randolph in 2016. This helps John Buck push ahead with his proposal for a 36-story building at 151 N. Franklin Street which happens to be located next door to the failed Beitler plan. The anticipated groundbreaking is set for September 2014 with completion in September 2016 contingent on an anchor tenant being secured.
•
Hines, which broke ground on 444 West Lake during the first quarter, began vertical construction in December 2013 with completion of the building slated for January 2017. There are 11 sites in total that have been actively marketed to prospective anchor tenants.
•
The CBD continues to benefit from strong demand drivers that include: a highly educated and sought-after labor force; rapidly expanding tech firms; a tightening market with no new supply expected until 2015; and government tax incentives put in place by Mayor Rahm Emanuel.
With almost 1.2 million square feet in net positive absorption over the last two years, the outlook of the CBD market continues to improve. New development speculation continues at a fast pace due to developers’ continued faith in the CBD. Class B buildings came out on top this year with 640,000 square feet of positive absorption, while Class A buildings had the lowest direct vacancy rate at 13.08%. The CBD as a whole saw no change to the total vacancy rate from the previous quarter. With this is mind, MB Real Estate’s baseline forecast predicts slowly improving positive absorption rates over the next two years, thus decreasing the vacancy rate in the CBD.
CBD VACANCY AND YEAR-END ABSORPTION SUMMARY Direct Vacancy 4Q2013 Central Loop East Loop N. Michigan Ave. River North South Loop West Loop CBD Chicago Total Net Absorption 4Q2013 Central Loop East Loop N. Michigan Ave. River North South Loop West Loop CBD Chicago Total
A
Change from 3Q2013
B
Change from 3Q2013
C
Change from 3Q2013
Total
Change from 3Q2013
10.7% 15.6% 16.5% 10.4% 27.4% 13.2% 13.1%
0.4% 0.0% 0.0% 0.0% 0.0% -0.1% 0.1%
14.9% 24.0% 18.9% 6.4% 11.0% 15.9%
0.0% -0.1% 0.0% 0.0% 0.0% -0.1%
15.5% 13.3% 21.9% 10.1% 22.7% 15.6% 15.1%
0.1% 0.2% 0.3% 0.1% -0.3% 0.2% 0.1%
13.7% 18.6% 19.2% 9.1% 24.9% 13.1% 14.5%
0.2% 0.0% 0.1% 0.0% -0.2% 0.0% 0.0%
A
B
C
Total
(50,959) 3,772 0 (3,125) 0 22,663 (27,649)
16,440 3,053 (2,280) 30,464 (4,791) 42,886
189 (33,535) (25,090) (28,051) (6,214) (55,156) (147,855)
(34,330) (26,709) (27,370) (711) (6,214) (37,284) (132,618) Numbers in parentheses are negative
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
2
Potential new developments vie for anchor tenants, financing •
In the fourth quarter, there were no new additions to the CBD’s inventory. This is the third year in a row that this has happened with the last building expansion occurring in 2010.
•
444 West Lake is still under construction and expected to be completed by late 2016. They have already signed a lease with McDermott Will & Emery and hope to continue preleasing with other tenants.
•
The only proposed inventory that was introduced this quarter is for 151 North Franklin. This proposal gained momentum after the proposed office building located at 200 West Randolph fell through. Had both come to fruition, these two buildings would have been next door to one another and created increased competition.
•
2000 - 5 Properties 2001 - 2 Properties 2002 - 2 Properties 2003 - 0 Properties 2004 - 1 Property 2005 - 2 Properties 2006 - 2 Properties 2007 - 0 Properties 2008 - 2 Properties 2009 - 3 Properties 2010 - 1 Expansion 2011 - 0 Properties 2012 - 0 Properties 2013 - 0 Properties
2,870,576 904,436 2,236,364 0 1,300,000 2,500,143 1,320,498 0 728,254 3,652,913 933,710 0 0 0
Total - 20 Properties
95.8% 86.9% 94.6% 0.0% 100.0% 97.4% 96.9% 0.0% 70.6% 81.4% 92.9% 0.0% 0.0% 0.0%
16,446,894 sf
William Blair & Co. signed a letter of intent to move their headquarters to the proposed West Loop office building located at 150 N. Riverside. If finalized, this would secure 300,000 square feet of the 1.2 million square foot building proposed by John O’Donnell.
UNDER CONSTRUCTION/ANNOUNCED
While there are a few other proposals in various stages, John Buck’s plan for 151 North Franklin is further along in the process having raised $145 million in equity. The project must secure an anchor tenant and be granted city approval.
Delivered (2000-2012) Delivered (2013)
16,446,894 sf 0 sf
Total Under Construction/Announced Proposed Inventory
16,446,894 sf 900,000 sf 4,100,000 sf
444 West Lake
900,000 sf
Total
900,000 sf
% Leased 26.0%
2000-2013 INVENTORY ADDITIONS
Total
•
sf sf sf sf sf sf sf sf sf sf sf sf sf sf
SUPPLY
•
% Leased (Avg)
2000 - 2013 INVENTORY ADDITIONS
CENTRAL BUSINESS DISTRICT
NEW DEVELOPMENT
5,000,000 sf
Twenty tenants are currently in the market seeking spaces greater than 100,000 square feet. The CBD has almost 19 spaces in Class A buildings with 100,000 or more contiguous square feet. This poses the question, what exactly are these tenants seeking and why haven’t they found it yet?
NO NEW DELIVERIES EXPECTED UNTIL 2015 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
4,000,000 3,000,000 2,000,000
1,000,000 0 (1,000,000) (2,000,000) 2002
2003
2004
2005
New Construction Delivery (square feet)
2006
2007
2008
2009
2010
Absorption (square feet)
2011
2012
2013
Direct Vacancy Rate %
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
3
Sublease availability declines •
There are currently 10 large sublease blocks in excess of 50,000 square feet available in Class A and B buildings in the CBD. From the third quarter to the fourth quarter, the amount of square feet in Class A dropped by about 47,000 while Class B remained the same.
•
550 West Jackson was one building that saw their sublease space decrease from 171,000 square feet in the third quarter to 144,000 in the fourth quarter.
•
While some Class A sublease space was filled, 77 West Wacker saw an increase of 44,000 in their sublease square footage. The majority of this building’s sublease space is coming from United Airlines who moved their headquarters to Willis Tower. As of midDecember, United still had 130,750 square feet of space to sublease.
CENTRAL BUSINESS DISTRICT
SUBLEASE SPACE
2013 SUBLEASE AVAILABILITY INCHES DOWN SUPPLY
7,000,000
6,000,000 5,000,000 4,000,000
4,467,890
4,644,911
3,714,187
2,376,184
2,404,109
3,158,562
4,201,801
3,576,846
2,897,711
3,214,365
3,060,757
1,000,000
5,458,623
2,000,000
6,164,679
3,000,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
LARGE BLOCKS (MORE THAN 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE CLASS A Building Address
Size (sf)
Occupancy
Expiration
Floor(s)
Sublandlord
550 W Jackson Blvd 131 S Dearborn St 77 W Wacker Dr 35 W Wacker Dr 1 N Wacker Dr
144,207 128,622 130,968 75,000 65,496
Negotiable Vacant 60 Days 90 Days Vacant
June 2017 October 2017 February 2022 December 2024 March 2015
2-8 7-8 14-17 35-37 19-20
Newedge USA Citadel United Airlines Winston & Strawn Merrill Lynch
Total - 5 Spaces
544,293
Sublandlord
CLASS B Building Address
Size (sf)
Occupancy
Expiration
Floor(s)
225 W Randolph St 600 W Chicago Ave 350 W Mart Ctr 10 S Riverside Plz 205 N Michigan Ave
238,778 117,101 83,729 71,972 65,463
Negotiable Vacant Vacant May 2014 90 Days
December 2022 November 2015 January 2016 Negotiable April 2016
22-30
Total - 5 Spaces
577,043
AT&T 2 Level 3 Communications 4 AT&T 5-6 Zurich 5-7 MCI, Inc.
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
4
Slight decrease in large block availability •
The fourth quarter saw a decrease in the total amount of large block space available from the third quarter. Class A decreased by about 150,000 square feet. Class B saw the largest drop of about 468,000 square feet due to medium sized renewals being signed like the one at 401 N. Michigan with MTV Networks for 22,000 square feet. Most of the buildings are returning from last quarter, but one addition this quarter is 550 West Jackson with 192,000 square feet. This space is available from the 2nd floor through the 8th floor.
