SECOND QUARTER
2013
CHICAGO SUBMARKET SNAPSHOTS
S E C O N D Q UA RT E R
2013 CHICAGO MARKET OVERVIEW MARKET OVERVIEW
TABLE OF CONTENTS SE CT ION ONE
CHICAGO CENTRAL BUSINESS DISTRICT CBD SUBMARKET SNAPSHOTS 01 02 03 04 05 06 07
Central Business District Map Central Loop East Loop North Michigan Avenue River North South Loop West Loop
SE CT ION T WO
SUBURBAN CHICAGO SUBURBAN SUBMARKET SNAPSHOTS 08 09 10 11 12
2013
Suburban Map East-West North Northwest O’Hare
SE CT ION T H RE E
ADDITIONAL INFORMATION 13 About MB Real Estate
The Chicago Market Overview is published quarterly by MB Real Estate. To obtain additional copies or for further information, please contact:
SCOTT MASON Research Coordinator 181 West Madison Street, Suite 4700 Chicago, Illinois 60602 (312) 726-1700 www.mbres.com
CENTRAL BUSINESS DISTRICT
SUBMARKET MAP
FEATURES SECOND QUARTER 2013 | CHICAGO MARKET OVERVIEW
1
Class B and C buildings lead strong second quarter rebound All three building classes in the Central Loop experienced positive absorption, decreasing the direct vacancy rate by 80 basis points to 13.0 percent. Of the Central Loop’s 274,000 square feet in net positive absorption, Class A buildings experienced very little demand. With direct vacancy at 9.2 percent in the Class A segment, the second lowest rate in the CBD, large absorption rates are not to be expected.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
The second quarter saw simultaneous decreases in sublease availability in the Central Loop, with nearly 80,000 square feet taken off of the market. Even so, at 2.4 percent of total stock, the Central Loop continues to have the second highest percentage of sublease availability in the CBD.
Size (sf)
Building Class
11 S LaSalle St **
146,313
A
10 S Dearborn St
139,165
C
222 N LaSalle St *
120,158
A
1 N Dearborn St
97,261
B
120 S LaSalle St
94,995
B
2 N LaSalle St *
93,912
B
200 N LaSalle St
91,476
B
230 S Clark St
88,541
B
175 W Jackson Blvd
68,539
B
175 W Jackson Blvd
67,794
B
One fund of CBRE Globe Investors sold 190 South LaSalle for $211 million or $264 per square foot to Tishman Speyer after increasing occupancy by more than 40 percent since 2006. Another of their funds purchased 181 West Madison for $300 million, or $320 per square foot, from General Electric who bought the property in 2006 for $294 million. Additionally, 111 West Jackson was brought to market by a joint venture of Michael Silberberg and David Werner who bought the property in 2011 for $35 million and invested $45 million in upgrades.
SUBMARKET SNAPSHOTS
In one of the biggest lease transactions of 2013, McGuireWoods signed * Indicates future available space **Block of space will be vacated in the upcoming quarter an extension at 77 West Wacker, shedding the 47th floor. The law firm will Italicized addresses indicate new blocks this quarter now occupy 115,000 square feet on floors 41-45. Advantage Futures, a Chicago-based brokerage, signed a 41,000 square foot lease at 231 South LaSalle where they will have enough room for 325 employees. The lease is nearly double their current space at 141 West Jackson.
CENTRAL BUSINESS DISTRICT
CENTRAL LOOP
The Central Loop’s boundaries are the Chicago River (North), Wells Street (West), State Street (East), and Van Buren Street (South). CENTRAL LOOP SUMMARY
A
B
C
Total
13,576,900
14,278,480
8,614,276
36,469,657
(30,167)
139,852
(13,485)
96,199
Direct Vacancy Rate
9.2%
15.0%
15.7%
13.0%
Total Vacancy Rate (Direct + Sublease)
12.6%
17.9%
16.0%
15.5%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parantheses are negative
CENTRAL LOOP SUBMARKET HISTORICAL DIRECT VACANCY 20% 18% 16% 14% 12% 10% 8%
17.5%
15.2%
11.8%
11.4%
12.7%
13.6%
13.8%
13.2%
13.0%
2%
15.2%
4%
14.7%
6%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
2
2
Class A and B buildings complete strong first half of 2013 The East Loop improved upon its strong start to 2013 with an additional 125,000 square feet in net positive absorption, causing direct vacancy to fall 50 basis points to 18.5 percent. Direct vacancy has now decreased in two straight quarters, dropping 120 basis points during that span. Class A and B buildings made up the entirety of the absorption while Class C buildings were essentially unchanged.
