FOURTH QUARTER
2016
CHICAGO SUBURBAN MARKET OVERVIEW
F OU RT H Q UA RT E R
2016 CHICAGO SUBURBAN MARKET OVERVIEW
TABLE OF CONTENTS SE CT ION ONE
CHICAGO ECONOMY 01 Economic Analysis SE CT ION T WO
SUBURBAN CHICAGO 02 Suburban Chicago Executive Summary SUPPLY 03 New Developments 04 Sublease Space 05 Large Blocks of Direct Availability DEMAND 06 Vacancy Rates 07 Large Deals 08 Absorption FEATURES
2013 The Chicago Market Overview is published quarterly by MB Real Estate. To obtain additional copies or for further information, please contact: Caitlin Ritter, Research Manager 181 West Madison Street, Suite 4700 Chicago, Illinois 60602 (312) 487-5977 critter@mbres.com www.mbres.com
09 10 11 12 13
Gross Asking Rents Investment Sales Forecast Market Statistics Submarket Map SUBURBAN SUBMARKET SNAPSHOTS
14 15 16 17
East-West North Northwest O’Hare
SE CT ION T H RE E
ADDITIONAL INFORMATION 18 Glossary 19 About MB Real Estate
CHICAGO ECONOMY ECONOMIC ANALYSIS Total nonfarm payroll employment increased nationally by 156,000 in December with the unemployment rate down to 4.7 percent overall. According to the Bureau of Labor Statistics, job gains primarily occurred in healthcare and social assistance. According to the Illinois Department of Employment Security’s (IDES) latest figures, the November 2016 unemployment rate for Chicago’s total MSA, including parts of Northwest Indiana and Southern Wisconsin, was 5.3 percent, down from 5.4 percent in November 2015. Chicago’s total MSA nonfarm payroll employment increased by 37,900 during the same time period, with gains occurring primarily in the professional and business services, as well as leisure and hospitality.
CENTRAL BUSINESS CHICAGO ECONOMICDISTRICT ANALYSIS
SECTION ONE
In December, the Federal Reserve increased interest rates for the second time in ten years. The 25 basis point increase, from a range of 0.25 to 0.5 percent to a range of 0.5 to 0.75 percent, was widely expected. Three additional quarter point interest rate increases are projected for 2017. HISTORIC UNEMPLOYMENT RATE
Chicago MSA Unemployment Rate
2016
2015
2014
2013
2012
2011
2010
13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% National Unemployment Rate
CHICAGO MSA EMPLOYMENT CHANGE BY INDUSTRY (NOVEMBER 2015 - NOVEMBER 2016) Professional and Business Services
23,200
Leisure and Hospitality
12,100
Construction
4,000
Trade, Transportation, and Utilities
3,300
Government
3,000
Educational and Health Services
2,700
Other Services
1,400
Natural Resources and Mining
(100)
Manufacturing
(1,900)
Information Financial Activities
(3,300)
(6,500)
Source: Bureau of Labor Statistics
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
31
SUBURBAN CHICAGO
SECTION TWO
SUBURBAN CHICAGO EXECUTIVE SUMMARY The Chicago suburban office market remained stable in the fourth quarter of 2016, ending the year with an overall direct vacancy rate of 20.24 percent, up from 19.86 percent at the end of 2015. There was 327,562 square feet of negative absorption, which brought the year’s total down to 686,468 square feet of negative absorption. Key Indicators: • There were 16 large deals signed in the fourth quarter in the suburban market, bringing the year’s total up to 63. Only one of the deals signed in the fourth was larger than 100,000 square feet: Ingredion’s renewal of 114,000 square feet at Westbrook Corporate Center in the East-West submarket. • The sublease market decreased by just 1,711 square feet in the fourth quarter of 2016, keeping the total amount of available sublease space at a historic low of 2,414,352 square feet. • The overall average direct gross asking rent for the suburbs decreased 2.8 percent from the fourth quarter of 2015 to $20.08 in the fourth quarter of 2016. • Approximately 2.8 million square feet of suburban office space sold in the fourth quarter of 2016, bringing the year-end total to nearly 11 million square feet. • OUTLOOK: With no new developments on the immediate horizon, it is unlikely that the suburban market will see substantial change in the next year.
SUBURBAN VACANCY AND 4TH QUARTER ABSORPTION SUMMARY Direct Vacancy 4Q2016 East-West
A
Change from 3Q2016
B
Change from 3Q2016
C
Change from 3Q2016
Total
Change from 3Q2016
18.5%
-0.3%
17.0%
0.1%
18.7%
-0.1%
18.0%
-0.1%
North
20.3%
0.0%
22.7%
0.3%
16.9%
0.5%
20.7%
0.2%
Northwest
21.6%
2.5%
27.8%
0.8%
20.3%
-0.2%
23.4%
1.8%
O'Hare
13.7%
-1.3%
19.2%
-2.4%
36.9%
-0.1%
18.9%
-1.5%
19.3%
0.5%
21.4%
0.0%
22.0%
0.2%
20.2%
0.3%
Suburban Chicago Total Net Absorption 4Q2016
A
B
C
Total
East-West
67,241
(6,776)
(15,840)
44,625
North
(5,635)
(25,861)
(12,007)
(43,503)
(460,447)
(69,708)
4,209
(525,946)
98,410
90,956
7,896
197,262
(300,431)
(11,389)
(15,742)
(327,562)
Northwest O'Hare
Suburban Chicago Total
Numbers in parentheses are negative
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
2
New Office Tower Proposed For O’Hare Submarket
The only office buildings over 50,000 square feet currently under construction are two medical office developments and two single tenant build-to-suit projects. These projects will not be considered additional office market inventory because they will not be available for lease.