•
MB Real Estate has identified 45 tenants actively seeking 50,000 square feet or more in the CBD. As many companies prelease inventory before it hits the market, and tenants renew leases, large users have a multitude of options. However with 57 blocks available, the market continues to struggle with this excess space.
130 E Randolph St 222 N LaSalle St 303 E Wacker Dr 410 N Michigan Ave 600 W Chicago Ave 233 N Michigan Ave 401 N Michigan Ave 180 N LaSalle St 1 N Dearborn St 2 N LaSalle St 333 S Wabash Ave 300 S Riverside Plz 222 Merchandise Mart Plz 111 E Wacker Dr 100 S Wacker Dr 10 S Riverside Plz 120 S LaSalle St 175 W Jackson Blvd 205 N Michigan Ave 230 W Monroe St 33 N LaSalle St 21 Blocks
Submarket
350,906 339,761 311,049 272,101 250,553 227,569 193,319 192,174 189,730 140,859 130,968 128,622 114,686 99,378 88,362 86,573 80,736 75,000 74,363 70,531 67,983 65,496 3,550,719
North Michigan Avenue East Loop West Loop West Loop West Loop North Michigan Avenue Central Loop West Loop West Loop South Loop Central Loop Central Loop West Loop West Loop West Loop West Loop West Loop Central Loop West Loop North Michigan Avenue West Loop West Loop
Size (sf)
Submarket
354,017 210,000 175,353 146,313 130,947 110,898 108,340 87,392 76,855 70,107 63,876 55,000 53,052 51,231 1,693,381
West Loop North Michigan Avenue West Loop Central Loop West Loop East Loop West Loop River North East Loop East Loop River North South Loop North Michigan Avenue North Michigan Avenue
CLASS C
CLASS B Building Address
515 N State St 200 E Randolph St 500 W Monroe St 227 W Monroe St 540 W Madison St 101 E Erie St 10 S Dearborn St 550 W Jacksin Blvd 233 S Wacker Dr 440 S LaSalle St 77 W Wacker Dr 131 S Dearborn St 111 S Wacker Dr 71 S Wacker Dr 222 W Adams St 30 S Wacker Dr 333 W Wacker Dr 35 W Wacker Dr 1 S Wacker Dr 455 N Cityfrontn Plaza 311 S Wacker Dr 1 N Wacker Dr 22 Blocks
Size (sf)
SUPPLY
•
CLASS A Building Address
CENTRAL BUSINESS DISTRICT
LARGE BLOCKS OF DIRECT AVAILABILITY
Size (sf)
Submarket
256,362 200,686 188,949 125,584 117,101 114,702 104,990 101,695 97,261 96,753 92,473 90,450 81,225 80,238 79,491 71,972 69,519 68,539 65,463 60,182 59,196 2,222,831
East Loop Central Loop East Loop North Michigan Avenue River North East Loop North Michigan Avenue Central Loop Central Loop Central Loop East Loop West Loop River North East Loop West Loop West Loop Central Loop Central Loop East Loop West Loop Central Loop
Building Address 311 W Monroe St 401-465 E Illinois St 111 N Canal St 11 S LaSalle St 111 N Canal St 401 S State St 2 N Riverside Plz 350 W Mart Ctr 360 N Michigan Ave 33 S State St 363 W Erie St 800 S Wells St 211 E Chicago Ave 435-445 N Michigan Ave 14 Blocks
Italicized addresses indicate space is new on the market * Block of space is for future occupancy **Block of space will be vacated in the upcoming quarter
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
5
CBD vacancy rates remain stagnant •
Direct vacancy remained the same from the third quarter at 14.5 percent which is the lowest it has been since 2009.
•
Class A buildings once again saw a slight increase in direct vacancy by eight basis points due to negative absorption of 28,000 square feet. Class B had positive absorption this quarter and saw a decrease in direct vacancy. Class C continues to have lower direct vacancy than Class B by 80 basis points although this margin is shinking quarter-to-quarter as Class B experiences positive absorption.
•
River North once again had the lowest direct vacancy of any submarket in the CBD, ending the year with 9.09 percent. This is 1,582 basis points lower than the South Loop, with the highest direct vacancy level of 24.91 percent.
•
OUTLOOK: MB Real Estate expects some volatility in vacancy rates on a quarterly basis. While we only saw minor changes from the third to the fourth quarter, we predict the overall CBD direct vacancy rate will decrease in 2014 due to large tenants taking occupancy.
DEMAND
HISTORIC DIRECT VACANCY: SIGNIFICANT DROP IN VACANCY RATE
CENTRAL BUSINESS DISTRICT
VACANCY RATES
18% 16% 14% 12%
9.8%
11.4%
13.7%
14.6%
15.7%
17.6%
14.3%
11.7%
11.5%
15.3%
16.0%
15.4%
15.1%
14.5%
10%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
8%
HISTORIC YEAR-END DIRECT VACANCY MARKET BY CLASS: CLASS B AND C BUILDINGS FALL 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2000
2001
2002 Class A
2003
2004
2005
2006 Class B
2007
2008
2009
2010
2011
2012
2013
Class C
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
6
New large lease activity slows in the fourth quarter •
In comparison to the third quarter, large lease signings increased by about 10,000 square feet this quarter. Fourth quarter saw one of the largest corporate moves from the suburbs to the CBD in recent years.
•
Gogo Inc. signed a lease for more than 230,000 square feet at 111 North Canal in the West Loop owned by Sterling Bay Co. This move will shift more than 500 workers from Gogo’s two operations near O’Hare Airport to the CBD.
•
The remaining eight new leases signed this quarter pale in comparison, with CBRE Global Investors’ lease for 61,000 square feet being the next largest.
•
OUTLOOK: Sterling Bay Co. continued to make headlines with large lease transactions this year. As long as their approach to buying distressed buildings and gutting them remains popular with companies looking to sign new leases in unique space, we will be seeing more repurposing in 2014.
CENTRAL BUSINESS DISTRICT
LARGE DEALS
DEMAND
LARGE LEASE TRANSACTIONS NEW Tenant
Type
Submarket
Building Address
Size (sf)
Gogo Inc. CBRE ATK Foods Talent Partners Kraft Foods Group Inc. PCM Logistics Senior Lifestyle Corp Fidessa BMO Financial Institution Total - 9 Deals
New New New New New New New New New
West Loop River North West Loop North Michigan Ave East Loop West Loop East Loop West Loop Central Loop
111 N. Canal 321 N. Clark 227 W. Monroe 541 N Fairbanks 401 N. Michigan 300 S. Riverside 111 E. Wacker 233 S. Wacker 115 S. LaSalle
234,000 61,000 58,000 29,095 29,000 28,000 26,500 22,000 20,000 507,595
Tenant
Type
Submarket
Building Address
Size (sf)
Humana Sprout Social Merge Healthcare MTV Networks Total - 4 Deals
Ren Sub Relo Ren
West Loop Central Loop River North North Michigan Ave
550 W. Adams 131 S. Dearborn 350 N. Orleans 401 N. Michigan Ave
RENEWAL/EXPANSION/SUBLEASE 97,050 64,000 22,000 21,491 204,541
Abbreviations: Cons - Consolidation Cont - Contraction Exp - Expansion Relo - Relocation Ren - Renewal Sub - Sublease
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
7
Negative absorption seen across the board •
Unfortunately the positive absorption seen in the third quarter did not continue into the fourth quarter. Submarkets struggled leading to the CBD having 133,000 square feet of negative absorption in the fourth quarter. However, since the beginning of the year started on a strong note, the CBD ends 2013 with positive absorption of 720,000 square feet.
•
Class C buildings in the West Loop saw the highest negative absorption with 55,000 square feet. Class A buildings in the Central Loop were not too far behind with 51,000 square feet of negative absorption.
•
Class B buildings in River North had the strongest quarter with 30,000 square feet of positive absorption and the lowest direct vacancy rate in the CBD with 6.36 percent.
