T H I R D Q U A R T E R
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THI R D QUARTER
2 012 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 TWO
SUBURBAN CHICAGO
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
T h e C h ic a g o M a r ke t O v e r v i e w i s p ubl 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 n a 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:
JAC K GAV IN Senior 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 2012 | CHICAGO SUBMARKET SNAPSHOTS
1
Class B and C properties see increased occupancy
The Central Loop experienced 249,000 square feet of net positive absorption, which was the most of any submarket during the third quarter. Class B and C properties each saw occupancy increases totaling 110,000 square feet. The direct vacancy rate in Class A buildings fell to 9.4 percent, which is the lowest of any Class A segment in the CBD. Citadel signed the largest lease transaction during the quarter by renewing 225,000 square feet at 131 South Dearborn. However, the restructured lease results in a one-third reduction from its current space. GSA Army Corp of Engineers will relocate from 111 North Canal and into 64,000 square feet at 231 South LaSalle. ThyssenKrupp leased 25,000 square feet at 111 West Jackson as they opened a new, North American regional headquarters.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class B
222 N LaSalle St *
199,132
200 N LaSalle St
164,586
B
11 S LaSalle St
150,166
C
10 S Dearborn St *
139,165
A
161 N Clark St *
116 964 116,964
A
1 N Dearborn St
97,261
B
120 S LaSalle St
94,995
B
175 W Jackson Blvd
68,539
B
175 W Jackson Blvd
67,725
B
77 W Wacker Dr
67,342
A
*Indicates future available space
No buildings traded during the quarter, but two new listings hit the market. After leasing 59,000 square feet to GrubHub and expanding Tribeca Flashpoint Media Arts Academy, Harbor Group International is seeking $100 million for 111 West Washington. Canadian Imperial Bank of Commerce is looking to sell the 79,000 square foot 123 West Madison. 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
13,571,480
14,215,057
8,626,430
36,412,967
31,952
98,849
46,683
177,484
Direct Vacancy Rate
9.4%
15.8%
16.4%
13.6%
Total Vacancy Rate (Direct + Sublease)
14.0%
18.4%
16.8%
16.4%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
Although direct vacancy in Class A buildings continues to fall, sublease availability is over 4.5 percent of inventory. This figure is nearly double the percentage of sublease space to inventory seen in the overall market. The main contributor to sublease availability is United Airlines’ 240,000 square foot block at 77 West Wacker.
CENTRAL BUSINESS DISTRICT
CENTRAL LOOP
CENTRAL LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
2
Net quarterly absorption continues to be minimal
For the third straight quarter occupancy was relatively unchanged in the East Loop. Class A and B buildings experienced slight upticks in vacancy. KPMG moved into 260,000 square feet at 200 East Randolph (AON Center). But the accounting firm vacated 303 East Wacker, so the net effect on absorption within the East Loop was minimal. The East Loop has a 20.0 percent vacancy rate and has historically trailed other submarkets due to its distance from commuter rail stations.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Two tenants signed large leases to expand in their current buildings. Walgreens e-Commerce institute expanded by 68,000 square feet at 33 South State. Advertising agency BBDO signed a long-term lease and will expand by 52,000 square feet at 225 North Michigan.
Size (sf)
Building Class
200 E Randolph St
340,959
A
130 E Randolph St *
256,720
B
303 E Wacker Dr
182,782
B
303 E Wacker Dr
165,827
B
130 E Randolph St *
155 829 155,829
B
333 S Wabash Ave
140,000
B
130 E Randolph St
128,948
B
401 S State St
110,898
C
33 S State St
70,107
C
111 E Wacker Dr
67,216
B
* Indicates future available space
No buildings were sold, but four buildings are actively being marketed for sale. Ivor Braka is looking to sell both 122 South Michigan and 332 South Michigan. Bentley Forbes is continuing to search for a buyer of a partial stake in 130 East Randolph and 180 North Stetson. 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 Inventory (square feet)
A
B
C
Total
4,040,431
10,520,472
8,438,390
22,999,292
Year to Date Absorption (square feet)
85,071
76,928
(138,832)
23,166
Direct Vacancy Rate
18.5%
24.4%
15.1%
20.0%
Total Vacancy Rate (Direct + Sublease)
22.2%
25.4%
15.8%
21.3%
SUBMARKET SNAPSHOTS
The East Loop continues to be saturated with large blocks. Eight contiguous direct blocks of at least 100,000 square feet are available, including a 341,000 square foot block at the AON Center.