Size (sf)
Building Class
200 E Randolph St
306,163
A
130 E Randolph St *
256,720
B
303 E Wacker Dr
158,773
B
130 E Randolph St *
155,829
B
130 E Randolph St
128,948
B
401 S State St
110,898
C
333 S Wabash Ave
92,473
B
33 S State St
70,107
C
111 E Wacker Dr
67,216
B
233 N Michigan Ave
67,028
B
* Indicates future available space
A joint venture of Michael Silberberg and David Werner purchased an undisclosed percentage of the two building, 2.2 million square foot Prudential Plaza complex for $100 million. The venture gained control of Prudential Plaza and will redevelop the retail as well as modernize One Prudential by adding amenities. AmTrust, in an off-market transaction, purchased 1 East Wacker for an undisclosed price. The 526,000 square foot Class B building is 94 percent leased. The East Loop is bordered by the Chicago River (North), State Street (West), Lake Shore Drive (East), and Van Buren Street (South). It is inhabited mostly by advertising and media firms and corporate tenants.
EAST LOOP SUMMARY
A
B
C
Total
4,051,837
10,584,226
8,349,923
22,985,986
148,444
154,314
(1,012)
301,746
Direct Vacancy Rate
14.3%
23.6%
14.0%
18.5%
Total Vacancy Rate (Direct + Sublease)
16.0%
25.2%
14.9%
19.8%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
The law firm Schuyler, Roche and Crisham moved its office in 130 East Randolph (Two Prudential Plaza) to existing space at 180 North Stetson (One Prudential Plaza) where they added space. They now occupy nearly 37,000 square feet and have agreed to a long term lease. The American Management Association moved their 50,000 square foot suburban office to 303 East Wacker.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS DISTRICT
EAST LOOP
Numbers in parantheses are negative
EAST LOOP SUBMARKET HISTORICAL DIRECT VACANCY 25% 20% 15%
18.4%
22.4%
19.1%
14.2%
12.1%
16.3%
20.2%
19.3%
19.7%
18.5%
5%
17.2%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
3
3
Positive absorption, albeit slight, returns to the CBD’s second smallest submarket The North Michigan Avenue submarket saw direct vacancy drop 30 basis points to 20.5 percent due to 25,000 square feet in positive absorption. While relatively minor, it was the third quarter of positive absorption in the past year. Class A buildings continue to outperform, with five straight quarters of positive absorption. Sublease activity was nonexistent and availabilities remain at 2.2 percent of total vacancy.
Size (sf)
Building Class
515 N State St *
350,906
A
435-445 N Michigan Ave **
316,190
C
101 E Erie St *
217,569
A
410 N Michigan Ave *
214,831
B
401-465 E Illinois St
210,000
C
401 N Michigan Ave
104,990
B
36 E Grand Ave
91,316
A
455 N Cityfront Plaza Dr
89,854
A
360 N Michigan Ave
76,855
C
740 N Rush St
71,501
C
* Indicates future available space **Block of space will be vacated in the upcoming quarter Italicized addresses indicate new blocks this quarter
Investment activity picked up slightly during the second quarter. The office portion and parking garage at 875 North Michigan (Hancock Center) traded for approximately $145 million, or $169 per square foot. The seller, a joint venture between the Deutsche Bank and NorthStar Realty, sold the asset to a venture led by the Hearn Co. and Mount Kellett Capital Management. Additionally, Tribeca Holdings is under contract to purchase the 343,000 square foot 625 North Michigan for $108 million, equating to an in-place capitalization rate of 6.0 percent. The North Michigan Avenue submarket is home to retailers, hotels, restaurants, entertainment venues, advertising and marketing agencies, and the large Northwestern Memorial Hospital campus. Its borders include Division Street (North), State Street (West), Lake Michigan (East), and the Chicago River (South).