•
OUTLOOK: River North was the strongest performer this quarter with only 711 square feet of negative absorption. This shows that the demand for space in a “technology hub” is high and is likely to keep increasing. The West Loop is setting itself up to be the submarket to take any tech overflow from River North. DEMAND
HISTORIC ABSORPTION: ON PACE FOR STRONGEST YEAR SINCE RECESSION 3,000,000
2,665,184
CENTRAL BUSINESS DISTRICT
ABSORPTION
2,566,896
2,500,000 2,000,000 1,500,000 913,519
1,000,000
720,110 472,780
500,000 0 (186,015)
(500,000) (1,000,000)
(790,475)
2001
2002
2003
(720,154)
(830,377)
(844,381) (1,144,784)
(1,500,000)
(136,763)
2004
2005
2006
2007
2008
(509,999)
2009
2010
2011
2012
2013
HISTORIC ABSORPTION BY SUBMARKET: POSITIVE YEAR-TO-DATE ABSORPTION ACROSS CLASSES 2,000,000 1,500,000 1,000,000 500,000 0 (500,000) (1,000,000) 2006 Central Loop
2007 East Loop
2008
2009
North Michigan Avenue
2010
2011
River North
2012 South Loop
2013 West Loop
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
8
No pattern emerges quarter-to-quarter •
Class A initial rental rates fell 2.4 percent for new leases, but grew 2.2 percent for renewals. In regards to tenant improvement allowances, Class A increased by $0.37 from the previous year.
•
Class B initial rental rates fell 0.5 percent but grew 6.7 percent in renewals. Tenant improvement allowances only increased by $0.10 from 2012.
•
Class C saw the opposite occur. New deal rental rates increased 5.8 percent from 2012 and the renewal decreased 0.4 percent. Tenant improvements increased by just under $1.00.
•
OUTLOOK: While rental rates did decrease slightly across the board from third quarter, fourth quarter’s rates fall in the average range over a span of 13 years. Class C buildings continue to see fluctuating rental rates as landlords make renovations to the older buildings. Class C rates have not been this close to Class A since pre-recession statistics.
NEW DEALS
AVERAGE NET INITIAL RATE
AVERAGE TENANT IMPROVEMENT
AVERAGE ABATEMENT (MONTHS)
FEATURES
AVERAGE LEASE TERMS ON NEW AND RENEWAL DEALS AVERAGE TERM (YEARS)
A
B
C
A
B
C
A
B
C
A
B
C
1Q2013 - 4Q2013
$19.55
$15.95
$14.88
$39.21
$30.34
$24.23
6.3
5.5
4.1
7.5
6.1
4.7
1Q2012 - 4Q2012
$20.03
$16.04
$14.06
$33.92
$33.02
$25.91
6.2
6.4
5.5
7.0
6.7
6.3
1Q2011 - 4Q2011
$19.93
$14.71
$13.35
$46.10
$28.41
$21.40
7.9
6.9
5.2
8.4
6.9
5.6
1Q2010 - 4Q2010
$19.78
$15.16
$11.23
$42.03
$24.57
$22.47
8.7
6.5
6.8
8.0
6.3
6.4
1Q2009 - 4Q2009
$20.39
$15.99
$12.63
$40.71
$32.61
$24.67
7.5
5.5
4.1
8.5
7.0
6.6
1Q2008 - 4Q2008
$21.95
$16.86
$14.26
$44.42
$39.54
$29.61
4.7
4.6
4.1
8.2
7.2
7.3
1Q2007 - 4Q2007
$18.72
$14.85
$10.96
$44.55
$38.13
$25.16
4.9
5.2
3.7
7.9
7.0
6.3
1Q2006 - 4Q2006
$17.88
$13.59
$15.75
$45.75
$37.76
$13.49
6.9
4.9
2.1
8.2
7.1
4.6
1Q2005 - 4Q2005
$17.48
$12.41
$10.42
$49.63
$41.20
$29.25
7.2
6.6
4.2
9.5
8.1
7.2
1Q2004 - 4Q2004
$16.70
$12.96
$9.61
$41.21
$41.22
$15.81
6.0
6.6
3.6
10.0
8.6
5.6
1Q2003 - 4Q2003
$18.14
$13.57
$10.12
$38.76
$36.37
$23.34
3.8
4.8
2.7
7.9
8.7
6.6
1Q2002 - 4Q2002
$22.86
$15.60
$11.95
$34.74
$29.98
$26.29
1.4
1.9
1.7
8.3
8.6
6.0
1Q2001 - 4Q2001
$22.59
$16.57
$16.87
$28.71
$26.30
$26.79
1.0
0.2
0.7
7.7
8.0
7.7
RENEWAL DEALS
AVERAGE NET INITIAL RATE
AVERAGE TENANT IMPROVEMENT
A
B
C
A
B
C
AVERAGE ABATEMENT (MONTHS) A
B
C
CENTRAL BUSINESS DISTRICT
LEASE COMPARABLES
AVERAGE TERM (YEARS) A
B
C
1Q2013 - 4Q2013
$19.39
$15.77
$12.76
$20.39
$11.32
$5.00
4.5
5.1
2.9
5.4
5.5
3.7
1Q2012 - 4Q2012
$18.98
$14.78
$12.81
$14.34
$10.00
$11.87
5.1
2.7
2.8
6.3
4.3
4.3
1Q2011 - 4Q2011
$18.87
$14.22
$12.38
$14.55
$8.90
$9.85
4.8
4.1
3.6
5.7
4.2
4.4
1Q2010 - 4Q2010
$20.10
$15.57
$10.87
$19.23
$10.66
$7.27
5.7
4.3
6.5
6.0
4.7
4.8
1Q2009 - 4Q2009
$17.74
$16.31
$11.54
$24.11
$12.92
$9.63
6.4
3.5
3.1
6.4
5.4
5.3
1Q2008 - 4Q2008
$22.27
$16.13
$17.31
$19.87
$16.88
$15.15
2.4
3.4
2.1
6.6
5.8
6.2
1Q2007 - 4Q2007
$17.42
$14.43
$11.49
$22.63
$17.32
$22.85
6.4
2.3
1.7
7.5
5.0
8.4
1Q2006 - 4Q2006
$16.32
$13.54
$17.71
$24.06
$17.37
$8.99
4.9
2.6
1.3
6.8
8.1
4.7
1Q2005 - 4Q2005
$16.50
$12.16
$12.86
$24.87
$18.81
$4.70
6.0
2.2
0.5
8.8
7.5
4.7
1Q2004 - 4Q2004
$17.33
$13.17
$9.70
$22.78
$19.94
$7.85
2.7
3.7
1.0
7.7
7.2
5.9
1Q2003 - 4Q2003
$19.15
$14.08
$10.19
$20.18
$16.42
$7.53
1.7
3.0
1.0
8.0
7.1
5.3
1Q2002 - 4Q2002
$22.68
$15.52
$13.55
$17.68
$13.26
$9.94
0.6
0.9
0.2
7.6
6.8
4.5
1Q2001 - 4Q2001
$22.44
$17.52
$11.52
$10.28
$5.90
$2.23
0.0
0.2
0.0
6.0
7.5
3.1
*Lease metrics are compared on a four-quarter basis instead of calendar year, allowing full years of data comparison.
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
9
A busy end to 2013 •
Investment activity increased in the final quarter in the CBD. The most expensive transaction was the sale of 500 West Madison which sold for $425 million. General Electric sold this property to KBS Realty Advisors.
•
181 West Madison sold for $322 per square foot which was the highest in the fourth quarter. General Electric was also the seller in this transaction and CBRE Global Investors was the buyer.
•
OUTLOOK: The fourth quarter involved a lot of investment sales. Going into the first quarter of 2014, there is an addition of about 500,000 square feet of office space on the market in the CBD.