CENTRAL BUSINESS DISTRICT
EAST LOOP
Numbers in parentheses are negative
EAST LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
3
John Hancock Center deal leads to first quarterly occupancy increase in two years
After eight consecutive quarters of negative absorption, the North Michigan Avenue submarket finally experienced positive demand. Much of the new demand stems from Interpublic Group’s GolinHarris, who occupied roughly 70,000 square feet at 875 North Michigan (John Hancock Center) during the quarter after moving from 111 East Wacker. Despite the positive quarter, direct vacancy is still well above 20 percent. The John Hancock Center was also home to one of the largest new lease transactions in the CBD. Advertising agency Draft FCB signed a 15-year lease for 185,000 square feet and will occupy the new space in early 2014. While they are relocating from two locations within the submarket, Northwestern University’s Feinberg School of Medicine has already signed a 62,000 square feet lease to backfill Draft FCB’s current space at 633 North Saint Clair.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class A
515 N State St *
350,906
101 E Erie St *
217,569
A
410 N Michigan Ave *
213,054
B
401-465 E Illinois St
210,000
C
435 445 N Michigan Ave 435-445
129 947 129,947
C
401 N Michigan Ave *
104,726
B
455 N Cityfront Plaza Dr
89,854
A
740 N Rush St
77,394
C
360 N Michigan Ave
76,855
C
980 N Michigan Ave
62,384
A
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
3,956,391
4,691,737
4,341,239
12,989,367
Year to Date Absorption (square feet)
95,122
30,625
(309,531)
(183,785)
Direct Vacancy Rate
18.8%
24.0%
19.3%
20.9%
Total Vacancy Rate (Direct + Sublease)
22.0%
24.5%
20.3%
22.3%
SUBMARKET SNAPSHOTS
* Indicates future available space North Michigan Avenue has failed to generate enough new demand to Italicized addresses indicate new blocks this quarter offset companies who have cut their space requirements or vacated the submarket. Future prospects could increase significantly if a 351,000 square foot block at 515 North State, which will be vacated by the American Medical Association, can be leased to one of the largest tenants in the market. However, this space is in competition with three other contiguous, Class A blocks greater than 300,000 square feet in other submarkets and numerous proposed new developments.
CENTRAL BUSINESS DISTRICT
NORTH MICHIGAN AVENUE
Numbers in parentheses are negative
NORTH MICHIGAN AVENUE SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
4
Google finalizes lease, establishes themselves as Chicago’s tech anchor
River North continues to be the best performing submarket in the CBD as it experienced 60,000 square feet of positive absorption. Direct vacancy fell to just 9.4 percent. The submarket has become a hotbed for technology firms due to its accessibility to city residents and its abundance of creative space. The major highlight this quarter was Google’s 15-year, 572,000 square foot lease at The Merchandise Mart. Google, who acquired Motorola Mobility, will occupy the top four floors and roof beginning next year. The company will relocate 3,000 employees from Motorola’s corporate campus in suburban Libertyville. The new lease solidifies River North as Chicago’s technology hub.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
350 W Mart Ctr *
130,380
B
350 W Mart Ctr
87,393
B
350 W Mart Ctr
64,661
B
222 Merchandise Mart Plz
63,193
B
321 N Clark St
61,431
A
* Indicates future available space Italicized addresses indicate new blocks this quarter
Investment activity cooled during the quarter, but two buildings are being marketed for sale. KBS REIT 2 is selling up to a 49 percent stake in 300 North LaSalle, which could fetch upwards of $600 per square foot. Additionally, Joseph Lagoa has placed 540 North LaSalle up for sale with a $10 million asking price. 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.