SUBURBAN CHICAGO
NEW DEVELOPMENT
There are multiple developers marketing office space at proposed new suburban developments. The five largest proposed office developments are listed in the table below. The newest proposal is for a 300,000 square foot, 11-story office tower near O’Hare International Airport in Chicago. GlenStar Properties is seeking an anchor tenant or single build-to-suit tenant to launch the project.
SUPPLY
NEW DELIVERIES PIPELINE 2016 Deliveries Building Address
Size (sf)
% Leased
Submarket
Delivery
Comments
Size (sf) % Pre-leased
Submarket
Due Date
Comments
Size (sf) % Pre-leased
Submarket
Due Date
Comments
North East-West O'Hare East-West O'Hare
None None None None None
International Corporate Park - Build-To-Suit Ryan Companies want to build three 3-story office buildings Pointe O'Hare II - Build-To-Suit Hamilton Partners want to build four low to mid rise office buildings GlenStar Properties wants to build an 11-story tower
Total - 0 Properties
Under Construction Building Address Total - 0 Properties
Proposed Building Address 100-199 S. Milwaukee Ave, Vernon Hills 2000 York Rd, Oak Brook 9550 W. Higgins Rd, Rosemont Eola Rd at 1-88, Aurora 8655 W. Higgins Rd, Chicago
405,920 400,000 346,995 330,000 300,000
0.0% 0.0% 0.0% 0.0% 0.0%
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
3
Suburban Sublease Market Remains Tight • The sublease market decreased by just 1,711 square feet in the fourth quarter of 2016, keeping the total amount of available sublease space at a historic low of 2,414,352 square feet.
SUBURBAN CHICAGO
SUBLEASE SPACE
• Only one large block of available sublease space was added to the market in the fourth quarter: DeVry University’s 70,973 square foot space at 2349 W. Lake St in Addison. • Approximately 48 percent of the total available suburban sublease space is in the East-West submarket, the majority of which is Class B space.
SUBLEASE MARKET CONTRACTS TO HISTORIC LOW SUPPLY
3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2003
2004
2005
Class A
2006
2007
2008
2009 Class B
2010
2011
2012
2013
2014
2015
2016
Class C
LARGE BLOCKS (MORE THAN 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
4
Plentiful Inventory of Class A Large Blocks
• There are currently a total of 103 direct, available large blocks (greater than 50,000 square feet) across all classes. • The largest direct block of space on the market continues to be 1,300,000 square feet at 2000 W. Att Center Dr in Hoffman Estates, which AT&T vacated in August 2016. • The largest block to go on the market is 348,000 square feet at 1301 E. Algonquin Rd in Schaumburg, which Motorola Solutions will be vacating in May 2017.
City
1301 E. Algonquin Rd 2001 Lakewood Blvd 1299 E. Algonquin Rd 1000 E. Woodfield Rd 5450 N. Cumberland Ave 141 NW Point Blvd 6300 N. River Rd 5201 Tollview Dr 700 N. Wood Dale Rd 750 N. Commons Dr 920-1014 E. Algonquin Rd 2601 Navistar Dr, Building 2 1350 E. Touhy Ave 703-709 W. Algonquin Rd 747 E. 22nd St 2601 Navistar Dr, Building 4 1260 Navistar Dr, Building 3 2400 E. Devon Ave 329-331 S. York Rd 1000 Plaza Dr 1260 Navistar Dr, Building 5 536-616 Atrium 999 E. Touhy Ave 1721 Moon Lake Blvd 2100 Swift Dr 1301 Basswood Rd 300 Bauman Ct 350 E. Dundee Rd
Schaumburg Hoffman Estates Schaumburg Schaumburg Chicago Schaumburg Rosemont Rolling Meadows Wood Dale Aurora Schaumburg Lisle Des Plaines Arlington Heights Lombard Lisle Lisle Des Plaines Bensenville Schaumburg Lisle Vernon Hills Des Plaines Hoffman Oakbrook Schaumburg Wood Dale Wheeling
28 Blocks of Space
Size (sf)
Submarket
348,000 287,000 200,000 184,574 143,525 141,642 137,942 126,284 125,323 112,605 110,488 107,700 98,357 96,213 95,078 89,703 83,713 72,975 72,000 68,433 65,379 60,209 59,710 57,758 57,560 54,640 52,259 49,688
Northwest Northwest Northwest Northwest O'Hare Northwest O'Hare Northwest Northwest East-West Northwest East-West O'Hare Northwest East-West East-West East-West O'Hare O'Hare Northwest East-West North O'Hare Northwest East-West Northwest Northwest North
3,158,758
CLASS C Building Address
City
9401 W. Grand Ave 3501 Algonquin Rd 150 S. Lincolnway 2-4 N. Genesee
Franklin Park Rolling Meadows North Aurora Waukegan
4 Blocks of Space
Size (sf)
Submarket
269,014 101,714 77,006 63,000
O'Hare Northwest East-West North
510,734
City