CENTRAL BUSINESS DISTRICT
INVESTMENT SALES
INVESTMENT SALES: A STRONG FINISH TO 2013 Sale Date
Size (sf)
Price
Price per sf
Class
Seller
Status (Buyer or Listing Agent)
200 W Jackson 311 S Wacker 180 N LaSalle 111 W Jackson 200 S Michigan 101 E Erie 500 W Madison
New On Market Under Contract Under Contract Under Contract Under Contract Under Contract 4th Qtr 2013
476,711 1,276,850 770,191 567,531 359,560 227,569 1,455,688
$85,000,000 $300,000,000 $136,000,000 $134,500,000 $72,000,000 $37,000,000 $425,000,000
$178.31 $234.95 $176.58 $236.99 $200.24 $162.59 $291.96
B A A B B A A
AREA Partners Shorenstein/Fremont Berkley Properties Berkley Properties Equus Lexington Corp Prop Trust GE Asset Management
10 &120 S Riverside
4th Qtr 2013
1,369,872
$361,000,000
$263.53
B
TIER REIT
Ivanhoe Cambridge
161 N Clark 181 W Madison 200 S Wacker 1 N Franklin 20 N Clark All Sales
4th Qtr 2013 4th Qtr 2013 4th Qtr 2013 4th Qtr 2013 4th Qtr 2013 4th Qtr 2013
1,056,408 941,163 754,751 617,592 381,345 6,576,819
$331,250,000 $302,500,000 $214,500,000 $187,000,000 $63,750,000 $1,885,000,000
$313.56 $321.41 $284.20 $302.79 $167.17 $286.61
A A A A A
Tishman Speyer GE Asset Manager Zell/Pearlmark/TIER REIT Tishman Speyer Hamilton Partners/MEPT
Korea Post/Hyundai CBRE Global Investors John Hancock Life Insurance MetLife Beacon Investments
Marketing (Eastdil) Zeller Realty Beacon Capital Melohn Shidler Group Geller KBS Realty
FEATURES
Building Address
*Price per square foot - based off estimated selling price for new to market buildings
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
10
Recovery slows from third quarter The CBD direct vacancy rate rose slightly from last quarter ending the year at 14.5 percent; however it still remains lower than previous years. Sluggish absorption across all submarkets caused negative absorption in the CBD overall. With uncertainty reemerging as a major concern for the outlook of the economy, doubled with lackluster job growth, it was no surprise the CBD market struggled this quarter. Even so, we remain optimistic after finishing the year with strong investment activity of over 7.3 million square feet.
Class B buildings are starting to lag, ending the year with 15.9 percent direct vacancy. The repurposing of Class C buildings continues to hold the demand for this property class in each submarket.
Total Historic and Forecasted Inventory (sf)
Total Historic & Forecasted Occupancy (sf)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
120,434,748 119,972,770 118,691,577 121,440,276 122,776,164 124,713,268 125,037,423 126,452,643 128,385,650 126,478,575 125,626,639 125,269,078 130,038,076 130,539,796 130,649,210 131,044,641 131,021,405 131,021,405
104,939,294 106,058,995 106,744,585 109,533,759 108,743,284 107,598,500 106,754,119 106,568,104 105,737,728 108,402,912 110,969,808 110,833,045 110,112,891 109,602,891 110,516,410 111,238,394 111,964,734 112,761,849
1997-2013 Absorption Avg:
613,165
2013 Absorption:
720,110
Direct Vacancy % 12.9% 11.6% 10.1% 9.8% 11.4% 13.7% 14.6% 15.7% 17.6% 14.3% 11.7% 11.5% 15.3% 16.0% 15.4% 15.1% 14.5% 13.9%
FEATURES
Mayor Emanuel has committed himself to attracting new jobs for Chicago’s highly educated work force. Archer Daniels Midland announced their plan to move headquarters to the CBD in the coming year. The name recognition that comes with a Fortune 100 company will continue to attract attention to Chicago.
Year
CENTRAL BUSINESS DISTRICT
FORECAST
While the long-term outlook for the Chicago CBD is positive, Total projected inventory based on addition of projects currently under construction certain challenges must be overcome in order for the market Occupancy is forecast based on proprietary assumptions regarding the Chicago MSA’s total employment to experience substantial growth. Tenants continue downsizing change and the office industry’s historical performance which trails the overall economy. due to shrinking space per-employee requirements. Additionally, cloud technology causes a decrease in the space required for technology systems. Both of these factors will cause absorption rates to fluctuate in coming quarters. Once this excess space has been removed from existing leases, expect net absorption to rise with smaller fluxes. MBRE expects demand to warrant new inventory once these factors are eliminated. MBRE forecasts decreasing direct vacancy rates as well as improving occupancy levels over the next two years.
HISTORIC & PROJECTED VACANCY: STRONG GROWTH IN OCCUPANCY OVER THE NEXT TWO YEARS 135,000,000
20% 18%
130,000,000
16% 125,000,000
14% 12%
120,000,000
10% 115,000,000
8% 6%
110,000,000
4% 105,000,000
2%
100,000,000
0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Historic and Forecasted Inventory (sf)
Total Historic & Forecasted Occupancy (sf)
Direct Vacancy %
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
11
CENTRAL BUSINESS DISTRICT
SUBMARKET MAP
FEATURES FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
12
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Direct + Sublease) %
RBA (sf)
YTD Absorption (sf)
4th Quarter Absorption (sf)
Class A
13,580,514
(225,311)
(50,959)
1,452,280
10.7%
12,128,234
487,230
14.3%
Class B
14,309,358
186,321
16,440
2,131,261
14.9%
12,178,097
394,984
17.7%
CENTRAL LOOP
Class C
8,617,327
11,765
189
1,333,217
15.5%
7,284,110
42,155
16.0%
Total
36,507,199
(27,225)
(34,330)
4,916,758
13.7%
31,590,441
924,369
16.0%
EAST LOOP
RBA (sf)
YTD Absorption (sf)
4th Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Direct + Sublease) %
Class A
4,059,412
100,243
3,772
633,631
15.6%
3,425,781
56,565
17.0%
Class B
10,605,108
132,246
3,053
2,542,367
24.0%
8,062,741
163,815
25.5%
8,302,263
19,716
(33,535)
1,103,190
13.3%
7,199,073
63,730
14.1%
Total
22,966,782
252,205
(26,709)
4,279,187
18.6%
18,687,595
284,110
19.9%
N. MICHIGAN AVE.
RBA (sf)
YTD Absorption (sf)
4th Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Direct + Sublease) %
Class A
3,949,554
52,725
0
652,028
16.5%
3,297,526
180,046
21.1%
Class B
4,712,967
212,431
(2,280)
892,956
18.9%
3,820,011
44,044
19.9%
Class C
4,228,590
(168,795)
(25,090)
924,154
21.9%
3,304,437
74,931
23.6%
Total
12,891,112
96,361
(27,370)
2,469,138
19.2%
10,421,974
299,021
21.5%
RIVER NORTH
RBA (sf)
YTD Absorption (sf)
4th Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Direct + Sublease) %
Class A
3,983,086
22,263
(3,125)
413,665
10.4%
3,569,421
50,038
11.6%
Class B
3,828,051
91,844
30,464
243,356
6.4%
3,584,695
194,314
11.4%
Class C
5,455,747
(114,761)
(28,051)
549,411
10.1%
4,906,336
124,259
12.3%
Total
13,266,884
(654)
(711)
1,206,432
9.1%
12,060,452
368,610
11.9%
SOUTH LOOP
RBA (sf)
YTD Absorption (sf)
4th Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Direct + Sublease) %
Class A
1,019,325
23,888
0
279,030
27.4%
740,295
0
27.4%
Class C
1,120,393
(2,885)
(6,214)
253,927
22.7%
866,466
0
22.7%
Total
2,139,718
21,003
(6,214)
532,957
24.9%
1,606,761
0
24.9%
WEST LOOP
RBA (sf)
YTD Absorption (sf)
4th Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Direct + Sublease) %
Class A
27,205,432
413,354
22,663
3,603,984
13.2%
23,601,448
861,322
16.4%
Class B
9,771,008
16,910
(4,791)
1,071,218
11.0%
8,699,790
249,969
13.5%
Class C
6,273,270
(51,755)
(55,156)
976,998
15.6%
5,296,272
73,356
16.7%
Total
43,249,710
378,510
(37,284)
5,652,200
13.1%
37,597,510
1,184,647
15.8%
TOTALS
RBA (sf)
YTD Absorption (sf)
4th Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Direct + Sublease) %
Class A
53,797,323
387,162
(27,649)
7,034,618
13.1%
46,762,705
1,635,201
16.1%
Class B
43,226,492
639,662
42,886
6,881,157
15.9%
36,345,334
1,047,126
18.3%
Class C
33,997,590
(306,715)
(147,855)
5,140,896
15.1%
28,856,694
378,431
16.2%
Total CBD
131,021,405
720,110
(132,618)
19,056,671
14.5%
111,964,734
3,060,757
16.9%
FEATURES
Class C
CENTRAL BUSINESS DISTRICT
MARKET STATISTICS
Numbers in parentheses are negative
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
13
SUBURBAN CHICAGO EXECUTIVE SUMMARY Suburban Chicago had a great start to 2013, but the same cannot be said for the fourth quarter. The fourth quarter ended with negative absorption of 668,000 square feet, with the majority coming from Class A buildings in the East-West submarket. Even with all the negative absorption, the direct vacancy rate only increased by 10 basis points to 22.7 percent.
