T H I R D Q U A R T E R
2 011
C
O
M
P
I
L
E
CHICAGO SUBMARKET SNAPSHOTS
D
B
Y
M
B
R
E
A
L
E
S
T A T
E
THI R D QUARTER
2 011 CHICAGO SUBMARKET SNAPSHOTS
TABLE OF CONTENTS SECTION ONE
CHICAGO CENTRAL BUSINESS DISTRICT CBD SUBMARKET SNAPSHOTS 01 Central Business District Map 02 Central Loop 03 East Loop 04 North Michigan Avenue 05 River North 06 South Loop 07 West Loop
SECTION ONE
CHICAGO CENTRAL BUSINESS DISTRICT
08 09 10 11 12
SUBURBAN SUBMARKET SNAPSHOTS Suburban Map East-West North Northwest O’Hare
SE CT ION T H RE E
ABOUT MB REAL ESTATE 13 Company Overview
Th e C h ic a g o M a r ke t O v e r v i e w S ubm a r ke t S n aps h o ts a re publ i s h e d q u a r t e r l y by M B R e a l E s ta te. To o b t a in ad d i ti o na l co pi e s o r fo r fur the r in f or ma ti o n, p l e a s e c o nta c t:
KRYS TA BAV LS IK Manager of Research and Analytics or JAC K G AV IN Research Coordinator 1 8 1 We st M a d i s o n S tre e t, S ui te 4 7 0 0 Ch ic a go, I l l i no i s 6 0 6 0 2 (312) 726-1700 w w w. m b r e s . c o m
CENTRAL BUSINESS DISTRICT
CENTRAL BUSINESS DISTRICT MAP
SUBMARKET SNAPSHOTS THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
1
Class B buildings drive occupancy increase
While the Central Loop’s Class A segment continues to have a direct vacancy rate under 10 percent, its Class B market has been struggling. However, Class B buildings improved with 177,000 square feet of additional occupancy during the third quarter. The demand increase translated into the Central Loop’s strongest performance since early 2009. Large lease transactions were highlighted by Accretive Health’s 28,000 square foot expansion at 231 South LaSalle, and The Administrative Office of the Illinois Court’s renewal at 222 North LaSalle. McCorkle Court Reporters extended and expanded at 200 North LaSalle.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
11 S LaSalle St
155,819
C
161 N Clark St
116,964
A
111 W Jackson Blvd
102,943
C
1 N Dearborn St
97,261
B
111 W Jackson Blvd
83,612
C
200 N LaSalle St
71,728
B
111 W Washington St *
71,718
C
120 S LaSalle St *
69,519
B
175 W Jackson Blvd *
68,539
B
175 W Jackson Blvd *
67,725
B
The Central Loop, which has historically been home to financial organizations and law firms, will see uneven demand in office space for the near-term. However, constrained supply and convenient location will keep the Central Loop’s vacancy rate below most of the CBD’s submarkets.
SUBMARKET SNAPSHOTS
With respect to investment sales, one major transaction closed and two * Indicates future available space other buildings were placed under contract. A joint venture led by GAW Italicized addresses indicate new blocks this quarter Capital Partners and the Korea Teachers Credit Union purchased 70 West Madison for $349 million, or $243 per square foot, from Hines Real Estate Investment Trust. In addition, an unidentified buyer is under contract to purchase the 440,000 square office portion of 22 West Washington for $187 million. Chicago-based Hearn Co. agreed to purchase 55 West Monroe from LaSalle Investment Management for $140 million.
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
13,554,346
14,030,785
8,613,255
36,198,386
85,930
85,487
(254,379)
(82,962)
Direct Vacancy Rate
9.7%
16.8%
16.8%
14.2%
Total Vacancy Rate (Direct + Sublease)
12.1%
19.4%
18.5%
16.4%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
CENTRAL LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
2
Robust leasing activity continues, but occupancy remains unchanged
After a strong second quarter, the East Loop experienced little net change in occupancy. Several tenants within the East Loop have leveraged soft market conditions to upgrade to Class A buildings. However, such tenants are from Class B or C buildings within the East Loop and do not generate new demand for the overall submarket.