2000 W. Att Center Dr 600 N. US Highway 1450 American Ln 1000 Milwaukee Ave 3100 Sanders Rd 263 Shuman Blvd 2 Overlook Pt 700 Oakmont Ln 4201 Winfield Rd 2550 W. Golf Rd 2400 Cabot Dr 2 Pierce Pl 1707 N. Randall Rd 300 Tower Pky 9600 W. Bryn Mawr Ave 100 Half Day Rd 2655 Warrenville Rd 21440 Lake Cook Rd 300 N. Field Dr 2441 Warrenville Rd 1400 American Ln 777 Big Timber Rd 8750 W. Bryn Mawr Ave 1 N. Field Ct 455 Knightsbridge Pky 1500 McConnor Pky 1500 W. Shure Dr 3333 Finley Rd 2355 Waukegan Rd 2 Pierce Pl 1501 E. Woodfield Rd 1250 N. Arlington Heights Rd 3333 Beverly Rd 98 Half Day Rd 1200 Townline Rd, East Building 4343 Commerce Ct 1200 Townline Rd, West Building 1333 Burr Ridge Pky 1 Tower Ln 1660 Feehanville Dr 2200 Cabot Dr 3333 Beverly Rd 100 S. Saunders Rd 4 Westbrook Corporate Ctr 2056 Westings Ave 333 Knightsbridge Pky 4320 Winfield Rd 2100 E. Lake Cook Rd 300 N. Milwaukee Ave 3050 Highland Pky 1 Overlook Pt 2870 Forbs Ave 200 N. Martingale Rd 3 Parkway Blvd N 1000 Royce Blvd 4201 Lake Cook Rd 2000 Spring Rd 1200 Townline Rd, North Building 410 Warrenville Rd 1 Tower Ln 300 N. Martingale Rd 485 E. Half Day Rd 150 NW Point Blvd 555 Pierce Rd 9500 W. Bryn Mawr Ave 90 Half Day Rd 1700 W. Higgins Rd 2895 Greenspoint Pky 8725 W. Higgins Rd 3010 Highland Pky 20 N. Martingale Rd
Hoffman Estates Libertyville Schaumburg Glenview Northbrook Naperville Lincolnshire Westmont Warrenville Rolling Meadows Lisle Itasca Elgin Lincolnshire Rosemont Lincolnshire Downers Grove Deer Park Lake Forest Lisle Schaumburg Elgin Chicago Lake Forest Lincolnshire Schaumburg Arlington Heights Downers Grove Bannockburn Itasca Schaumburg Itasca Hoffman Estates Lincolnshire Mundelein Lisle Mundelein Burr Ridge Oakbrook Mount Prospect Lisle Hoffman Estates Lake Forest Westchester Naperville Lincolnshire Warrenville Buffalo Grove Vernon Hills Downers Grove Lincolnshire Hoffman Estates Schaumburg Deerfield Oakbrook Terrace Northbrook Oakbrook Mundelein Lisle Oakbrook Schaumburg Buffalo Grove Elk Grove Itasca Rosemont Lincolnshire Des Plaines Hoffman Estates Chicago Downers Grove Schaumburg
71 Blocks of Space
Size (sf)
1,300,000 966,091 440,538 405,039 365,268 354,000 302,678 256,767 250,000 216,592 205,633 203,493 202,463 175,545 161,676 154,998 149,615 145,020 136,000 132,134 131,971 125,000 117,791 116,041 115,485 114,284 107,161 103,368 103,115 101,869 101,768 100,525 100,000 97,230 96,672 96,273 91,053 90,000 89,896 87,453 87,364 86,637 85,816 82,728 80,792 80,503 79,766 77,502 75,444 74,319 72,449 72,000 70,385 68,452 68,000 66,000 65,679 65,100 63,409 62,014 61,724 58,398 57,584 57,261 56,454 56,000 53,645 52,851 52,259 52,118 51,616
Submarket
Northwest North Northwest North North East-West North East-West East-West Northwest East-West Northwest Northwest North O'Hare North East-West Northwest North East-West Northwest Northwest O'Hare North North Northwest Northwest East-West North Northwest Northwest Northwest Northwest North North East-West North East-West East-West Norhwest East-West Northwest North East-West East-West North East-West North North East-West North Northwest Northwest North East-West North East-West North East-West East-West Northwest North Northwest Northwest O'Hare North O'Hare Northwest O'Hare East-West Northwest
SUPPLY
CLASS B Building Address
CLASS A Building Address
SUBURBAN CHICAGO
LARGE BLOCKS OF DIRECT AVAILABILITY
10,704,774
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
5
Direct Vacancy Increases Slightly • The overall direct vacancy rate for the suburbs increased by 30 basis points from 19.94 percent in the third quarter to 20.24 percent in the fourth quarter.
SUBURBAN CHICAGO
VACANCY RATES
• The Northwest submarket continues to carry the highest direct vacancy rate of the suburban submarkets. The overall direct vacancy rate in the Northwest submarket increased by 1.76 percent in the fourth quarter to 23.39 percent. • The overall direct vacancy rate in the O’Hare submarket decreased by 1.46 percent to 18.9 percent, the lowest direct vacancy rate of the suburban submarkets. The O’Hare Class A vacancy rate decreased by 1.25 percent in the fourth quarter to 13.71 percent, which is the lowest vacancy rate in the suburban market. DEMAND
HISTORIC YEAR-END VACANCY RATES BY SUBMARKET 30% 25% 20% 15% 10% 5% 0% 2006
2007
East-West
2008
2009
2010
North
2011
2012
Northwest
2013
2014
O'Hare
2015
2016
Total Suburban
VACANCY RATES BY CLASS 30% 25% 20% 15% 10% 5% 0% 2006
2007 Class A
2008
2009
2010
Class B
2011
2012 Class C
2013
2014
2015
2016
Total Suburban
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
6
North and Northwest Submarkets See Majority of New Deals • A total of 63 large deals were signed in 2016, 42 of which were new deals and 21 of which were renewals, expansions or subleases. The largest deal signed in 2016 was Paylocity’s lease of 309,559 square feet in Schaumburg.