SUBURBAN CHICAGO
SECTION THREE
Key Indicators: •The North and Northwest submarkets both saw positive net absorption this quarter with 19,000 square feet and 38,000 square feet respectfully. With Motorola slowly moving out of Schaumburg in the Northwest submarket, Zurich North America has development plans for the existing campus. •The largest investment sale of the year occurred in the North submarket with Illinois Tool Works purchasing the old Kraft Foods campus. This building is 503,000 square feet located in Glenview. •Outdated product, such as single tenant buildings, plagues the suburbs and causes the high direct vacancy rates. Many companies are faced with the decision to demolish outdated corporate campuses and start from scratch. •The suburban market is still seen as a tenant’s market. Landlords offer incentive packages to attract new tenants but many companies have many locations to choose from and they can play one off the other.
SUBURBAN VACANCY AND 2013 ABSORPTION SUMMARY Direct Vacancy 4Q2013 East-West North Northwest O'Hare Suburban Chicago Total Net Absorption 4Q2013 East-West North Northwest O'Hare Suburban Chicago Total
A
Change from 3Q2013
B
Change from 3Q2013
C
Change from 3Q2013
Total
Change from 3Q2013
20.6% 21.5% 21.2% 17.7% 20.7%
1.2% -0.2% -0.1% -0.6% 0.3%
23.4% 16.6% 31.0% 31.5% 25.0%
-1.0% 0.0% -0.6% 1.9% -0.4%
24.4% 18.8% 28.6% 36.7% 26.5%
0.1% -3.0% 0.4% -0.8% -0.7%
22.1% 19.9% 24.9% 24.9% 22.7%
0.3% -0.4% -0.2% 0.0% -0.1%
A
B
C
Total
(560,076) (6,604) (4,446) 25,326 (545,800)
(18,103) 23,493 24,045 (138,203) (108,768)
(19,978) 2,405 18,592 (14,738) (13,718)
(598,157) 19,295 38,191 (127,616) (668,287) Numbers in parentheses are negative
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
14
Proposed sites may never come to fruition •
T wo buildings were delivered this quarter that had been under construction. 130,000 square feet at 2000 Clearwater Drive in Oak Brook opened and is the headquarters for the Hub Group. 5440 Park Place in Rosemont was completed as well and is home to the Big Ten Conference. Both buildings are 100 percent leased.
•
T here are numerous proposals for suburban office complexes that currently have no preleased tenants or funding. One of these includes White Oak Office Park located in Aurora. The Hamilton Partners wish to building 330,000 square feet of Class A office buildings that are low to mid rise.
•
UTLOOK: The Suburban market has around 25.4 million square feet of vacant space. Also several corporate headquarters remain O vacant which makes speculative construction unfeasible. New developments will not happen until the demand and job growth demand more inventory. SUPPLY
NEW DELIVERIES PIPELINE 2013 Deliveries Building Address
SUBURBAN CHICAGO
NEW DEVELOPMENT
Size (sf)
% Leased
Submarket
Comments
Due Date
Comments
February 2014
Class A office building
Due Date
Comments
None
Hamilton Partners want to build low to mid rise Class A
Total - 0 Properties
Under Construction Building Address
Size (sf) % Pre-leased
1000 W Irving Park Rd
16,000
63.5%
Total - 1 Property
Proposed Building Address White Oak Office Park
Size (sf) % Pre-leased 330,000
0.0%
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
15
Little change in Suburban sublease availability •
The amount of available sublease space continued to shrink in the fourth quarter, down 20,000 square feet to just over three million square feet.
•
There are currently nine subleases available in the suburban markets over 50,000 square feet in Class A buildings. The largest is 1.2 million square feet in the Northwest submarket. The largest Class B sublease available is 240,000 square feet in the Northwest submarket as well.
•
Many of these leases were available in the third quarter as well. A 40,000 square foot lease was signed at 2441 Warrenville Road in Lisle since last quarter.
•
OUTLOOK: Sublease space has proven difficult for sub-lessors to lease. While it did decrease from last quarter, many of these spaces are outdated and will continue to remain on the market in the coming quarters.
SUPPLY
HISTORIC YEAR-END SUBLEASE AVAILABILITY: STEEP DROP IN CLASS A SUBLEASE
SUBURBAN CHICAGO
SUBLEASE SPACE
3,000,000 2,500,000 2,000,000 1,500,000 1,000,000
500,000 0 2002
2003
2004
2005
Class A
2006
2007
2008
2009
2010
Class B
2011
2012
2013
Class C
LARGE BLOCKS (MORE THAN 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE Class A Building Address
Size (sf)
Occupancy
Expiration
Submarket
Sublandlord
2000 W AT&T Dr, Hoffman Estates 26525 N Riverwoods Blvd, Mettawa 1000 Milwaukee Ave, Glenview 4201 Winfield Rd, Warrenville 150 S Saunders Rd, Lake Forest 1200 Lakeside Dr, Bannockburn 150 E Pierce Rd, Itasca 2455 Corporate West Dr, Lisle 2441 Warrenville Rd, Lisle
1,207,245 492,948 289,613 249,996 126,595 106,147 97,750 54,808 50,033
Negotiable 42,491 30 Days Vacant Vacant Vacant Negotiable June 2023 January 2016
August 2016 June 2021 February 2017 Negotiable April 2017 May 2014 May 2023 July 2019 January 2016
Northwest North North East-West North East-West North Northwest East-West
AT&T Capital One Hewitt Associates Navistar AON Hillshire Brands Catalyst Rx Jewel-Osco SXC Health Solutions Group
Total - 9 Spaces
2,675,135
Size (sf)
Occupancy
Expiration
Submarket
Sublandlord
2001 Lakewood Blvd, Hoffman Estates 750 N Commons Dr, Aurora
239,250 112,605
Negotiable 30 Days
Negotiable September 2017
East/West East/West
AT&T Westell Technologies
Total - 2 Spaces
351,855
Class B Building Address
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
16
Size of large blocks grow •
The total number of direct, available large blocks (greater than 50,000 square feet) increased by thirteen properties this quarter. The total square footage increased by nearly three million during this time period. Class B space increased the most, by one million square feet. The majority of new space comes from an office complex on Algonquin Road in Schaumburg. 850, 854, 860, and 846 East Algonquin Road became available this quarter for 529,000 total square feet. This involved numerous smaller tenants vacating the property.