A
B
C
Total
3,998,711
3,681,438
5,598,724
13,278,873
162,482
123,796
6,678
292,955
Direct Vacancy Rate
11.5%
6.4%
9.8%
9.4%
Total Vacancy Rate (Direct + Sublease)
13.3%
12.7%
13.0%
13.0%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
Joining Google in River North next year will be Salesforce, who leased 116,000 square feet at 111 West Illinois. In addition numerous technology firms based in River North announced plans to expand their workforces by 2015. The explosion of leasing activity and commitments to add jobs suggests that River North will be a tight submarket for years to come.
RIVER NORTH SUMMARY
CENTRAL BUSINESS DISTRICT
RIVER NORTH
RIVER NORTH SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
5
Little activity in the CBD’s smallest submarket
Comprised of just over 2.2 million square feet, the South Loop is subject to large swings in vacancy rates if a large tenant enters or exits the submarket. Last quarter MF Global vacated 77,000 square feet at 440 South LaSalle (One Financial Place), causing vacancy to rise 8.4 percent in the building and 3.7 percent in the submarket. At 26.2 percent, the CBD’s smallest submarket has the highest direct vacancy rate. As a result of MF Global’s dissolution, smaller tenant move-outs, and restacking within the building, three contiguous blocks ranging from 52,000 to 67,000 square feet are now available at One Financial Place. The building has traditionally been home to trading firms and financial institutions, but may look to diversify due to its high availability.
LARGEST BLOCK OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class
440 S LaSalle St *
159,539
A
619 S LaSalle St
89,000
C
440 S LaSalle St *
67,322
A
440 S LaSalle St *
53,143
A
* Indicates future available space
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.
A
C
Total
1,019,325
1,185,970
2,205,295
(82,285)
(38,499)
(120,784)
Direct Vacancy Rate
28.8%
24.0%
26.2%
Total Vacancy Rate (Direct + Sublease)
29.8%
24.2%
26.8%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
The South Loop, while farther from the major commuter train stations than the West Loop and Central Loop, has direct access to the CTA trains. It is also closest to the residential area of the South Loop, an up and coming location for young professionals. Its location is a benefit, but with only one Class A and no Class B buildings, it will trail the recovery. As tenants have been upgrading their office space to take advantage of attractive rents, the South Loop will continue to lag because of its limited options.
SOUTH LOOP SUMMARY
CENTRAL BUSINESS DISTRICT
SOUTH LOOP
Numbers in parentheses are negative
SOUTH LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
6
Class B in high demand as market for Class A begins to cool
The CBD’s largest submarket experienced a modest 55,000 square feet of net positive absorption. Occupancy has increased in nine of the past ten quarters. The West Loop has been one of the most desirable submarkets in recent years due to its access to commuter trains, Chicago public transit, as well as its inventory of some of the newest buildings in the CBD. Class B buildings were in high demand this quarter, as 158,000 square feet was newly occupied. In contrast, Class A buildings lost 94,000 square feet of occupancy. This was due to large tenants such as UBS giving back significant amounts of space and “right-sizing” upon lease expiration.
Size (sf)
Building Class
500 W Monroe St
392,063
A
233 S Wacker Dr
293,706
A
309-311 W Monroe St *
214,490
C
227 W Monroe St *
139,883
A
300 S Riverside Plz *
128,948
B
233 S Wacker Dr *
125,553
A
233 S Wacker Dr
91,807
A
30 S Wacker Dr
85,831
A
540 W Madison St
84,031
A
333 W Wacker Dr
80,736
A
* Indicates future available space Italicized addresses indicate new blocks this quarter
Investors continue to pursue the West Loop as four buildings were sold during the quarter. GE Pension Trust sold 230 West Monroe to a joint venture of Lincoln Property and Pimco for $146 per square foot and 200 West Monroe to a joint venture of the Farbman Group and LubertAdler Funds for $130 per square foot. Alliance Partners acquired 300 West Adams from Sterling Bay for $202 per square foot. Sterling Bay was active on the acquisition side as well, placing 111 North Canal under contract for approximately $108 per square foot. 1 South Wacker is currently under contract to Harbor Group International for approximately $192 per square foot.