SUBURBAN CHICAGO
LARGE DEALS
• In the fourth quarter, 16 large suburban deals were executed with a total of 635,852 square feet. • Only one of the deals signed in the fourth was larger than 100,000 square feet: Ingredion’s renewal of 114,000 square feet at Westbrook Corporate Center in the East-West submarket. • The largest new suburban deal was Vyaire’s lease of 96,360 square feet at Woodland Falls Corporate Center, located at 26125 N. Riverwoods Blvd in Mettawa. Brunswick also signed a new deal in the same building for 55,552 square feet. Due to the Vylair and Brunswick deals the Woodland Falls Corporate Center is now fully leased. DEMAND
LARGE LEASE TRANSACTIONS
NEW Tenant
Type
Submarket
Building Address
Size (sf)
Vyaire First Midwest Bank* Captive Resources Valent Biosciencs Corporation Brunswick Corporation Swiss RE Management Marcum LLP CBRE Plante Moran Delivercarerx Aptinyx
New New New New New New New New New New New
North O'Hare Northwest North North Northwest North East-West Northwest Northwest North
26125 N. Riverwoods Blvd, Mettawa 8750 W. Bryn Mawr, Chicago 1100 N. Arlington Heights Rd, Itasca 600 N. US Highway 45, Libertyville 26125 N. Riverwoods Blvd, Mettawa 1450 American Ln, Schaumburg 9 Parkway Blvd, Deerfield 700 Commerce Dr, Oak Brook 200 N. Martingale Rd, Schaumburg 1471 Business Center Dr, Mount Prospect 909 Davis St, Evanston
96,360 80,000 61,016 58,000 55,552 34,000 25,620 24,752 21,592 18,604 16,000
Total - 11 Deals
491,496
RENEWAL/EXPANSION/SUBLEASE Tenant
Type
Submarket
Building Address
Ingredion Aurico Reports TravelClick Fairway Independent Mortgage Corporation Honor Finance
Renewal Sublease Renewal Exp Exp
East-West Northwest Northwest East-West North
5 Westbrook Corporate Ctr, Westchester 3800 Golf Rd, Rolling Meadows 10 N. Martingale Rd, Schaumburg 550-650 Warrenville Rd, Lisle 909 Davis St, Evanston
Total - 5 Deals
Size (sf) 114,000 49,291 21,000 20,500 19,565
224,356
* MB Real Estate Transaction
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
7
Zurich North America Creates Negative Absorption • The overall suburban market had 327,562 square feet of negative absorption in the fourth quarter of 2016, which brought the year to date total down to 686,468 square feet of negative absorption. • The Northwest submarket had the most negative absorption in the fourth quarter with a total of negative 525,946 square feet overall. The negative absorption is primarily due to Zurich North America vacating 440,538 square feet at 1450 American Ln in Shaumburg and relocating into their newly built 783,800 square foot headquarters, which is also in Schaumburg.
SUBURBAN CHICAGO
ABSORPTION
• The O’Hare submarket had the most positive absorption in the fourth quarter with an overall total of 197,262 square feet. SUBURBAN CHICAGO ABSORPTION BY CLASS DEMAND
1,500,000 1,000,000 500,000 0 (500,000) (1,000,000) (1,500,000)
2007
2008
2009
2010
Class A
2011
Class B
2012
2013
2014
2015
2016
Class C
EAST-WEST
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Class A
542,281
(259,973)
(595,372)
(219,164)
299,247
(457,450)
(244,250)
433,096
164,310
66,466
Class B
(203,072)
(2,062)
(259,196)
67,827
(152,069)
92,876
(126,654)
167,940
424,193
241,280
Class C
(108,813)
(87,441)
(179,177)
7,017
55,114
(5,912)
24,289
(40,759)
21,967
27,786
Total
230,396
(349,476)
(1,033,744)
(144,319)
202,292
(370,486)
(346,615)
560,278
610,469
335,531
NORTH
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Class A
615,115
(240,617)
(207,914)
(312,238)
(261,008)
(365,450)
23,960
6,062
444,323
13,300
Class B
355,510
(60,982)
(38,575)
(319,078)
33,814
131,363
107,166
47,617
(82,433)
(720,188)
Class C
26,935
(2,048)
(104,195)
(40,044)
(90,151)
8,074
100,580
(22,607)
6,580
(21,621)
Total
997,560
(303,647)
(350,684)
(671,360)
(317,345)
(226,013)
231,686
31,072
368,469
(728,509)
NORTHWEST
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Class A
10,333
(302,930)
(388,945)
(21,262)
(632,282)
379,728
(14,767)
307,374
22,826
(492,414)
Class B
(164,112)
(261,498)
(310,263)
(295,928)
(383,730)
(19,395)
218,201
104,904
(95,169)
94,643
Class C
(51,429)
(28,362)
(35,167)
(192,091)
(48,617)
41,909
39,325
76,740
(30,073)
50,623
Total
(205,208)
(592,790)
(734,375)
(509,280)
(1,064,629)
402,242
242,758
489,018
(102,416)
(347,148)
O'HARE
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Class A
11,636
(256,325)
(134,526)
209,180
40,666
81,456
61,413
132,457
28,732
91,544
Class B
(81,167)
(51,601)
(80,925)
70,376
14,041
26,266
(144,235)
151,102
141,247
16,055
Class C
(50,022)
(35,696)
62,815
(10,855)
(14,567)
17,442
(29,258)
(24,682)
(36,397)
(53,942)
Total
(119,553)
(343,622)
(152,637)
268,701
40,140
125,164
(112,080)
258,876
133,582
53,657
TOTALS Class A
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
1,179,365
(1,059,845)
(1,326,757)
(343,484)
(553,378)
(361,716)
(173,665)
878,988
660,191
(321,104) (368,210)
Class B
(92,841)
(376,143)
(688,960)
(476,802)
(487,944)
231,110
54,478
471,564
387,837
Class C
(183,329)
(153,547)
(255,724)
(235,972)
(98,221)
61,512
134,936
(11,308)
(37,924)
2,846
Total
903,195
(1,589,535)
(2,271,441)
(1,056,259)
(1,139,542)
(63,094)
15,749
1,339,244
1,010,104
(686,468)
Numbers in parentheses are negative
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
8
Average Asking Rents Down Slightly
• The overall average direct gross asking rent for the suburbs decreased 2.8 percent from the fourth quarter of 2015 to $20.08 in the fourth quarter of 2016.