NORTH MICHIGAN AVENUE SUMMARY Inventory (square feet)
A
B
C
Total
3,949,554
4,715,830
4,268,249
12,933,632
Year to Date Absorption (square feet)
61,307
(41,046)
(52,568)
(32,307)
Direct Vacancy Rate
16.3%
24.4%
20.1%
20.5%
Total Vacancy Rate (Direct + Sublease)
20.8%
25.2%
21.7%
22.7%
SUBMARKET SNAPSHOTS
ComPsych signed the CBD’s second largest lease of the quarter, extending its lease by three years at 455 North Cityfront (NBC Tower) while expanding their footprint by 23,000 square feet to 128,000 square feet. Direct response TV advertising agency A. Eicoff renewed its 24,000 square foot lease at 401 North Michigan, representing the submarket’s only other lease greater than 20,000 square feet.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS DISTRICT
NORTH MICHIGAN AVENUE
Numbers in parantheses are negative
NORTH MICHIGAN AVENUE SUBMARKET HISTORICAL DIRECT VACANCY 25% 20% 15%
12.7%
14.0%
14.0%
11.8%
11.4%
16.7%
18.2%
19.5%
20.5%
20.5%
5%
10.8%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
44
4
Vacancy lowest in CBD despite second quarter losses For the first time in over three years, the River North submarket experienced quarterly net negative absorption. Occupancy fell by 106,000 square feet, increasing its direct vacancy rate 70 basis points to 9.5 percent. Even so, it is the most occupied submarket, with vacancy rates more than 5.0 percent below the overall market rate. Sublease vacancy decreased nearly 100,000 square feet, offsetting the total vacancy increase Despite the drop in total sublease availability, several large blocks remain. AT&T, Level 3 Communications and Career Education Corporation are all marketing their respective spaces at 350 West Mart, 600 West Chicago, and 222 Merchandise Mart for a combined total of 450,000 square feet.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
600 W Chicago Ave
117,101
B
350 W Mart Ctr **
87,404
C
350 W Mart Ctr
87,393
C
222 Merchandise Mart Plz
68,829
B
350 W Mart Ctr
64,639
C
321 N Clark St
61,431
A
CENTRAL BUSINESS DISTRICT
RIVER NORTH
**Block of space will be vacated in the upcoming quarter Itlicized addresses indicate new blocks this quarter
Urban Innovations, which typically own in River North has expanded into the River West area as River North availabilities tighten. They purchased a two building Class B portfolio from Wells Fargo for $14 million or $92 per square foot. Located at 322 South Green and 833 West Jackson, Urban Innovations has already closed over 13,000 square feet in leases and raised total occupancy to 76 percent. Erie Properties sold the 113,000 square foot 363 West Erie to Brijus Capital. After spending $8.5 million for the property, Brijus Capital will add an addition $5 million in upgrades and tenant improvement allowances. The borders of the River North submarket are defined as Division Street (North), Racine Avenue (West), State Street (East), Fulton Street, and the Chicago River (South). It has historically been home to small, older buildings catering to art galleries, furniture studios, and small businesses but has recently seen an influx of technology, law, trading, and financial firms.
RIVER NORTH SUMMARY Inventory (square feet)
A
B
C
Total
3,989,336
3,767,873
5,512,173
13,269,382
Year to Date Absorption (square feet)
17,704
25,263
(100,819)
(57,852)
Direct Vacancy Rate
10.6%
6.6%
10.7%
9.5%
Total Vacancy Rate (Direct + Sublease)
11.2%
18.0%
13.7%
14.2%
SUBMARKET SNAPSHOTS
Google (Motorola Mobility) continued to add space at 222 Merchandise Mart, increasing their square footage by 32,000, bringing its total to 604,000 square feet. Thornton Tomasetti, an international engineering firm, expanded into the entire 15th floor at 330 North Wabash where they will occupy 32,000 square feet through 2023.
Numbers in parantheses are negative
RIVER NORTH SUBMARKET HISTORICAL DIRECT VACANCY 25% 20% 15%
19.3%
14.5%
12.6%
10.6%
9.2%
15.8%
13.6%
11.7%
9.1%
9.5%
5%
11.9%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
5
5
The CBD’s smallest submarket continues to lag overall market With less total inventory than individual building classes throughout other submarkets, the South Loop is subject to large swings in vacancy rates. The second quarter proved quiet for the South Loop, with direct vacancy dropping 10 basis points to 25.7 percent.