•
OUTLOOK: The total square footage increased this quarter from last, and the trend may again continue into 2014. Several companies are moving to the downtown markets and vacating large suburban campuses. Motorola and Kraft are prime examples. While this is not feasible for every company, additional moves are likely to follow in the future. CLASS B Building Address
City
2850 W Golf Rd 1421 W Shure Dr 1000 E Woodfield Rd 3890 Salem Lake Dr 5450 N Cumberland Ave 2350-2360 E Devon Ave 850 E Algonquin Rd 854 E Algonquin Rd 860 E Algonquin Rd 846 E Algonquin Rd 700 N Wood Dale Rd 920 E Algonquin Rd 1002 E Algonquin Rd 1014 E Algonquin Rd 750 N Commons Dr 1441 W Shure Dr 300 Bauman Ct 2250 W Pinehurst Blvd 703-709 W Algonquin Rd 3800 Golf Rd 2000 S Finley Rd 1350 E Touhy Ave 1501 Feehanville Dr 544 Lakeview Pky 333 E Butterfield Rd 814 Commerce Dr 27545 Diehl Rd 999 E Touhy Ave 2211 Butterfield Rd 9801 W Higgins Rd 30 Blocks of Space
Des Plaines Wood Dale Schaumburg Schaumburg Schaumburg Schaumburg Schaumburg Schaumburg Schaumburg Arlington Heights Downers Grove Lombard Oak Brook Des Plaines Rolling Meadows Rolling Meadows Rosemont Vernon Hills Addison Long Grove Des Plaines Schaumburg Chicago Aurora Warrenville Lombard Wood Dale Mount Prospect Arlington Heights Arlington Heights
Size (sf)
Submarket
252,266 218,661 183,488 150,000 143,525 142,596 132,969 132,969 132,969 129,984 125,323 112,765 112,765 112,765 112,655 105,150 104,518 102,190 96,213 93,431 78,300 71,367 71,310 68,452 67,195 66,882 62,440 59,710 52,980 50,238 3,346,076
O'Hare Northwest Northwest Northwest Northwest Northwest Northwest Northwest Northwest Northwest East-West East-West East-West O'Hare Northwest Northwest O'Hare North Northwest Northwest O'Hare Northwest O'Hare East-West East-West East-West Northwest Northwest Northwest Northwest
City
600 N US Highway 45 * 2001 N Division St * 1000 Milwaukee Ave * 21440 Lake Cook Rd * 700 Oakmont Ln * 4201 Winfield Rd * 25 Tri State International * 75 Tri State International * 2400 Cabot Dr * 1707 N Randall Rd * 5550 Prairie Stone Pky * 200 N Martingale Rd * 300 Tower Pky * 1200 Lakeside Dr * 2001 N Division St * 1701 Golf Rd * 2655 Warrenville Rd * 2441 Warrenville Rd * 3500 Lacey Rd * 1 Overlook Pt * 1 Pierce Pl * 2355 Waukegan Rd * 8420 W Bryn Mawr Ave * 535 E Diehl Rd * 1600 N Randall Rd * 425 N Martingale Rd * 2550 W Golf Rd * 2895 Greenspoint Pky * 3 Parkway Blvd N * 480 Warrenville Rd * 5100 River Rd * 333 Knightsbridge Pky * 3050 Highland Pky * 1333 Butterfield Rd * 1000 Royce Blvd * 10255 W Higgins Rd * 3000 Lakeside Dr * 701 Warrenville Rd * 4343 Commerce Ct * 4201 Lake Cook Rd * 410 Warrenville Rd * 2800 W Higgins Rd * 9500 W Bryn Mawr Ave * 2275 Half Day Rd * 2135 CityGate Ln * 2100 Sanders Rd * 1222 Hamilton Pky * 7400 N Caldwell Ave * 6 Parkway Blvd N * 3010 Highland Pky * 750 Warrenville Rd * 51 Blocks of Space
Libertyville Harvard Glenview Deer Park Westmont Warrenville Lincolnshire Lincolnshire Lisle Elgin Hoffman Estates Schaumburg Lincolnshire Bannockburn Harvard Rolling Meadows Downers Grove Lisle Downers Grove Lincolnshire Itasca Bannockburn Chicago Naperville Elgin Schaumburg Rolling Meadows Hoffman Estates Deerfield Lisle Schiller Park Lincolnshire Downers Grove Downers Grove Oakbrook Terrace Rosemont Bannockburn Lisle Lisle Northbrook Lisle Hoffman Estates Rosemont Bannockburn Naperville Northbrook Itasca Niles Deerfield Downers Grove Lisle
Size (sf)
Submarket
1,121,186 407,347 405,039 277,200 256,767 249,996 208,808 208,808 205,633 196,088 193,601 186,740 175,545 170,165 165,605 159,824 149,896 148,423 112,834 111,327 106,766 106,495 104,164 83,792 82,800 81,862 81,222 79,464 79,101 75,000 74,988 74,728 74,319 70,251 70,000 69,285 68,384 67,233 66,518 66,000 63,409 61,790 60,680 58,099 56,829 56,209 54,150 54,000 52,895 51,357 50,662 7,262,622
North Northwest Near North Northwest East-West East-West North North East-West Northwest Northwest Northwest North North Northwest Northwest East-West East-West East-West North Northwest North O'Hare East-West Northwest Northwest Northwest Northwest North East-West O'Hare North East-West East-West East-West O'Hare North East-West East-West North East-West Northwest O'Hare North East-West North Northwest Near North North East-West East-West
SUPPLY
•
CLASS A Building Address
SUBURBAN CHICAGO
LARGE BLOCKS OF DIRECT AVAILABILITY
Italicized addresses indicate space is new on the market * Block of space is for future occupancy **Block of space will be vacated in the upcoming quarter
CLASS C Building Address
City
9401 W Grand Ave 3501 Algonquin Rd 600-680 Oakmont Ln 2-4-6 Genesee St 4825 N Scott St 2100 Swift Dr 6 Blocks of Space
Rolling Meadows Waukegan Schiller Park Franklin Park Westmont Oak Brook
Size (sf)
Submarket
269,014 106,380 89,634 75,996 74,656 58,450 674,130
Northwest North O'Hare O'Hare East-West East-West
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
17
Direct vacancy rates increase •
The direct vacancy rate in the suburban submarkets increased by 10 basis points from the third quarter to 22.7 percent. The Northwest and O’Hare submarkets both saw a decrease by 10 basis points while East-West increased by 30 basis points. The North remained at 19.2 percent.
•
The suburban markets did see a total decline of 460,000 square feet of direct vacancy from last quarter. The majority of this decrease came from Class A buildings.
•
OUTLOOK: The direct vacancy rate increased this quarter after falling for three straight quarters. However the demand will need to increase before the suburban markets direct vacancy rate falls below 20 percent.
SUBURBAN CHICAGO
VACANCY RATES
HISTORIC YEAR-END VACANCY RATES BY SUBMARKET: NORTHWEST SHOWS STRONG IMPROVEMENT DEMAND
30% 25% 20% 15% 10%
5% 0% 2002
2003
2004
East-West
2005
2006
North
2007
2008
2009
Northwest
2010
2011
O'Hare
2012
2013
Total Suburban
HISTORIC YEAR-END VACANCY RATES BY CLASS: ALL CLASSES DECREASE SLIGHTLY 30% 25% 20%
15% 10% 5% 0% 2002
2003 Class A
2004
2005
2006 Class B
2007
2008
2009
Class C
2010
2011
2012
2013
Total Suburban
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
18
Size of large deals increased •
Renewal and expansion saw a large increase of activity this past quarter with almost 383,000 square feet. Zebra Technologies signed a sublease in the North submarket for 233,000 square feet. Middough renewed their lease in Oak Brook for 69,000 square feet in the East-West submarket. Winthrop Realty Trust had the third largest renewal of 41,000 square feet in the East-West submarket as well.
•
Basic Enterprises signed a large lease for 101,000 square feet in the O’Hare submarket. The second largest new lease signed this quarter was by Flexera Software in Itasca for 75,000 square feet.
•
OUTLOOK: It is a positive sign that two companies renewed their current leases and one chose to expand at their current location, but the suburbs are going to need to draw more than three new tenants to help fill the current occupancy.
NEW Tenant
Type
Basic Enterprises Flexera Software Omron Corporation
New New New
Submarket Submarket O'Hare Northwest Northwest
0 Building Address 2567 N Greenleaf Ave, Elk Grove 300 Park Blvd, Itasca 2895 Greenspoint Pky, Hoffman Estates
Total - 3 Deals
Size (sf)
DEMAND
LARGE LEASE TRANSACTIONS
SUBURBAN CHICAGO
LARGE DEALS
101,543 75,000 71,139
247,682
RENEWAL/EXPANSION/SUBLEASE Tenant
Type
Submarket
Building Address
Zebra Technologies Middough Winthrop Realty Trust JDA eHealth Systems Total - 4 Deals
Sub Ren Ren Exp
North East-West East-West East-West
3 Overlook Pt, Lincolnshire 700 Commerce Dr., Oak Brook 550-650 Warrenville Road 1415 W Diehl Rd., Naperville
Size (sf) 233,286 68,748 41,289 39,215 382,538
Abbreviations: Cons - Consolidation Cont - Contraction Exp - Expansion Relo - Relocation Ren - Renewal Sub - Sublease
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
19
East-West slows overall market •
The fourth quarter saw negative absorption of nearly 669,000 square feet. This is a big swing from the third quarter absorption of a positive 173,000 square feet.
•
The East-West submarket contributed the largest amount of negative absorption of 598,000 square feet. This was mainly from Motorola vacating their large campus.
•
OUTLOOK: The trend of vacating sprawling campuses and moving to the CBD will continue to affect the suburban markets negatively in the coming quarters.