SUBURBAN CHICAGO
GROSS ASKING RENTS
• The largest increases were seen in Northwest submarket, particularly in Class A properties, where asking rents increased by 4.8 percent. • The Class A sector of the North and O’Hare submarkets demand the highest gross asking rents with $26.67 and $24.56 per square foot, respectively. • The highest gross asking rents seen in the entire suburban office market are currently $38.00.
Average Direct Gross Asking Rent
A
Change over last year
B
Change over last year
C
Change over last year
Total
Change over last year
East-West North Northwest O'Hare
$22.01 $26.67 $22.12 $24.56
-1.2% 2.3% 4.8% 3.2%
$17.78 $19.10 $16.59 $19.80
1.5% 1.2% -0.6% 2.6%
$16.26 $17.22 $14.88 $17.53
4.4% -0.6% 0.1% 4.3%
$20.01 $22.05 $20.21 $21.17
1.6% -5.1% 5.2% -0.9%
Suburban Chicago Total
$21.90
-5.4%
$17.62
-1.0%
$16.88
5.4%
$20.08
-2.8%
FEATURES
AVERAGE GROSS ASKING RATES BY CLASS AND SUBMARKET
CLASS A ASKING RATES CONTINUE TO INCREASE $26 $24 $22 $20 $18 $16
2Q2016
2Q2015
2Q2014
2Q2013
Class B
2Q2012
2Q2011
2Q2010
Class A
2Q2009
2Q2008
2Q2007
2Q2006
$14
Class C
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
9
Suburban Investment Sales Market Builds Momentum • Approximately 2.8 million square feet of suburban office space sold in the fourth quarter of 2016, bringing the year-end total to nearly 11 million square feet. • The largest suburban office investment in the fourth quarter, as well as the entire year of 2016, was Adventus Realty Trust’s purchase of Riverway, a collection of three office buildings and a daycare facility in Rosemont. The price paid for the entire portfolio was $173,000,000 with $171,480,789 of the purchase price allocated towards the 858,711 square foot total of three office properties.
SUBURBAN CHICAGO
INVESTMENT SALES
• Two new office investment opportunities were put on the market in the fourth quarter of 2016, both of which are in the East-West Submarket.
INVESTMENT SALES
FEATURES
• The largest suburban office investment opportunity currently on the market is a five story, 516,120 square foot Class A building on 81 acres of land at 1960 Lucent Ln in Naperville. The property was custom built in 1999 for Alcatel-Lucent, which was recently aquired by Nokia.
On the Market: 4th Quarter 2016 Building Address
Submarket
Size (sf)
Price
PSF
Class Seller
Status (Listing Agent)
28301 Ferry Rd, Warrenvile
East-West
136,234
$16,348,080
$120
B
Cantera Pointe Leasing
NAI Hiffman
2115 Butterfield Rd, Oak Brook
East-West
50,505
$11,900,000
$236
B
Group Fox
Cawley Chicago Commercial
Investment Sales: 4th Quarter 2016 Building Address
Submarket
Size (sf)
Price
PSF
Class Seller
9377 W. Higgins Rd, Rosemont 6133 N. River Rd, Rosemont 9399 W. Higgins Rd, Rosemont (Part of 4 Property Portforlio)
O'Hare O'Hare O'Hare
313,478 284,241 260,992
$62,600,170 $56,761,671 $52,118,948
$200 $200 $200
A A A
17 W. 110 22nd St, Oakbrook Terrace
East-West
264,162
$47,500,000
$180
1815 S. Meyers, Oak Brook Terrace
East-West
232,052
Undisclosed
4343 Commerce Ct, Lisle
East-West
167,756
1100 N. Arlington Heights Rd, Itasca
Northwest
300 N. Field, Lake Forest
Buyer
The Blackstone Group
Adventus Realty Trust
A
TIAA
Hamilton Partners
Undisclosed
A
Colony Capital LLC
Helios Property Management
$5,179,000
$31
B
Five Mile Capital Partners
The Missner Group Co.
148,988
$9,000,000
$60
A
Northwestern Mutual Life Insurance Co.
Captive Resources, LLC
North
137,300
$9,700,000
$71
A
Hospira, Inc.
The Missner Group Co.
953 - 955 American Ln, Schaumburg
Northwest
287,266
Undisclosed
Undisclosed
A
Franklin Partners
Undisclosed
100 N. Field, Lake Forest
North
105,000
$19,350,000
$184
A
Egf One Conway LLC
Ph Conway LLC
10600 & 10400 W. Higgins Rd, Rosemont
O'Hare
202,325
$10,500,000
$52
B
William Napleton
Ketu Amin
175 E. Hawthorn Pky, Vernon Hills
North
84,592
$9,200,000
$109
A
Montesano Capital Management
Not Available
915 National Pky, Schaumburg 935 National Pky, Schaumburg 955 National Pky, Schaumburg
Northwest Northwest Northwest
66,268 66,268 35,004
$10,001,403 $1,798,563 $950,035
$151 $27 $27
A B B
Alcion Ventures
Sperry Equities
2505 S. Finley Rd, Lombard
East-West
63,196
$8,200,000
$130
B
Pritchett Realty Corp.