LARGEST BLOCK OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
440 S LaSalle St *
154,200
A
440 S LaSalle St *
55,475
A
440 S LaSalle St * 53,143 A There were no lease transactions greater than 20,000 square feet. Leasing at the South Loop’s only Class A building, 440 South LaSalle * Indicates future available space (One Financial Place) was responsible for all of the positive activity. Even so, a 154,000 square foot block of contiguous space as well as two 55,000 square foot blocks remain at the building.
The boundaries of the South Loop include Van Buren Street (North), I-90/I-94 (West), Lakeshore Drive (East), and 16th Street (South). The South Loop is populated primarily with education, small businesses, and converted residential properties.
SOUTH LOOP SUMMARY Inventory (square feet)
A
C
Total
1,019,325
1,145,800
2,165,125
Year to Date Absorption (square feet)
21,682
(2,572)
19,110
Direct Vacancy Rate
27.6%
24.1%
25.7%
Total Vacancy Rate (Direct + Sublease)
28.7%
24.1%
26.2%
SUBMARKET SNAPSHOTS
Despite its direct access to CTA trains and the LaSalle Street Metra Station, the South Loop in general has struggled to attract tenants looking for top-quality space. This is due in large part to the fact that Class C buildings make up over half of its inventory, with the remaining 1,000,000 square feet coming from 440 South LaSalle. The South Loop submarket will continue to trail the recovery as tenants leave its Class C buildings in an effort to upgrade their office space to take advantage of attractive rents.
CENTRAL BUSINESS DISTRICT
SOUTH LOOP
Numbers in parantheses are negative
SOUTH LOOP SUBMARKET HISTORICAL DIRECT VACANCY 30% 25% 20% 15%
19.1%
16.3%
12.3%
14.5%
14.5%
12.9%
18.6%
23.0%
27.3%
25.7%
5%
20.5%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
6
6
CBD’s largest submarket shows no sign of slowing While adding positive absorption of 215,000 square feet this quarter, the West Loop has had only one quarter of negative absorption in three years. Led by 162,000 square feet of positive absorption in Class A buildings, all building classes saw decreased vacancies, lowering overall direct vacancy 50 basis points to 13.4 percent. The CBD’s largest submarket trails only the East Loop in year-to-date positive absorption.
Size (sf)
Building Class
500 W Monroe St
311,049
A
233 S Wacker Dr **
285,994
A
540 W Madison St *
250,553
A
311 W Monroe St
214,490
C
300 S Riverside Plz *
198,302
B
111 N Canal St *
176,520
C
111 N Canal St *
131,520
C
233 S Wacker Dr *
125,553
A
222 S Riverside Plz *
103,128
B
97,716
A
227 W Monroe St
* Indicates future available space **Block of space will be vacated in the upcoming quarter
Mirae Asset Global Investments, a South Korean based financial services company, entered the Chicago CBD market with their purchase of 225 West Wacker from J.P. Morgan Chase. The $218 million purchase price translates to a 5.5 percent in-place capitalization rate, well below the average rate recently seen for similar downtown properties. Sterling Bay, after purchasing and redeveloping 400 South Jefferson, sold the 230,000 square foot building to Cole Real Estate Investments for $97.5 million or $424 per square foot. The building was fully leased to Hillshire Brands, and allowed Sterling Bay and their equity partners to realize a nearly 67 percent gain on their investment for the purchase and redevelopment of the property.