SUBMARKET SNAPSHOTS
United Airlines expanded by 205,000 square feet and extended their lease at Willis Tower through 2028. United now leases a total of 830,000 square feet at Willis Tower, and is now trying to sublease 240,000 square feet of its space at 77 West Wacker. AIG will relocate within the West Loop as they will vacate 300 South Riverside and lease 75,000 square feet at 500 West Madison.
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
27,105,356
9,725,125
6,383,314
43,213,795
(145,784)
289,976
(29,562)
114,630
Direct Vacancy Rate
14.9%
10.8%
16.2%
14.2%
Total Vacancy Rate (Direct + Sublease)
18.2%
12.2%
17.6%
16.8%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
WEST LOOP SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
7
SUBURBAN CHICAGO
SUBURBAN MAP
SUBMARKET SNAPSHOTS THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
8
Large tenant move-outs cause vacancy rates to jump
After being the best performing Suburban submarket in the first half of the year, vacancy rates rose across all building classes during the third quarter. The East-West submarket experienced over 318,000 square feet of negative absorption, which can be attributed to large users exiting the submarket. Catamaran is vacating 110,000 square feet at 2441 Warrenville Road in Lisle and relocating to Bannockburn, while TCF Bank vacated 78,000 square feet at 500 Joliet Road in Willowbrook.
City
Size (sf)
Building Class
700 Oakmont Ln 3075 Highland Pky *
Westmont
256,767
A
Downers Grove
241,519
A
2400 Cabot Dr
Lisle
217,718
A
747 E 22nd St
Lombard
209,557
B
28100 Torch Pky
Warrenville
100,830
A
4343 Commerce Ct *
Lisle
81,097
A
500 Joliet Rd
Willowbrook
78,400
B
2000 S Finley Rd **
Lombard
78,300
B
2655 Warrenville Rd
Downers Grove
76,691
A
2245 Sequoia Dr *
Aurora
76,126
A
* Indicates future available space ** Indicates space available in current quarter
EN Engineering signed the largest lease during the quarter and will occupy 84,000 square feet at the newly-renovated 28100 Torch Parkway in Warrenville. The firm, which designs oil and gas pipelines, has benefitted from a domestic energy boom and has outgrown the 53,000 square feet it leases in Woodridge. After merging with Minnesota-based Farley Sathers Candy, Ferrara Candy Co. signed a new 39,000 square foot lease at 1 Tower Lane in Oakbrook Terrace. Investors continued to favor well-leased, core properties. U.S. Equities purchased the Class A, 94 percent leased property at 2056 Westings Avenue in Naperville for $140 per square foot. Wells Core Office Income REIT acquired 2275 Cabot Drive in Lisle for $188 per square foot. The property is fully leased to McCain Foods through May 2021.