Lagestee-Mulder Commerical Construction
1804 N. Naper Rd, Naperville
East-West
54,108
$6,585,000
$122
B
Suburban Real Estate Services
Elshafei Equity Partners
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
10
Cautious Optimism Continues Though much has been made of the Chicago area’s suburban to urban migration in recent years, the Chicago suburban office market has remained stable. Despite the negative absorption and slightly increased vacancy rate seen in 2016, the suburban market is in a position of relative strength in comparison to the past six years. The suburban office market has become increasingly attractive to investors that see value in lower prices that allow for higher capitalization rate potential.
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017
Total Historic & Forecasted Inventory (sf)
Total Historic & Forecasted Occupancy (sf)
Direct Vacancy %
90,601,193 91,989,948 95,078,215 98,744,696 103,270,399 108,254,000 109,769,838 110,090,266 110,423,452 111,030,084 110,806,221 111,175,875 112,080,944 112,218,212 112,374,614 112,250,112 112,311,826 111,789,663 111,767,228 112,090,103 111,532,423 111,532,423
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 88,202,240 89,832,215 88,972,455 89,294,361
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% 20.5% 19.9% 20.2% 19.9%
2012-2016 Absorption Avg:
321,907
2016 Absorption:
(686,468)
FEATURES
With no new developments on the immediate horizon, it is unlikely that the suburban market will see substantial change in the next year. If absorption continues at the average pace seen over the last five years, vacancy rates may improve slightly in 2017.
Year
SUBURBAN CHICAGO
FORECAST
HISTORIC & PROJECTED VACANCY: 115,000,000
25%
110,000,000
20%
105,000,000 15%
100,000,000 95,000,000
10%
90,000,000 5%
85,000,000 80,000,000
0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD
Total Historic & Forecasted Inventory (sf)
Total Historic & Forecasted Occupancy (sf)
Direct Vacancy %
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
11
EAST-WEST
RBA (sf)
Absorption (sf) YTD
3rd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
20,376,345
66,466
67,241
3,776,042
18.5%
16,600,303
400,183
20.5%
Class B
14,157,253
241,280
(6,776)
2,411,031
17.0%
11,746,222
729,525
22.2%
Class C
4,768,364
27,786
(15,840)
892,309
18.7%
3,876,055
27,434
19.3%
Total
39,301,962
335,531
44,625
7,079,382
18.0%
32,222,580
1,157,142
21.0%
NORTH
RBA (sf)
Absorption (sf) YTD
3rd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
17,431,159
13,300
(5,635)
3,537,312
20.3%
13,893,847
566,138
23.5%
Class B
7,908,178
(720,188)
(25,861)
1,791,820
22.7%
6,116,358
59,478
23.4%
2,420,736
(21,621)
(12,007)
407,944
16.9%
2,012,792
13,976
17.4%
Total
27,760,073
(728,509)
(43,503)
5,737,076
20.7%
22,022,997
639,592
23.0%
NORTHWEST
RBA (sf)
Absorption (sf) YTD
3rd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
18,320,842
(492,414)
(460,447)
3,948,491
21.6%
14,372,351
318,845
23.3%
Class B
9,350,246
94,643
(69,708)
2,600,322
27.8%
6,749,924
92,239
28.8%
Class C
2,476,068
50,623
4,209
502,014
20.3%
1,974,054
36,468
21.7%
Total
30,147,156
(347,148)
(525,946)
7,050,827
23.4%
23,096,329
447,552
24.9%
O'HARE
RBA (sf)
Absorption (sf) YTD
3rd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
7,872,808
91,544
98,410
1,079,562
13.7%
6,793,246
136,286
15.4%
Class B
4,236,112
16,055
90,956
811,823
19.2%
3,439,172
32,700
19.9%
Class C
2,214,311
(53,942)
7,896
816,181
36.9%
1,398,130
1,080
36.9%
Total
14,323,231
53,657
197,262
2,707,566
18.9%
11,630,548
170,066
20.1%
TOTALS
RBA (sf)
Absorption (sf) YTD
3rd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
64,001,154
(321,104)
(300,431)
12,341,407
19.3%
51,659,747
1,421,452
21.5%
Class B
35,651,789
(368,210)
(11,389)
7,614,996
21.4%
28,051,676
913,942
23.9%
Class C
11,879,479
2,846
(15,742)
2,618,448
22.0%
9,261,031
78,958
22.7%
Total Suburban
111,532,423
(686,468)
(327,562)
22,574,851
20.2%
88,972,455
2,414,352
22.4%
FEATURES
Class C
SUBURBAN CHICAGO
MARKET STATISTICS
Numbers in parentheses are negative
FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
12
SUBURBAN CHICAGO
SUBMARKET MAP
FEATURES FOURTH QUARTER 2016 | CHICAGO SUBURBAN MARKET OVERVIEW
13
Largest Submarket Remains Strong The East-West submarket overall direct vacancy rate decreased 8 basis points to a historically low 18.01 percent. There was positive Class A absorption of 67,241 square feet, but negative Class B and C absorption of 22,616 square feet. In 2016, a total of 19 large deals were signed in the East-West submarket. Only one large new deal was executed in the fourth quarter: CBRE’s lease of 24,752 square feet at 700 Commerce Dr in Oak Brook.