SUBMARKET SNAPSHOTS
Large lease transactions were again concentrated in the West Loop. The largest lease of the year was signed during the second quarter by Google who will occupy 200,000 square feet, with the option to expand, at the soon to be completed 1000 West Fulton redevelopment located just west of the West Loop. SNR Denton is in advanced negotiations to consolidate its space from 177,000 square feet to 125,000 square feet by relocating within 233 South Wacker (Willis Tower). This will allow the firm to modernize its space without disrupting day-to-day operations.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS DISTRICT
WEST LOOP
The West Loop’s borders are defined as the Chicago River (North), I-94/I-90 (West), Wells Street (East), and Van Buren Street (South). WEST LOOP SUMMARY
A
B
C
Total
27,167,750
9,731,161
6,334,676
43,233,588
321,314
(8,732)
(92,603)
219,980
Direct Vacancy Rate
13.5%
10.9%
17.0%
13.4%
Total Vacancy Rate (Direct + Sublease)
16.9%
12.4%
18.0%
16.1%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parantheses are negative
WEST LOOP SUBMARKET HISTORICAL DIRECT VACANCY 20% 18% 16% 14% 12% 10% 8%
17.3%
11.5%
10.2%
11.8%
16.6%
15.8%
14.2%
13.9%
13.4%
2%
14.4%
4%
14.6%
6%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
7
7
SUBURBAN CHICAGO
SUBMARKET MAP
FEATURES SECOND QUARTER 2013 | CHICAGO MARKET OVERVIEW
8
Suburban market’s largest submarket leads overall recovery The East-West submarket continued its strong start to 2013 with nearly 100,000 square feet in net positive absorption. Class A buildings, after a disappointing finish to 2012, have now experienced 402,000 square feet in 2013 net positive absorption. Class B buildings continued to lose occupancy with 96,000 square feet in negative absorption, causing direct vacancy to increase 70 basis points to 24.4 percent.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
700 Oakmont Ln
Westmont
256,767
A
2400 Cabot Dr
Lisle
217,718
A
535 E Diehl Rd
Naperville
83,792
A
2000 S Finley Rd
Lombard
78,300
B
2655 Warrenville Rd
Downers Grove
76,691
A
4343 Commerce Ct *
Lisle
74,804
A
3050 Highland Pky *
Downers Grove
74,319
A
3075 Highland Pky
Downers Grove
72,156
A
333 E Butterfield Rd
Lombard
70,897
B
2135 CityGate Ln
Naperville
70,537
A
* Indicates future available space
Two buildings over 50,000 square feet were traded during the second quarter as investment activity continued at a tepid pace. The nearly fully leased building at 2001 York Road in Oak Brook was sold by CWCapital Asset Management for $34 million, or $185 per square foot, to Pembroke Hobson. Deutsche Asset and Wealth Management purchased the 94,000 square foot building at 9022 Heritage Parkway in Woodridge. The seller, Oak Realty Group, sold the Class B building which is fully leased to Allstate for $13.3 million or $141 per square foot.
The East-West submarket continues to struggle with a high concentration of large blocks greater than 50,000 square feet. With 24 blocks of direct availability and another seven of sublease availability, landlords continued to decrease asking rental rates, which are down an average of 2.0 percent over the past year.
SUBMARKET SNAPSHOTS
Multiple leases for spaces greater than 20,000 square feet were signed. The largest transaction on a square foot basis was Farmers Insurance’s renewal of 66,000 square feet at 2245 Sequoia Drive in Aurora. Wells Fargo signed a new lease for 31,000 square feet on floors 4-5 at 1 East 22nd Street in Lombard.
City
SUBURBAN CHICAGO
EAST-WEST
The East-West submarket encompasses Cook, DuPage, Kane, Kendall, and Will Counties, with major cities including Downers Grove, Lisle, Naperville, and Oak Brook.
EAST-WEST SUMMARY
A
B
C
Total
20,690,949
14,514,633
5,158,340
40,363,922
402,215
(194,954)
57,865
265,126
Direct Vacancy Rate
19.4%
24.4%
24.3%
21.8%
Total Vacancy Rate (Direct + Sublease)
23.5%
28.1%
24.5%
25.3%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parantheses are negative
EAST-WEST SUBMARKET HISTORICAL DIRECT VACANCY 25% 20% 15%
20.1%
19.3%
17.1%
17.2%
18.9%
21.5%
22.1%
21.6%
22.4%
21.8%
5%
22.6%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
9
Class A buildings lead the most in-demand submarket The North submarket was the strongest performing segment in the Suburban market, experiencing 174,000 square feet in positive absorption. With direct vacancy dropping 60 basis points to 20.3 percent, the North submarket has the lowest direct vacancy rate of the Suburban submarkets. Class A buildings experienced 160,000 square feet in positive absorption, while Class B and C buildings contributed minimal net absorption.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Sublease vacancy of nearly 1.2 million square feet in the North submarket accounts for nearly 4.3 percent of total vacancy, the highest percentage in the overall market. Despite decreasing 150,000 square feet, the Class A sublease segment still accounts for 6 percent of total Class A inventory.