Size (sf)
Building Class
200 E Randolph St
380,158
A
303 E Wacker Dr *
271,382
B
130 E Randolph St *
185,042
B
55 E Monroe St
175,263
B
303 E Wacker Dr *
143,960
B
333 S Wabash Ave *
136,500
B
205|225 N Michigan Ave
120,446
B
33 S State St
117,207
C
401 S State St
110,898
C
78,498
B
225 N Michigan Ave
* Indicates future available space
CommonWealth REIT, who entered the East Loop by purchasing 233 North Michigan last quarter, has agreed to purchase 111 East Wacker for $151 million. The new owners face with the challenge of leasing 200,000 square feet that will become available next year. The East Loop continues to have an uphill battle in gaining occupancy levels that match its competitive submarkets. Of the nine available, contiguous blocks greater than 100,000 square feet, five represent space that will be vacated in 2012, totaling nearly 1 million square feet. Also, short-term leases for Groupon and Obama for America are set to expire next year. Considering large block availability across the CBD and speculation regarding a new office development, it remains likely that the East Loop will continue to have a higher vacancy rate compared to the rest of the CBD.
SUBMARKET SNAPSHOTS
The most notable example is energy company Integrys, who will vacate 196,000 square feet at 130 East Randolph and consolidate operations into 150,000 square feet at the Class A, 200 East Randolph. While this move strengthens the Class A segment, the vacancy rate for Class B buildings will rise, and another large block will hit the market. However, Class B will see some relief when OWP&P Cannon Design occupies 61,000 square feet at 205|225 North Michigan Avenue, as it relocates from 111 West Washington in the Central Loop.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS DISTRICT
EAST LOOP
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
4,014,487
10,207,612
8,457,711
22,679,811
148,082
(3,055)
(79,224)
65,802
Direct Vacancy Rate
21.9%
24.1%
13.9%
19.9%
Total Vacancy Rate (Direct + Sublease)
27.4%
26.5%
14.2%
22.1%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
EAST LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
3
Activity remains slow; Wrigley Building sold
Occupancy levels remained relatively unchanged as North Michigan Avenue experienced 20,000 square feet of negative absorption. This marks the eleventh consecutive quarter of occupancy declines. At 19.2 percent, the North Michigan Avenue vacancy rate has reached its highest level in MB Real Estate’s tracked history. No lease transactions greater than 20,000 square feet were signed this quarter. This is significant because tenants larger than 20,000 square feet have relocated outside of the submarket. This quarter, Healthcare Information and Management Systems Society vacated 30,000 square feet at 230 East Ohio and moved to 33 West Monroe in the Central Loop.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
330 N Wabash Ave
371,945
B
330 N Wabash Ave
97,932
C
455 N Cityfront Plaza Dr
90,207
B
740 N Rush St
73,294
B
980 N Michigan Ave
62,384
B
401 N Michigan Ave
51,870
A
North Michigan Avenue continues to have six blocks of direct, contiguous space greater than 50,000 square feet, including the 37th through 47th floors at 330 North Wabash, which total 372,000 square feet. Without significant job growth, demand will continue to falter. Vacancy rates are expected to remain high in light of tepid leasing activity. 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
A
B
C
Total
3,952,669
4,634,167
4,425,684
13,012,520
(44,835)
(51,535)
(49,636)
(146,006)
Direct Vacancy Rate
20.0%
24.4%
13.2%
19.2%
Total Vacancy Rate (Direct + Sublease)
22.5%
27.3%
14.0%
21.3%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
The submarket’s biggest headline occurred when Groupon co-founders Brad Keywell and Eric Lefkofsky teamed with Zeller Realty Group to purchase the Wrigley Building at 400-410 North Michigan Avenue for approximately $33 million. The new owners will seek landmark status and also plan significant renovations but are expected to lease the majority of the building as office space. Zeller Realty Group has also placed 500 North Michigan on the market, which could command offers between $70 and $80 million.