SUBURBAN CHICAGO
ABSORPTION
SUBURBAN CHICAGO ABSORPTION BY CLASS: MOMENTUM GATHERS STEAM 1,500,000 1,000,000
DEMAND
500,000 0 (500,000) (1,000,000) (1,500,000) 2005
2006
2007
2008
Class A EAST-WEST
2005
2006
Class A
102,299
Class B
389,014
Class C Total
2009
2010
Class B 2007
2008
366,688
542,281
484,869
(203,072)
85,269
(125,850)
576,582
725,707
2011
2012
2013
Class C
2009
2010
2011
2012
2013
(259,973)
(595,372)
(2,062)
(259,196)
(219,164)
299,247
(457,450)
(244,250)
67,827
(152,069)
92,876
(108,813)
(87,441)
(126,654)
(179,177)
7,017
55,114
(5,912)
230,396
(349,476)
24,289
(1,033,744)
(144,319)
202,292
(370,486)
(346,615)
NORTH
2005
2006
2007
2008
2009
2010
2011
2012
2013
Class A
196,403
(100,049)
615,115
(240,617)
(207,914)
(312,238)
(261,008)
(365,450)
23,940
Class B
164,357
316,207
355,510
(60,982)
(38,575)
(319,078)
33,814
131,363
107,166
Class C
12,697
(39,440)
26,935
(2,048)
(104,195)
(40,044)
(90,151)
8,074
100,580
Total
373,457
176,718
997,560
(303,647)
(350,684)
(671,360)
(317,345)
(226,013)
231,686
NORTHWEST
2005
2006
2007
2008
2009
2010
2011
2012
2013
Class A
225,865
(488,651)
10,333
(302,930)
(388,945)
(21,262)
(632,282)
379,728
(14,767)
Class B
(234,681)
12,266
(164,112)
(261,498)
(310,263)
(295,928)
(383,730)
(19,395)
218,201
Class C
(216,898)
(15,371)
(51,429)
(28,362)
(35,167)
(192,091)
(48,617)
41,909
39,325
Total
(225,714)
(491,756)
(205,208)
(592,790)
(734,375)
(509,280)
(1,064,629)
402,242
242,758
O'HARE
2005
2006
2007
2008
2009
2010
2011
2012
2013
Class A
(55,786)
189,235
11,636
(256,325)
(134,526)
209,180
40,666
81,456
61,413
Class B
53,945
7,915
(81,167)
(51,601)
(80,925)
70,376
14,041
26,266
(144,235)
Class C
(204,597)
90,170
(50,022)
(35,696)
62,815
(10,855)
(14,567)
17,442
(29,258)
Total
(206,438)
287,320
(119,553)
(343,622)
(152,637)
268,701
40,140
125,164
(112,080)
TOTALS
2005
2006
2007
2008
2009
2010
2011
2012
2013
Class A
468,781
(32,777)
1,179,365
(1,059,845)
(1,326,757)
(343,484)
(553,378)
(361,716)
(173,665)
Class B
372,635
821,257
(92,841)
(376,143)
(688,960)
(476,802)
(487,944)
231,110
54,478
Class C
(323,529)
(90,491)
(183,329)
(153,547)
(255,724)
(235,972)
(98,221)
61,512
134,936
Total
517,887
697,989
903,195
(1,589,535)
(2,271,441)
(1,056,259)
(1,139,542)
(63,094)
15,749
Numbers in parentheses are negative
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
20
Landlords continue to decrease asking rental rates to combat high vacancies •
The only buildings to see gross asking rents increase over the past year were Class A in the O’Hare submarket, and Class C in the East-West and Northwest submarkets. Overall Class A buildings saw a decrease of 4.9 percent from last year.
•
Class C buildings did increase by 2.5 percent from last year. The Northwest submarket saw the largest improvement, increasing by 3.7 percent.
•
OUTLOOK: After multiple consecutive quarters of decreased rental rates, as well as increased direct vacancy, the suburban market will see rental rates continue to decline until the occupancy level reaches pre-recession levels.
SUBURBAN CHICAGO
GROSS ASKING RENTS
AVERAGE GROSS ASKING RATES BY CLASS AND SUBMARKET
East-West North Northwest O'Hare Suburban Chicago Total
A
Change over last year
B
Change over last year
C
Change over last year
Total
Change over last year
$21.60 $19.66 $18.55 $21.97 $20.28
-2.4% -0.7% -14.3% 0.8% -4.9%
$17.66 $19.11 $15.49 $17.81 $17.42
-0.2% -3.0% -5.7% -11.3% -3.5%
$15.33 $16.75 $13.05 $16.53 $15.38
1.9% -5.7% 3.7% -0.5% 2.5%
$19.49 $19.24 $17.17 $19.90 $18.86
-1.1% -0.7% -11.0% -2.4% -3.8%
FEATURES
Average Direct Gross Asking Rent
ASKING RATES CONTINUE TO HIT RECORD LOWS $26 $24
$22 $20 $18 $16 $14 4Q2002 4Q2003 4Q2004 4Q2005 4Q2006 4Q2007 4Q2008 4Q2009 4Q2010 4Q2011 4Q2012 4Q2013 Class A
Class B
Class C
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
21
Investment activity ended strong in an unsteady Suburban market •
Two buildings in the East-West submarket were put on the market in the fourth quarter. The larger of the two, at 210,000 square feet, is 747 East 22nd Street in Lombard.
•
Six buildings over 50,000 square feet were sold in the fourth quarter. The largest was Kraft’s headquarters in the North submarket. Illinois Tool Works bought the 503,000 square foot property for $21.5 million. The second largest building sale was 405,000 square feet located at 1000 Milwaukee Avenue in Glenview.
•
OUTLOOK: While some companies are choosing to relocate to the CBD, there are other companies that continue to desire a suburban location. Illinois Tool Works is a prime example. So while we expect the trend of suburban to Chicago relocation to continue, we also believe some of the vacated space will fill.
On the Market: 4th Quarter 2013 Building Address
Submarket
Size (sf)
Price
PSF *
Class Seller
Status (Listing Agent)
747 E 22nd St, Lombard
East-West
210,000
$9,750,000
$47
A
Undisclosed
On Market (JLL)
3030 Warrenville Rd, Lisle
East-West
150,000
$18,960,000
$126
B
Undisclosed
On Market (Transwestern)
FEATURES
INVESTMENT SALES: INVESTMENT ACTIVITY ACCELERATES
SUBURBAN CHICAGO
INVESTMENT SALES
Investment Sales: 4th Quarter 2013 Building Address
Submarket
Size (sf)
Price
PSF *
Class Seller
Buyer
1 Kraft Court, Glenview
North
503,000
$21,450,000
$43
A
Kraft Foods
Illinois Tool Works
1000 Milwaukee Avenue, Glenview
Submarket Cluster
405,039
Undisclosed
***
A
American Realty Capital
Caplease, Inc
1603 Orrington Ave, Evanston Oak Brook
North
307,000
$55,750,000 $181
A
Lowe Enterprises
Investcorp International
215 Shuman Blvd, Naperville
East-West
211,000
$24,000,000 $114
A
TA Associates Realty
Beacon Investment Properties
2301 Patriot Blvd, Glenview
North
176,000
$26,200,000 $149
B
H. Ruskin & M. Lustbader
Globe Corporation
5450 Prairie Stone Pky, Hoffman Estates
Northwest
110,000
$26,500,000 $240
A
J.F. McKinney & Associates
Oak Street Real Estate Capital
*Price per square foot - based off estimated selling price for new to market buildings
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
22
Stagnant quarter highlights daunting obstacles faced by Suburban market The year ended with overall positive absorption of 16,000 square feet; however going into the fourth quarter it was at 736,000 square feet. This is indicative of large tenants choosing to relocate at the end of the year. With increased competition from downtown Chicago, one of the country’s fastest growing metro markets, positive absorption is not to be expected. Attracting top talent to the suburbs is of utmost importance. The ease of travel seen in the CBD needs to be replicated with intersuburban public transportation.