City
Size (sf)
Building Class
600 N US Highway 45 *
Libertyville
1,121,186
A
300 Tower Pky
Lincolnshire
175,545
A
1000 Milwaukee Ave
Glenview
161,667
A
25 Tri State International
Lincolnshire
112,541
A
1 Overlook Pt
Lincolnshire
111,327
A A
Deerfield
107,625
2355 Waukegan Rd
Bannockburn
106,495
A
75 Tri State International
Lincolnshire
86,036
A
544 Lakeview Pky
Vernon Hills
84,237
B
2-4-6 Genesee St
Waukegan
75,996
C
Large lease activity remained hard to come by with only two * Indicates future available space leases larger than 20,000 square feet being signed in the North submarket. An undisclosed tenant occupied 49,000 square feet at 75 North Fairway Drive in Vernon Hills; bringing the building to 100% occupancy. BigMachines, a configuration, pricing and quoting solutions firm, increased their footprint by nearly 50 percent, expanding into 52,000 square feet at 570 Lake Cook Road in Deerfield. While no buildings over 50,000 square feet traded during the second quarter, two buildings were put on the market, while 1 Kraft Court in Glenview is now under contract. Illinois Tool Works has agreed to purchase the 500,000 square foot former Kraft Campus from Hamilton Partners and plan to redevelop the 57-acre property to include retail space. Walgreens is marketing its 575,000 square foot headquarters at 1411-1435 Lake Cook Road in Deerfield. They intend to perform a sale-leaseback and hope to attract institutional investors seeking a low-risk, long-term cash flow.
SUBMARKET SNAPSHOTS
3 Parkway Blvd N
SUBURBAN CHICAGO
NORTH
The North submarket is located within portions of Cook and Lake Counties, with major cities including Bannockburn, Deerfield, Evanston, Glenview, Highland Park, Lake Forest, Northbrook, and Vernon Hills.
NORTH SUMMARY Inventory (square feet)
A
B
C
Total
16,878,216
7,368,656
2,500,821
26,747,693
Year to Date Absorption (square feet)
4,015
93,979
13,311
111,304
Direct Vacancy Rate
21.7%
16.6%
21.8%
20.3%
Total Vacancy Rate (Direct + Sublease)
27.5%
18.3%
22.9%
24.5%
NORTH SUBMARKET HISTORICAL DIRECT VACANCY 25% 20% 15%
17.6%
16.5%
16.1%
12.5%
14.5%
17.5%
19.6%
20.6%
20.7%
20.3%
5%
17.5%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
10
Woes return for suburbs’ most distressed submarket After five straight quarters of positive absorption, the second largest submarket in the suburbs experienced net negative absorption of 48,000 square feet. This raised direct vacancy 10 basis points to 25.1 percent, the first increase in vacancy since 2011. The decline was driven by Class A buildings, which was the only segment to experience negative absorption.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
2850 W Golf Rd
Rolling Meadows
279,286
B
21440 Lake Cook Rd
Deer Park
277,200
A
1299 Algonquin Rd
Schaumburg
195,393
C
5550 Prairie Stone Pky *
Hoffman Estates
193,601
A
1701 Golf Rd
Rolling Meadows
183,506
A C
3501 Algonquin Rd
Rolling Meadows
156,140
2895 Greenspoint Pky
Hoffman Estates
150,603
A
3890 Salem Lake Dr
Long Grove
150,000
B
3333 Beverly Rd
Hoffman Estates
129,000
A
700 N Wood Dale Rd
Wood Dale
125,328
B
* Indicates future available space
The Northwest submarket saw one portfolio trade and another put up for sale. The Continental Tower Complex, a 911,000 square foot portfolio at 1701 West Golf Road in Rolling Meadows, was sold by CWCapital Asset Management to GlenStar Properties for $59 million. The Class A property exemplifies the distress seen in the submarket, as it was only 53 percent occupied at the time of sale. Additionally, Pearlmark Real Estate is marketing its 432,000 square foot portfolio at 1700-1750 East Gold Road (Century Centre). The Class A property is expected to garner bids near $45 million.
SUBMARKET SNAPSHOTS
Capital One signed the largest lease of the quarter, agreeing to expand into an additional 68,000 square feet at 3800 Golf Road in Rolling Meadows. They originally signed a 150,000 square foot lease in 2012. GN Otometrics expanded into 25,000 square feet at 50 East Commerce Drive in Schaumburg. The lease represents a 9,000 square foot expansion at the hearing and balance software companies North American headquarters.