CENTRAL BUSINESS DISTRICT
NORTH MICHIGAN AVENUE
Numbers in parentheses are negative
NORTH MICHIGAN AVENUE SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
4
Vacancy continues to fall; 600 West Chicago sale closes
Albeit slight, occupancy increased for the sixth consecutive quarter. The submarket has been the fastest to recover from the recession and currently boasts the lowest vacancy rate in the CBD due to its inventory of creative, loft-style buildings, as well as two of the market’s newest skyscrapers. Two long-term leases signed by tenants currently outside of River North will increase future occupancy and counter those tenants who are reducing their space. In January 2012, Ventas will relocate from 111 South Wacker into 29,000 square feet at 353 North Clark. The American Bar Association signed the largest lease in the submarket by renewing 201,000 square feet at 321 North Clark but will cut space by one floor.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
111 W Illinois St
141,503
A
350 W Mart Ctr
106,168
C
321 N Clark St
61,431
A
222 Merchandise Mart Plz
50,000
B
One obstacle facing River North is that 5.4 percent of inventory is available for sublease, compared to 2.4 percent for the entire CBD. Once the underlying leases expire, these spaces will convert to direct vacancy. The submarket will need to continue to attract tenants from other submarkets or cities in order to keep vacancy below the rest of the CBD. The borders of the River North submarket are defined as Division Street (North), Racine Avenue (West), State Street (East), and 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 seen new development which has brought law firms and financial institutions to the submarket. RIVER NORTH SUMMARY
A
B
C
Total
4,003,546
3,538,948
5,764,476
13,306,970
(41,288)
151,168
67,972
177,852
Direct Vacancy Rate
16.4%
7.0%
11.9%
12.0%
Total Vacancy Rate (Direct + Sublease)
19.7%
17.5%
15.8%
17.4%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
CommonWealth REIT, the most active buyer this year in the CBD, closed on its purchase of 600 West Chicago for roughly $390 million ($249 per square foot). The sellers paid $290 million for the building at the height of the real estate bubble in 2007 when the building was 78 percent leased. Another prominent property is back on the market as Vornado Realty Trust looks to sell the 1.2 million square foot 350 North Orleans.
CENTRAL BUSINESS DISTRICT
RIVER NORTH
Numbers in parentheses are negative
RIVER NORTH SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
5
Smallest submarket now has highest direct vacancy rate in CBD
As has been the case since the downturn, the South Loop continued to see vacancy rates rise. At 20.6 percent, the South Loop now has the highest direct vacancy rate of the CBD’s submarkets. However, due to the South Loop’s limited inventory, one large tenant has the ability to drastically impact the performance of the submarket.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
619 S LaSalle St
89,000
C
One Financial Place comprises nearly half of the total amount of office space in the South Loop and is the submarket’s only Class A building. Behringer Harvard, the building’s owner, was able to secure a $90 million refinance loan during the quarter just nine days before the loan was due. The refinance required significant equity, since it was acquired at the height of the market in 2007.
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
A
C
Total
1,019,325
1,271,908
2,291,233
(53,752)
(39,500)
(93,252)
Direct Vacancy Rate
14.7%
25.3%
20.6%
Total Vacancy Rate (Direct + Sublease)
16.0%
25.5%
21.3%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
Approximately 61,000 square feet in the building is set to become directly available next quarter. This is largely due to the consolidation of back office operations at Goldman Sachs. If the building does not attract enough demand to fill this space next quarter, vacancy will continue to climb and could reach the highest levels in MB Real Estate’s tracked history.
CENTRAL BUSINESS DISTRICT
SOUTH LOOP
Numbers in parentheses are negative
SOUTH LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
6
Class A continues to outperform the CBD
The West Loop posted its sixth consecutive quarter of positive demand and continues to recover faster than the rest of the CBD overall. Class A buildings now have absorbed 400,000 square feet in 2011, showing that this segment is the most desired location and asset class. For the second straight quarter, Wacker Drive was home to the largest lease transaction. PricewaterhouseCoopers renewed its lease for 279,000 square feet at 1 North Wacker. Fifth Third Bank renewed its lease and expanded to 218,000 square feet at 222 South Riverside, increasing its footprint by 38,000 square feet. Acquity Group renewed and expanded at 500 West Madison for a total of 65,000 square feet.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
500 W Monroe St
369,207
A
233 S Wacker Dr
299,514
A
101 N Wacker Dr
106,732
B
500 W Monroe St *
106,475
A
300 S Riverside Plz
105,183
B
500 W Madison St
92,924
A A
233 S Wacker Dr
91,216
1 S Wacker Dr
86,658
A
30 S Wacker Dr
85,831
A
564 W Randolph St
81,331
C
Due to the amount of leasing activity the submarket has experienced, MB Real Estate expects further positive absorption in the West Loop next quarter. Also, the investment sales market will continue to heat up as institutional investors and high-net-worth individuals bid for the some of the largest and most iconic buildings in the CBD.