City
Size (sf)
Building Class
700 Oakmont Ln
Westmont
256,767
A
4201 Winfield Rd
Warrenville
250,000
A
2400 Cabot Dr
Lisle
205,633
A
2655 Warrenville Rd
Downers Grove
149,615
A
2441 Warrenville Rd
Lisle
132,134
A
2601 Navistar Dr, Building 2
Lisle
107,700
B
3333 Finley Rd
Downers Grove
103,368
A
747 E. 22nd St
Lombard
95,078
B
1333 Burr Ridge Pky
Burr Ridge
90,000
A
1 Tower Ln
Oakbrook
89,896
A
2601 Navistar Dr, Building 4
Lisle
89,703
B
2200 Cabot Dr
Lisle
87,364
A
2601 Navistar Dr, Building 3
Lisle
83,713
B
4 Westbrook Corporate Ctr
Westchester
82,728
A
2056 Westings Ave
Naperville
80,792
A
4320 Winfield Rd
Warrenville
79,766
A
150 S. Lincolnway
North Aurora
77,006
C
1000 Royce Blvd
Oakbrook Terrace
68,000
A
2000 Spring Rd
Oakbrook
65,679
A
2601 Navistar Dr (5)
Lisle
65,379
B
410 Warrenville Rd
Lisle
63,409
A
1 Tower Ln
Oakbrook
62,014
A
2100 Swift Dr
Oakbrook
57,560
B
3010 Highland Pky
Downers Grove
52,118
A
There were five large investment sales in the East-West Corridor this quarter and two properties over 50,000 square feet were put on the market. 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 Inventory (square feet)
A
B
C
Total
20,376,345
14,157,253
4,768,364
39,301,962
Year to Date Absorption (square feet)
66,466
241,280
27,786
335,531
Direct Vacancy Rate
18.5%
17.0%
18.7%
18.0%
Total Vacancy Rate (Direct + Sublease)
20.5%
22.2%
19.3%
21.0%
FEATURES SNAPSHOTS SUBMARKET
Average direct gross asking rents for properties in the East-West submarket have increased by 1.6 percent over the past year to an average of $20.01.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
EAST-WEST
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%
22.1%
20.5%
19.0%
18.0%
0%
22.6%
5%
18.0%
10%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
FOURTH QUARTER 2016 | CHICAGO SUBURBAN SUBMARKET SNAPSHOTS
14 16
Vacancy Rate Increases The North submarket experienced 43,503 square feet of negative absorption and a 15 basis point percent increase in vacancy in the fourth quarter.
LARGEST BLOCKS OF DIRECT AVAILABILITY
In 2016, a total of 12 large deals were signed in the North submarket. In the fourth quarter, six large deals were executed. The largest deal of the fourth quarter was Vyaire’s lease of 96,360 square feet at 26125 N. Riverwoods Blvd in Mettawa. Brunswick Corporation also signed a lease for 55,552 square feet at the same building.
There were three large investment sales in the North submarket this quarter. 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)
City
Size (sf)
Building Class
600 N. US Highway
Libertyville
966,091
A
1000 Milwaukee Ave
Glenview
405,039
A
3100 Sanders Rd
Northbrook
365,268
A
2 Overlook Pt
Lincolnshire
302,678
A
300 Tower Pky
Lincolnshire
175,545
A
300 N. Field Dr
Lake Forest
136,000
A
1 N. Field Ct
Lake Forest
116,041
A
455 Knightsbridge Pky
Lincolnshire
115,485
A
2355 Waukegan
Bannockburn
103,115
A
98 Half Day Rd
Lincolnshire
97,230
A
1200 Townline Rd, East Building
Mundelein
96,672
A
1200 Townline Rd, South Building
Mundelein
91,053
A
100 S. Saunders Rd
Lake Forest
85,816
A
333 Knightsbridge Pky
Lincolnshire
80,503
A
2100 E. Lake Cook Rd
Buffalo Grove
77,502
A
300 N. Milwaukee Ave
Vernon Hills
75,444
A
1 Overlook Pt
Lincolnshire
72,449
A
3 Parkway Blvd N
Deerfield
68,452
A
4201 Lake Cook Rd
Northbrook
66,000
A
1200 Townline Rd, North Building
Mundelein
65,100
A
2-4 N. Genesee
Waukegan
63,000
C
536-616 Atrium
Vernon Hills
60,209
B
485 E. Half Day Rd
Buffalo Grove
58,398
A
90 Half Day Rd
Lincolnshire
56,000
A
350 E. Dundee Rd
Wheeling
49,688
B
A
B
C
Total
17,431,159
7,908,178
2,420,736
27,760,073
Year to Date Absorption (square feet)
13,300
(720,188)
(21,621)
(728,509)
Direct Vacancy Rate
20.3%
22.7%
16.9%
20.7%
Total Vacancy Rate (Direct + Sublease)
23.5%
23.4%
17.4%
23.0%
FEATURES SNAPSHOTS SUBMARKET
Average direct gross asking rents for properties in the North submarket have decreased by 5.1 percent over the past year to an average of $22.05.
Building Address
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
NORTH
Numbers in parantheses are negative
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%
19.9%
18.1%
18.2%
20.7%
0%
17.5%
5%
14.8%
10%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
FOURTH QUARTER 2016 | CHICAGO SUBURBAN SUBMARKET SNAPSHOTS
15 17
Submarket Continues to Carry the Highest Vacancy Rate The Northwest submarket had the most negative absorption in the fourth quarter with a total of negative 525,946 square feet overall. The overall direct vacancy rate increased by 1.76 percent to 23.39 percent, the highest of all the suburban submarkets.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
The Northwest submarket’s negative absorption was caused by Zurich North America vacating 440,538 square feet at 1450 American Ln in Shaumburg when they relocated to their newly built 783,800 square foot headquarters, which is also in Schaumburg.