SUBMARKET SNAPSHOTS
Asking rental rates are down 2.2 percent on a year-overyear basis. Landlords have been aggressive in retaining existing and attracting new tenants since a number of large users such as Sara Lee are vacating the submarket and relocating to the CBD. Large tenants continue to have a multitude of options, with 28 direct and 7 sublease blocks greater than 50,000 square feet available for lease.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
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 Inventory (square feet)
A
B
C
Total
20,627,861
14,540,471
4,908,425
40,076,757
Year to Date Absorption (square feet)
22,563
(55,674)
(2,850)
(35,961)
Direct Vacancy Rate
19.7%
24.3%
22.6%
21.7%
Total Vacancy Rate (Direct + Sublease)
23.7%
27.7%
21.8%
24.9%
EAST-WEST SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
9
Class A occupancy, rents fall
The North submarket’s direct vacancy rate rose 90 basis points during the third quarter due to 260,000 square feet of negative absorption experienced in Class A buildings. To combat lost occupancy, landlords have cut asking rental rates by an average of 4.2 percent in order to fill the nearly 1 million square feet of occupied space lost from 2010 to 2011.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class A
1 Corporate Dr
Long Grove
251,877
544 Lakeview Pky
Vernon Hills
144,999
B
1 Overlook Pt
Lincolnshire
117,798
A
2355 Waukegan Rd
Bannockburn
106,495
A
75 Tri State International *
Lincolnshire
79,449
A
2-4-6 Genesee St
Waukegan
75,996
C
333 Knightsbridge Pky
Lincolnshire
74,728
A
2100 Sanders Rd
Northbrook
67,681
A
4201 Lake Cook Rd
Northbrook
66,000
A
2 Corporate Dr
Long Grove
64,871
A
* Indicates future available space
Aon Hewitt signed the largest lease transaction in the Suburbs in the past four years. The insurance company extended its lease of 818,000 square feet spanning the entire building at 4 Overlook Point in Lincolnshire. As a result Retail Properties of America is marketing the building for sale and hopes to attract bids upwards of $200 per square foot. Cole Real Estate Investments closed on its purchase of 555-557 Aptakisic Road in Lincolnshire for $305 per square foot. The 163,000 square foot building is fully leased to Sysmex through November of 2026. 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
16,834,771
7,442,255
2,526,564
26,803,591
(218,286)
50,172
(25,395)
(193,509)
Direct Vacancy Rate
20.9%
19.4%
23.9%
20.7%
Total Vacancy Rate (Direct + Sublease)
26.1%
21.0%
24.6%
24.5%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
One positive development this quarter was the reduction of available sublease space. While 1.1 million square feet of Class A space was available for sublease last quarter, only 854,000 square feet was on the market at the end of the third quarter. This helps aid the direct leasing market as tenants have fewer competitive sublet options. However, sublease availability in Class A buildings is still 5.1 percent of the total stock, compared to 3.1 percent in the overall Suburban market.
City
SUBURBAN CHICAGO
NORTH
Numbers in parentheses are negative
NORTH SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
10
Distressed submarket shows signs of recovery In 2011 the Northwest submarket lost over 1 million square feet of occupancy, driving direct vacancy up to a staggering 27.7 percent. Much to the relief of landlords, this year has been a different story. The submarket has experienced 475,000 square feet of positive absorption this year, which is the most of any Suburban submarket. But at 25.8 percent, the Northwest submarket continues to have the highest direct vacancy rate in the Suburban market.
City
Size (sf)
Building Class
21440 Lake Cook Rd
Deer Park
351,425
A
1299 Algonquin Rd
Schaumburg
195,393
C
5550 Prairie Stone Pky *
Hoffman Estates
193,601
A
3501 Algonquin Rd
Rolling Meadows
186,432
C
1701 Golf Rd
Rolling Meadows
183,506
A
3890 Salem Lake Dr
Long Grove
150,000
B
3333 Beverly Rd
Hoffman Estates
129,000
A
2895 Greenspoint Pky
Hoffman Estates
127,941
A
700 N Wood Dale Rd
Wood Dale
125,328
B
2850 W Golf Rd
Rolling Meadows
110,941
B
* Indicates future available space