SUBMARKET SNAPSHOTS
As with leasing activity, the investment sales market continued to be * Indicates future available space extremely active. The Multi-Employer Property Trust purchased 200 West Madison from a Tishman Speyer & Transwestern joint venture for $218 million, or $235 per square foot. The property is 88 percent leased and was acquired in an all-cash transaction. Irvine Company, who purchased 71 South Wacker last year, agreed to purchase a 50 percent stake in 1 North Wacker for an estimated $443 per square foot. Hines Real Estate Investment Trust will retain the remaining 50 percent stake. Willis Tower and 311 South Wacker remain on the market.
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
26,891,979
9,723,404
6,467,059
43,082,442
402,928
101,773
30,629
535,330
Direct Vacancy Rate
14.8%
12.7%
17.1%
14.6%
Total Vacancy Rate (Direct + Sublease)
17.3%
14.0%
18.2%
16.7%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
WEST LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
7
SUBURBAN CHICAGO
SUBURBAN MAP
SUBMARKET SNAPSHOTS THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
8
Class A buildings outperform submarket; rest of Suburban market
Driven by strong demand for Class A buildings, the EastWest submarket experienced its largest quarterly absorption since the second quarter of 2007. While Class B and C buildings saw minor occupancy changes, Class A buildings direct vacancy dipped below 20 percent.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
City
1200 Warrenville Rd
Naperville
329,770
B
700 Oakmont Ln
Westmont
256,767
A
28100 Torch Pky
Warrenville
203,842
B
Size (sf)
Building Class
American Realty Advisors purchased the Oak Brook Regency Towers located at 1415 & 1515 West 22nd Street for $70 million, equating to $174 per square foot. Combined, the buildings are 93 percent leased. This transaction demonstrates that demand for core, well-located office buildings still exists in the Suburban market. With leasing activity picking up in Class A assets, but stagnating in Class B and C, MB Real Estate expects vacancy to be flat over the next quarters. Current job growth cannot create absorption across all classes, and companies are considering alternative locations.
SUBMARKET SNAPSHOTS
2000 Clearwater Dr Oak Brook 198,250 B In addition to this quarter’s absorption, the East-West 2400 Cabot Dr * Lisle 194,052 B submarket attracted several large leases that will result 3500 Lacey Rd * Downers Grove 103,199 A in additional positive absorption in the upcoming 1333 Butterfield Rd Downers Grove 102,096 A quarters. State Farm Insurance signed the largest lease 3333 Warrenville Rd Lisle 89,334 A in the entire Suburban market: a 154,000 square foot 800 Jorie Blvd Oak Brook 88,886 B renewal and expansion at 1400 Opus Place in Downers 2655 Warrenville Rd Downers Grove 76,691 A Grove. This new lease results in an additional 82,000 square feet of occupancy. Comcast will relocate its of* Indicates future available space Italicized addresses indicate new blocks this quarter fices from 1901 South Meyers Road in Oakbrook Terrace and increase its footprint by 50,000 square feet when it moves into 80,000 square feet at 1415 West Diehl Road in Naperville.
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
20,618,272
14,542,179
4,910,365
40,070,816
262,562
(107,224)
25,786
181,124
Direct Vacancy Rate
19.6%
23.9%
23.1%
21.6%
Total Vacancy Rate (Direct + Sublease)
23.9%
27.4%
23.2%
25.1%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
EAST-WEST SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
9
Occupancy continues its slide; 909 Davis under contract
The direct vacancy rate in the North submarket reached 20.7 percent, which is the highest level in MB Real Estate’s tracked history. While vacancy declined in Class B buildings, Class A experienced 220,000 square feet of negative absorption as a few buildings had large blocks vacated during the quarter.