Three investment sales were completed in the Northwest submarket this quarter. 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
Size (sf)
Building Class B
1000 E. Woodfield Rd
Schaumburg
184,574
21440 Lake Cook Rd
Deer Park
145,020
A
1400 American Ln
Schaumburg
131,971
A
5201 Tollview Dr
Rolling Meadows
126,284
B
777 Big Timber Rd
Elgin
125,000
A B
920-1014 E. Algonquin Rd
Schaumburg
110,488
1500 W. Shure Dr
Arlington Heights
107,161
A
2 Pierce Pl
Itasca
101,869
A
1501 E. Woodfield Rd
Schaumburg
101,768
A
3501 Algonquin Rd
Rolling Meadows
101,714
C
1250 N. Arlington Heights Rd
Itasca
100,525
A
3333 Beverly Rd
Hoffman Estates
100,000
A
703-709 W. Algonquin Rd
Arlington Heights
96,213
B
1660 Feehanville Dr
Mount Prospect
87,453
A
3333 Beverly Rd
Hoffman Estates
86,637
A
2870 Forbs Ave
Hoffman Estates
72,000
A
200 N. Martingale Rd
Schaumburg
70,385
A
1000 Plaza Dr
Schaumburg
68,433
B
300 N. Martingale Rd
Schaumburg
61,724
A
1721 Moon Lake Blvd
Hoffman
57,758
B
150 NW Point Blvd
Elk Grove
57,584
A
555 Pierce Rd
Itasca
57,261
A
1301 Basswood Rd
Schaumburg
54,640
B
2895 Greenspoint Pky
Hoffman Estates
52,851
A
300 Bauman Ct
Wood Dale
52,259
B
20 N. Martingale Rd
Schaumburg
51,616
A
A
B
C
Total
18,320,842
9,350,246
2,476,068
30,147,156
(492,414)
94,643
50,623
(347,148)
Direct Vacancy Rate
21.6%
27.8%
20.3%
23.4%
Total Vacancy Rate (Direct + Sublease)
23.3%
28.8%
21.7%
24.9%
Inventory (square feet) Year to Date Absorption (square feet)
FEATURES SNAPSHOTS SUBMARKET
In 2016, a total of 22 new large deals were signed in the Northwest submarket. There were six large deals signed in the Northwest submarket in the third quarter. The largest was Aurico Reports’ sublease of 49,291 square feet at 3800 Golf Rd in Rolling Meadows.
City
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
NORTHWEST
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%
24.9%
22.3%
22.5%
23.4%
0%
18.8%
5%
16.3%
10%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
FOURTH QUARTER 2016 | CHICAGO SUBURBAN SUBMARKET SNAPSHOTS
16 18
Class A Vacancy Rate Remains Lowest in Suburban Market The O’Hare submarket experienced 179,262 square feet of positive absorption and 1.46 percent decrease in vacancy. The Class A sector of the O’Hare submarket continues to have the lowest vacancy rate of any suburban sector.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
In 2016, a total of nine new large deals were signed in the O’Hare submarket. There was only one large deal executed in the fourth quarter: First Midwest Bank’s lease of 80,000 square feet at 8750 W. Bryn Mawr in Chicago.
City
Size (sf)
Building Class
9600 W. Bryn Mawr Ave
Rosemont
161,676
A
5450 N. Cumberland Ave
Chicago
143,525
B
6300 N. River Rd
Rosemont
137,942
B
8750 W. Bryn Mawr Ave
Chicago
117,791
A B
1350 E. Touhy Ave
Des Plaines
98,357
329-331 S. York Rd
Bensenville
72,000
B
999 E. Touhy Ave
Des Plaines
59,710
B
9500 W. Bryn Mawr Ave
Rosemont
56,454
A
1700 W. Higgins Rd
Des Plaines
53,645
A
8725 W. Higgins Rd
Chicago
52,259
A
FEATURES SNAPSHOTS SUBMARKET
Two investment sales were completed in the O’Hare submarket this quarter, the largest of which was also the largest suburban office investment of the year: Adventus Realty Trust’s purchase of Riverway, a collection of three office buildings and a daycare facility in Rosemont. The price paid for the entire portfolio was $173,000,000, with $171,480,789 of the purchase price allocated towards the three office properties that total 858,711 square feet. 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 Inventory (square feet)
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
O’HARE
A
B
C
Total
7,872,808
4,236,112
2,214,311
14,323,231
Year to Date Absorption (square feet)
91,544
16,055
(53,942)
53,657
Direct Vacancy Rate
13.7%
19.2%
36.9%
18.9%
Total Vacancy Rate (Direct + Sublease)
15.4%
19.9%
36.9%
20.1% 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%
21.6%
19.8%
18.9%
0%
20.0%
5%
18.6%
10%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
FOURTH QUARTER 2016 | CHICAGO SUBURBAN SUBMARKET SNAPSHOTS
17 19
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.
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 are located 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 third 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.
SUBURBAN CHICAGO
SECTION THREE
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
DEPARTMENT LEADERSHIP PATRICIA ALUISI
181 West Madison, Suite 4700 Chicago, Illinois 60602 phone: 312.726.1700 www.mbres.com
Executive Vice President & Chief Administrative Officer/General Counsel
EAST COAST REGIONAL HEADQUARTERS
MARK A. BUTH
335 Madison Avenue, 14th Floor New York, New York 10017 phone: 212.350.2300 fax: 212.350.2301
KRYSTA BAVLSIK
Executive Vice President & MBRE Healthcare
Executive Vice President & Managing Director of Leasing Services
ANDREW J. DAVIDSON
Executive Vice President & Managing Director of Corporate Services & Tenant Advisory
DAVID R. GRAFF
Executive Vice President of Project Services
COMPANY LEADERSHIP PETER E. RICKER Chairman & CEO
JOHN T. MURPHY Vice Chairman
SUZANNE HENDRICK
Senior Vice President & Director of Asset Management
KAROLINE EIGEL
Senior Vice President & Chief Marketing Officer
EILEEN FLYNN
Senior Vice President/Managing Director, Accounting Services/Corporate Controller
KEVIN M. PURCELL
President, Leasing & Management Services
PETER J. WESTMEYER
Executive Vice President & Managing Director of Investment Services/ President & Managing Principal, MBRE Healthcare Group
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