Providing the occupancy boost during the third quarter was Catamaran, who leased the entire 301,000 square foot building at 1600 McConnor Parkway in Schaumburg. The company, formerly known as SXC Health Solutions, consolidated offices in the North and EastWest submarkets. Capital One signed the second largest lease in the suburbs: a 150,000 square foot new lease at 3800 Golf Road in Rolling Meadows. The company will occupy the space in the first quarter of 2013 and will vacate its current facility in Elmhurst. Investment sales activity was quiet compared to the previous quarter, but two new portfolio listings from the Multi Employer Property Trust are now on the market. The pension fund is seeking bids for the four building, 500,000 square foot Greenspoint Office Park in Hoffman Estates. They also are looking to sell 2349 West Lake Street and 2250 West Pinehurst Boulevard in Addison. 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
18,505,684
9,687,611
2,341,317
30,534,613
317,527
141,356
15,790
474,674
Direct Vacancy Rate
21.5%
32.8%
31.1%
25.8%
Total Vacancy Rate (Direct + Sublease)
25.3%
35.5%
32.2%
29.0%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
Due to this high vacancy rate, tenants have and will continue to have the upper-hand in lease negotiations. Asking rental rates are down 1.3 percent on a year-overyear basis. There are 25 direct contiguous blocks of at least 50,000 square feet available for lease; 12 of which are greater than 100,000 square feet.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
SUBURBAN CHICAGO
NORTHWEST
NORTHWEST SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
11
Activity muted as divide between Class A and Class B product grows
Suburban Chicago’s smallest submarket saw minimal changes in occupancy across all building classes. O’Hare continues to have the greatest disparity in vacancy among its building classes. Direct vacancy among Class A buildings is 19.1 percent, making it one of the tightest segments in Suburban Chicago. However, direct vacancy continues to be well above 30 percent in Class B and Class C buildings.
City
Size (sf)
Building Class B
2350-2360 E Devon Ave
Des Plaines
142,596
8420 W Bryn Mawr Ave
Chicago
104,164
A
4242 N Harlem Ave
Norridge
93,155
B
9801 W Higgins Rd
Rosemont
91,614
B
5100 River Rd *
Schiller Park
74,988
A
1350 E Touhy Ave
Des Plaines
71,367
B
9500 W Bryn Mawr Ave
Rosemont
69,701
A
10255 W Higgins Rd
Rosemont
69,695
A
999 E Touhy Ave
Des Plaines
59,710
B
9525 W Bryn Mawr Ave
Rosemont
55,040
A
* Indicates future available space Italicized addresses indicate new blocks this quarter
While several new large lease transactions were signed last quarter, no new leases over 20,000 square feet were recorded this quarter. O’Hare was home to the largest sale transaction on a size and price basis. CBRE Global Investors acquired the 380,000 square foot building at 6250 North River Road in Rosemont from GLL Real Estate Partners for $67 million. The property was 94 percent leased at the time of sale, and further demonstrates investors’ desire for core office properties in the Chicago Suburban market. 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)
A
B
C
Total
7,856,623
4,334,861
2,535,582
14,727,065
Year to Date Absorption (square feet)
58,992
17,931
1,812
78,736
Direct Vacancy Rate
19.1%
30.9%
37.1%
25.7%
Total Vacancy Rate (Direct + Sublease)
21.1%
31.4%
37.6%
27.0%
SUBMARKET SNAPSHOTS
Asking rental rates have held steady, falling just 0.5 percent on a year-over-year basis. O’Hare has had the smallest rent decline of the Suburban markets, signaling that landlords, at least in Class A properties, may be able to raise rents in the near future. However, leasing activity must pick up after a relatively inactive third quarter.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
SUBURBAN CHICAGO
O’HARE
O’HARE SUBMARKET HISTORICAL DIRECT VACANCY
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
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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
PATRICIA ALUISI Chief Administrative Officer
MARK A. BUTH Executive Vice President & Managing Director of Leasing Services
EAST COAST REGIONAL HEADQUARTERS 335 Madison Avenue, 14th Floor New York, New York 10017 phone: 212.350.2300 fax: 212.350.2301
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
MAUREEN G. GROVE
PETER E. RICKER
Vice President & Managing Director of Accounting Services
Chairman & CEO
JOHN T. MURPHY
DANIEL J. NIKITAS Executive Vice President of Corporate Services & Tenant Advisory Services
President
KEVIN M. PURCELL Executive Vice President & Chief Operating Officer
PETER J. WESTMEYER Senior Vice President & Managing Director of Investment Services
THIRD QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
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