City
Size (sf)
Building Class
1200 Lakeside Dr 1 Corporate Dr
Bannockburn
257,190
A
Long Grove
204,965
A
75 N Fairway Dr *
Vernon Hills
200,344
A
1 Overlook Pt
Lincolnshire
148,686
A
544 Lakeview Pky
Vernon Hills
144,999
B
1 Corporate Dr
Long Grove
142,130
A
4 Corporate Dr
Long Grove
133,422
B
2355 Waukegan Rd
Bannockburn
106,495
A
6 Parkway Blvd N *
Deerfield
95,854
A
75 Tri State International *
Lincolnshire
79,534
A
* Indicates future available space Italicized addresses indicate new blocks this quarter
909 Davis Street, a premier office building in Evanston, was sold to Franklin Street properties for approximately $180 per square foot. The seller, American Real Estate Capital, previously had the property under contract for $200 per square foot, but the deal fell through last fall. The 195,000 square foot building is fully leased, with a majority occupied by Houghton Mifflin Harcourt. With weak leasing activity, seven direct blocks more than 100,000 square feet and an additional three blocks greater than 130,000 square feet available for sublease, MB Real Estate continues to maintain a negative short-term outlook. Sustained job growth and the retention of large tenants are necessary for occupancy to grow towards levels seen just a couple of years ago.
SUBMARKET SNAPSHOTS
Despite historically being the most desired submarket in the Suburban market, the North submarket faltered. Mercer signed the largest lease transaction by renewing its 63,000 square foot space at 540 Lake Cook Road in Deerfield. Saputo Cheese USA extended its 27,000 square feet at 25 Tri State International in Lincolnshire. While retaining large tenants is crucial to a recovery, neither deal results in increased occupancy.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
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
A
B
C
Total
16,873,552
7,442,387
2,560,495
26,876,434
(267,373)
11,616
(75,325)
(331,083)
Direct Vacancy Rate
20.5%
20.6%
22.5%
20.7%
Total Vacancy Rate (Direct + Sublease)
26.4%
21.9%
23.0%
24.8%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
NORTH SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
10
Another weak quarter leads to highest vacancy rate in suburbs
Occupancy declined for a sixth consecutive quarter as several large lease rollovers increased the amount of vacant space. At 27.5 percent, the Northwest submarket has surpassed O’Hare to have the highest direct vacancy rate in the suburbs.
City
Size (sf)
Building Class
21440 Lake Cook Rd 1600 McConnor Pky
Deer Park
351,425
A
Schaumburg
300,686
A
1701 Golf Rd
Rolling Meadows
281,528
A
3501 Algonquin Rd
Rolling Meadows
206,770
C
1299 Algonquin Rd
Schaumburg
195,393
C
5550 Prairie Stone Pky *
Hoffman Estates
193,601
A
150 NW Point Blvd
Elk Grove Village
190,164
B
425 N Martingale Rd
Schaumburg
163,330
A
3800 Golf Rd
Rolling Meadows
156,574
B
1 Salem Lake Dr
Long Grove
140,252
A
* indicates future available space
Although several large tenants renewed last quarter, the submarket once again failed to attract enough new tenants to lead to significant future occupancy gains. Lincoln Financial will relocate within submarket and into 47,000 square feet 1701 Golf Road in Rolling Meadows. Intuit signed a 10-year lease for 24,805 square feet at 95 West Algonquin. A surplus of large blocks continues to hamper any potential recovery. The Northwest has 17 contiguous blocks of at least 100,000 square feet available for direct lease, more than any other submarket in Suburban Chicago. In addition, AT&T is marketing its 1.2 million square foot campus in Hoffman Estates for sublease. With numerous options available, large tenants evaluating the Northwest submarket will continue to have the upper hand in lease negotiations for the foreseeable future.