Total Historic & Forecasted Occupancy (sf)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
90,601,193 91,989,948 95,078,215 98,744,696 103,270,399 108,254,000 109,769,838 110,090,266 110,423,452 111,030,084 110,806,221 111,175,875 112,080,944 112,218,212 112,374,614 112,250,112 112,311,826 111,789,663 111,789,663
82,039,636 85,388,879 88,016,285 90,321,332 93,033,912 92,247,968 91,258,173 88,104,389 90,452,884 90,970,771 91,668,760 92,571,955 90,982,420 87,973,132 86,916,873 85,761,730 86,203,123 87,044,588 87,901,419
1996-2013 Absorption Avg:
288,239
2013 Absorption:
15,749
Direct Vacancy % 9.4% 7.2% 7.4% 8.5% 9.9% 14.8% 16.9% 20.0% 18.1% 18.1% 17.3% 16.7% 18.8% 21.6% 22.7% 23.6% 23.2% 22.7% 21.4%
FEATURES
MB Real Estate predicts that 2014 will see a decrease in direct vacancy rates with much of the expected absorption resulting from discounted rental rates and incremental growth within existing companies.
Year
Total Historic and Forecasted Inventory (sf)
SUBURBAN CHICAGO
FORECAST
Total projected inventory based on addition of projects currently under construction Occupancy is forecast based on proprietary assumptions regarding the Chicago MSA’s total employment change and the office industry’s historical performance which trails the overall economy.
HISTORIC & PROJECTED VACANCY: 25%
115,000,000 110,000,000
20% 105,000,000 15%
100,000,000 95,000,000
10%
90,000,000 5% 85,000,000 0%
80,000,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Historic and Forecasted Inventory (sf)
Total Historic & Forecasted Occupancy (sf)
Direct Vacancy %
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
23
SUBURBAN CHICAGO
SUBMARKET MAP
FEATURES FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
24
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
20.6%
16,021,039
815,668
24.6%
23.4%
11,093,052
555,679
27.3%
1,246,777
24.4%
3,871,843
10,166
24.6%
8,796,133
22.1%
30,985,934
1,381,513
25.6%
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
21.5%
13,242,273
914,457
26.9%
16.6%
6,160,357
127,633
18.4%
471,377
18.8%
2,035,274
20,331
19.6%
5,330,153
19.9%
21,437,903
1,062,421
23.9%
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
21.2%
14,580,648
513,543
24.0%
31.0%
6,634,943
65,329
31.7%
RBA (sf)
Absorption (sf)
4th Quarter Absorption (sf)
Class A
20,175,666
(244,250)
(560,076)
4,154,627
Class B
14,487,781
(126,654)
(18,103)
3,394,729
Class C
5,118,620
24,289
(19,978)
Total
39,782,067
(346,615)
(598,157)
NORTH
RBA (sf)
Absorption (sf)
4th Quarter Absorption (sf)
Class A
16,872,823
23,940
(6,604)
3,630,550
Class B
7,388,583
107,166
23,493
1,228,226
Class C
2,506,651
100,580
2,405
Total
26,768,056
231,686
19,295
NORTHWEST
RBA (sf)
Absorption (sf)
4th Quarter Absorption (sf)
Class A
18,505,369
(14,767)
(4,446)
3,924,721
Class B
9,618,235
218,201
24,045
2,983,292
Direct Direct Vacancy Vacancy (sf) %
Direct Direct Vacancy Vacancy (sf) %
Class C
2,559,044
39,325
18,592
731,395
28.6%
1,827,649
30,734
29.8%
Total
30,682,648
242,758
38,191
7,639,408
24.9%
23,043,240
609,606
26.9%
O'HARE
RBA (sf)
Absorption (sf)
4th Quarter Absorption (sf)
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
7,886,476
61,413
25,326
1,393,275
17.7%
6,493,201
148,028
19.5%
Class B
4,201,057
(144,235)
(138,203)
1,323,890
31.5%
2,877,167
24,017
32.1%
Class C
2,469,359
(29,258)
(14,738)
906,818
36.7%
1,562,541
440
36.7%
Total
14,556,892
(112,080)
(127,616)
3,623,983
24.9%
10,932,909
172,485
26.1%
TOTALS
RBA (sf)
Absorption (sf)
4th Quarter Absorption (sf)
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
63,440,334
(173,665)
(545,800)
13,103,172
20.7%
50,337,161
2,391,696
24.4%
Class B
35,695,656
54,478
(108,768)
8,930,138
25.0%
26,765,519
772,658
27.2%
Class C
12,653,673
134,936
(13,718)
3,356,366
26.5%
9,297,307
61,671
27.0%
Total Suburban
111,789,663
15,749
(668,287)
25,389,677
22.7%
86,399,987
3,226,025
25.6%
Direct Direct Vacancy Vacancy (sf) %
Direct Direct Vacancy Vacancy (sf) %
FEATURES
Occupancy (sf)
Direct Direct Vacancy Vacancy (sf) %
EAST-WEST
SUBURBAN CHICAGO
MARKET STATISTICS
Numbers in parentheses are negative
FOURTH QUARTER 2013 | CHICAGO MARKET OVERVIEW
25
ADDITIONAL INFORMATION GLOSSARY Absorption: The net change in occupied space over a given period of time. Unless otherwise noted, Net Absorption includes direct and sublease space.
Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis.
Asking Rent: The published rental rate for a space in a building, which may vary from the rent which is negotiated upon by the tenant and landlord.
Sales Price: The total dollar amount paid for a particular property at a particular point in time.
Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA.
SF: Abbreviation for Square Feet.
Class: A classification used to describe buildings, with Class A reflecting the highest quality and Class C reflecting the lowest quality.
Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they arelocated within.
Direct Vacant Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Initial Rate: The contracted starting rental rate for the first term of a lease. Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. Calculated by adding the Rentable Building Area (RBA) of all properties in a market or submarket. Large Block: The amount of contiguous space available in a building in terms of square footage. Contiguous spaces over 50,000 square feet are considered large by MB Real Estate. Lease Comparable: Comparables are properties with characteristics that are similar in nature. Their signing lease rates and other contracted elements are aggregated to analyze contracted market conditions as opposed to asking market conditions. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building type specific and are non-overlapping contiguous geographic designations. Markets can be further subdivided into Submarkets. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Rentable Building Area (RBA): The total building square footage that can be occupied by or assigned to a tenant for the purpose of determining a tenant’s rental obligation. Generally, RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets.
CHICAGO MARKET OVERVIEW
SECTION FOUR
Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space.
Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. Tenant Improvement: Those changes to property to accommodate specific needs of a tenant. TIs include installation or relocation of interior walls or partitions, carpeting or other floor covering, shelves, windows, toilets, etc. The cost of these is negotiated in the lease. Total Vacant Space: Direct plus sublease vacant space. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construction and until it receives a certificate of occupancy. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacancy rate can be based on direct, sublease, or total vacant space. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied.
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MB REAL ESTATE
ABOUT MB REAL ESTATE
At MB Real Estate, our corporate mission is to maximize the value of our clients’ real estate by creating timely and innovative solutions that meet their unique needs and objectives. We offer the highest level of real estate support with our team of committed, results-driven experts in asset and facilities management, leasing, tenant representation, development, project management, and investment services. Supported by dedicated accounting, marketing, human resources, and information technology teams, our unique full-service firm is an industry leader in local and national corporate real estate.
MB REAL ESTATE HEADQUARTERS 181 West Madison, Suite 4700 Chicago, Illinois 60602 phone: 312.726.1700 fax: 312.807.3853
EAST COAST REGIONAL HEADQUARTERS 335 Madison Avenue, 14th Floor New York, New York 10017 phone: 212.350.2300 fax: 212.350.2301
DEPARTMENT LEADERSHIP PATRICIA ALUISI Executive Vice President & Chief Administrative Officer/General Counsel
MARK A. BUTH Executive Vice President & Managing Director of Leasing Services
ANDREW J. DAVIDSON Executive Vice President & Managing Director of Corporate Services & Tenant Advisory
GARY A. DENENBERG Executive Vice President & Managing Director of Leasing Services
DAVID R. GRAFF Senior Vice President of Project Services
COMPANY LEADERSHIP PETER E. RICKER Chairman & CEO
JOHN T. MURPHY President
MAUREEN G. GROVE Vice President & Managing Director of Accounting Services
DANIEL J. NIKITAS Executive Vice President of Corporate Services & Tenant Advisory Services
KEVIN M. PURCELL Executive Vice President & Chief Operating Officer
PETER J. WESTMEYER Executive Vice President & Managing Director of Investment Services & MBRE Healthcare Group
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