City
SUBURBAN CHICAGO
NORTHWEST
The Northwest submarket is located within the portions of Cook, Kane, Lake, and McHenry Counties, with major cities including Arlington Heights, Itasca, Rolling Meadows, and Schaumburg.
NORTHWEST SUMMARY
A
B
C
Total
18,507,818
9,632,574
2,539,686
30,680,078
(34,456)
170,741
35,297
171,581
Direct Vacancy Rate
21.3%
31.6%
28.2%
25.1%
Total Vacancy Rate (Direct + Sublease)
23.6%
32.5%
29.4%
26.9%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parantheses are negative
NORTHWEST SUBMARKET HISTORICAL DIRECT VACANCY 30% 25% 20% 15%
15.2%
16.5%
18.1%
18.8%
21.3%
22.7%
24.4%
27.7%
25.8%
25.1%
5%
18.8%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
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Asking rates decline significantly in smallest submarket While the O’Hare submarket has experienced positive absorption in the last five quarters, only two of those quarters saw numbers in excess of 10,000 square feet. Again in the second quarter, demand was essentially flat as the direct vacancy rate fell less than 10 basis points to 24.9 percent. The smallest submarket continues to have the second highest vacancy rates in the Suburban market.
LARGEST BLOCKS OF DIRECT AVAILABILITY City
Size (sf)
Building Class
5450 N Cumberland Ave 2350-2360 E Devon Ave
Chicago
143,525
B
Des Plaines
142,596
B
8420 W Bryn Mawr Ave **
Chicago
104,164
A
4242 N Harlem Ave
Norridge
93,155
B
8750 W Bryn Mawr Ave
Chicago
90,101
A
5100 River Rd *
Schiller Park
74,988
A
1350 E Touhy Ave
Des Plaines
71,367
B
10255 W Higgins Rd
Rosemont
69,695
A
8550 W Bryn Mawr Ave *
Chicago
66,895
B
9500 W Bryn Mawr Ave
Rosemont
60,680
A
* Indicates future available space **Block of space will be vacated in the upcoming quarter
Lease transactions in excess of 20,000 square feet were nonexistent as increases in occupancy have come from small, existing users. Additionally, there was no investment activity greater than 50,000 square feet as large block availabilities account for nearly 7 percent of O’Hare inventory. Made up of 12 blocks of contiguous space greater than 50,000 square feet, this glut has contributed to investors caution in the O’Hare submarket.
SUBMARKET SNAPSHOTS
Average direct asking rents continued to decrease, down a market high of 7.7 percent on a year-over-year basis. This movement had previously led to increased absorption in Class A, but did not translate into significant declines in direct vacancy in the second quarter.
Building Address
SUBURBAN CHICAGO
O’HARE
The O’Hare submarket is located in northwestern Cook County surrounding O’Hare International Airport, with major cities including northwestern Chicago, Elk Grove Village, and Rosemont.
O'HARE SUMMARY
A
B
C
Total
7,875,762
4,335,770
2,506,406
14,717,938
171
32,486
(24,560)
8,097
Direct Vacancy Rate
18.3%
29.6%
37.5%
24.9%
Total Vacancy Rate (Direct + Sublease)
20.4%
30.4%
37.5%
Inventory (square feet) Year to Date Absorption (square feet)
26.3%
Numbers in parantheses are negative
O’HARE SUBMARKET HISTORICAL DIRECT VACANCY 30% 25% 20% 15%
19.4%
20.8%
18.2%
19.0%
21.4%
27.3%
26.1%
26.0%
24.9%
24.9%
5%
20.0%
10%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD 2013
0%
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
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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.
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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
MAUREEN G. GROVE Vice President & Managing Director of Accounting Services
DANIEL J. NIKITAS Executive Vice President of Corporate Services & Tenant Advisory Services
JOHN T. MURPHY President
KEVIN M. PURCELL Executive Vice President & Chief Operating Officer
PETER J. WESTMEYER Executive Vice President & Managing Director of Investment Services & MBRE Healthcare Group
SECOND QUARTER 2013 | CHICAGO SUBMARKET SNAPSHOTS
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