SUBMARKET SNAPSHOTS
A key contributor to this quarter’s vacancy jump is Ameriquest Mortgage’s lease expiration at 1600 McConnor Parkway in Schaumburg. The defunct wholesale lender, whose practices were at the heart of the financial crisis, previously marketed a total of 168,000 square feet for sublease. However, its lease expired in August and joined the glut of direct vacant space.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
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
18,526,958
9,759,079
2,312,562
30,598,599
(560,645)
(358,363)
(50,783)
(969,791)
Direct Vacancy Rate
23.0%
35.0%
31.3%
27.5%
Total Vacancy Rate (Direct + Sublease)
24.7%
36.3%
32.6%
29.0%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
NORTHWEST SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
11
Demand flattens; three-building Columbia Centre trades in short sale
The O’Hare submarket experienced occupancy losses in Class A buildings but slight increases in Class B and C. The direct vacancy rate remains below its peak. However, vacancy rates for Class B and C properties are still well over 30 percent.
City
Size (sf)
Building Class
2350-2360 E Devon Ave 9525 W Bryn Mawr Ave
Des Plaines
142,596
B
Rosemont
113,868
8700 W Bryn Mawr Ave
Chicago
97,801
A A
4242 N Harlem Ave
Norridge
93,155
B
9801 W Higgins Rd
Rosemont
78,682
B
8700 W Bryn Mawr Ave *
Chicago
76,469
A
9500 W Bryn Mawr Ave
Rosemont
72,149
B
9500 W Bryn Mawr Ave *
Rosemont
56,554
A
2400 E Devon Ave
Des Plaines
51,000
B
8725-8745 W Higgins Rd
Chicago
50,214
A
* Indicates future available space
Investment activity was highlighted by the short-sale of the three building, Columbia Centre. The three Class A buildings located at 9450 and 9525 Bryn Mawr Avenue, as well as 5600 North River Road in Rosemont, traded for $37 million or $61 per square foot. The properties, which have a combined vacancy rate of 25 percent, were acquired by a joint venture of White Oak Realty Partners and Pearlmark Real Estate Partners from Transwestern Investment Company. Tenants with large space requirements have considerable options with 10 direct blocks and one sublease block of space greater than 50,000 square feet available. Given the amount of options, O’Hare will continue to be a tenants' market.
SUBMARKET SNAPSHOTS
As firms continue to shed space or relocate outside of the submarket, O’Hare failed to attract new large tenants during the quarter. The American Board of Radiology, who signed a 10-year lease for 50,000 square feet at 5440 North Cumberland Avenue in Chicago last quarter, will not occupy its space until Spring 2012. This represents the only known large future addition to occupancy.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
SUBURBAN CHICAGO
O’HARE
The O’Hare submarket is located in northwestern Cook County, with major cities including northwestern Chicago, Elk Grove Village, and Rosemont. O'HARE SUMMARY
A
B
C
Total
7,826,174
4,347,075
2,543,059
14,716,308
(90,761)
(19,928)
16,488
(94,200)
Direct Vacancy Rate
21.7%
31.3%
35.7%
26.9%
Total Vacancy Rate (Direct + Sublease)
24.4%
35.6%
35.8%
29.7%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
O’HARE SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
12
Our mission is to provide clients and investors with extraordinary real estate value and unlimited support
M B R E A L E S TAT E
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, resultsdriven 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
181 West Madison, Suite 4700 Chicago, Illinois 60602 phone: 312.726.1700 fax: 312.807.3853
MARK A. BUTH
EAST COAST REGIONAL HEADQUARTERS
GARY A. DENENBERG
335 Madison Avenue, 14th Floor New York, New York 10017 phone: 212.350.2300 fax: 212.350.2301
Senior Vice President & Managing Director of Leasing Services
ANDREW J. DAVIDSON Executive Vice President & Managing Director of Corporate Services & Tenant Advisory
Executive Vice President & Managing Director of Leasing Services
DAVID R. GRAFF Senior Vice President of Project Services
MAUREEN G. GROVE Vice President & Managing Director of Accounting Services
COMPANY LEADERSHIP PETER E. RICKER Chairman & CEO
JOHN T. MURPHY
DANIEL J. NIKITAS Executive Vice President of Corporate Services & Tenant Advisory Services
KEVIN M. PURCELL Executive Vice President & Managing Director of Asset Management
President
PATRICIA ALUISI Senior Vice President & Managing Director of Administration
THIRD QUARTER 2011 | CHICAGO SUBMARKET SNAPSHOTS
13