FOURTH Q U A R T E R
2 012
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
FOURTH 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 or
SC OT T M AS ON 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 FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
1
Direct and sublease space post strong vacancy declines
The Central Loop outperformed all other submarkets in terms of net absorption and reduction in direct vacancy during the fourth quarter. Comprising 28 percent of the total CBD inventory, the Central Loop accounted for over 59 percent (148,000 square feet) of the market’s net absorption. This led direct vacancy to fall 40 basis points to 13.2 percent. The Central Loop saw sublease vacancy decrease 100,000 square feet to 919,000 square feet. This was largely due to Capital One Financial Corp. subleasing 65,000 square feet from United Airlines at 77 West Wacker. Despite this, the Central Loop has the second highest percentage of sublease vacancy in the CBD at 2.6 percent of inventory and United Airlines continues to market a 175,000 square foot block.
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
146,313
C
10 S Dearborn St *
139,165
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 *
67,794
B
175 W Jackson Blvd
67,725
B
No buildings traded, but two properties went under contract in the fourth quarter. After Harbor Group International brought 111 West Washington to the market last quarter, the Shidler Group is moving forward to buy the Class C property for $79.5 million. Berkley Properties is now under contract with Gramercy Capital to purchase the Class B, 231 South LaSalle for a reported $97 million. 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
13,573,287
14,242,003
8,628,797
36,444,087
94,785
(36,526)
105,661
325,211
Direct Vacancy Rate
9.0%
15.8%
15.7%
13.2%
Total Vacancy Rate (Direct + Sublease)
13.0%
18.1%
16.2%
15.8%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
77 W Wacker Dr 67,342 A Grant Thornton signed a new lease for 137,000 square feet and naming rights at 161 North Clark. The professional services firm will relocate * Indicates future available space from 175 West Jackson in what was the second largest transaction Italicized addresses indicate new blocks this quarter during the quarter. Greenberg Traurig renewed 112,000 square feet at 77 West Wacker and Heartland Alliance consolidated multiple suites at 208 South LaSalle into 37,000 square feet of contiguous space.
CENTRAL BUSINESS DISTRICT
CENTRAL LOOP
Numbers in parentheses are negative
CENTRAL LOOP SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
2
Occupancy levels slowly rise
The East Loop experienced improvements in occupancy for Class A and C buildings. Their combined 49,000 square feet in positive quarterly absorption overshadowed slight quarterly negative absorption in Class B buildings. The East Loop’s direct vacancy rate continues to drop falling to 19.7 percent. However it is still well above the overall market with nearly a quarter of Class B space available for direct lease.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Building Class
200 E Randolph St
306,091
A
130 E Randolph St *
256,720
B
303 E Wacker Dr
182,782
B
130 E Randolph St *
155,829
B
130 E Randolph St
128,948
B
333 S Wabash Ave
112,000
B
401 S State St
110,898
C
303 E Wacker Dr
91,679
B
33 S State St
70,107
C
111 E Wacker Dr
67,216
B
* Indicates future available space
Contiguous blocks of at least 100,000 square feet decreased from eight to seven, but still constitute the highest concentration of blocks of this size in the CBD. No buildings were sold in the fourth quarter, but Michael Silberberg and Mark Karasick agreed to invest $100 million into the twobuilding Prudential Plaza (130 East Randolph and 180 North Stetson) in exchange for a controlling interest in the property. Current owner BentleyForbes had been seeking to recapitalize the building as it faced $470 million in maturing debt and a 21% occupancy loss over the next two years due to Baker McKenzie and Integrys vacating a combined 469,000 square feet. 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
4,044,233
10,537,769
8,370,899
22,952,901
119,587
55,356
(124,914)
50,029
Direct Vacancy Rate
17.8%
24.7%
14.2%
19.7%
Total Vacancy Rate (Direct + Sublease)
21.4%
26.1%
14.8%
21.2%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
After subleasing 396,000 square feet in its namesake building, AON signed a new direct deal at 200 East Randolph (AON Center), representing the market’s largest lease transaction of the quarter. Standard Parking signed a new lease at 200 East Randolph and will occupy 41,000 square feet. Other large transactions include Maximus signing a lease for 70,000 square feet at 303 East Wacker and Sears Online expanding by 27,000 square feet at 1 North State.
Size (sf)
CENTRAL BUSINESS DISTRICT
EAST LOOP
Numbers in parentheses are negative
EAST LOOP SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
3
Large blocks of vacancy remain despite uptick in quarterly absorption
The North Michigan Avenue submarket experienced its second straight quarter of positive absorption after a steady two year decline in occupancy. Yet the 35,000 square foot quarterly occupancy increase coupled with a 60,000 square foot increase in the third quarter was not enough to achieve positive net absorption for the year. Total sublease vacancy increased just over 10,000 square feet in a relatively quiet fourth quarter for the North Michigan Avenue submarket. Large activity was once again muted as no new lease transactions over 20,000 square feet were signed in the fourth quarter. The submarket has lagged other submarkets in attracting new, large tenants to fill several sizable vacant spaces.
Size (sf)
515 N State St *
350,906
A
435-445 N Michigan Ave *
317,706
C
101 E Erie St *
217,569
A
410 N Michigan Ave *
214,849
B
401-465 E Illinois St
210,000
C
401 N Michigan Ave *
104,990
B
89,854
A
360 N Michigan Ave
76,855
C
740 N Rush St
71,501
C
444 N Michigan Ave *
67,575
B
455 N Cityfront Plaza Dr
Building Class
* Indicates future available space ** Indicates space available in current quarter Italicized addresses indicate new blocks this quarter
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
3,949,554
4,704,471
4,316,814
12,970,840
128,641
71,533
(348,556)
(148,382)
Direct Vacancy Rate
17.8%
23.3%
19.8%
20.5%
Total Vacancy Rate (Direct + Sublease)
20.7%
24.1%
21.0%
22.0%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
With six contiguous blocks of at least 100,000 square feet, the North Michigan Avenue submarket has numerous availabilities for large users. The two largest contiguous blocks are 351,000 square feet at 515 North State and 318,000 square feet at Tribune Tower (435-445 North Michigan).
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS DISTRICT
NORTH MICHIGAN AVENUE
Numbers in parentheses are negative
NORTH MICHIGAN AVENUE SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
4
Direct availability continues to fall, but sublease vacancy skyrockets
River North continues to have the lowest direct vacancy rate in the CBD and experienced positive quarterly absorption of 26,000 square feet. Class C performance lagged as it was the only class to have negative absorption. However, total vacancy in River North jumped 1.3 percent to 14.3 percent as sublease vacancy increased by almost 200,000 square feet. While having no contiguous direct blocks over 100,000 square feet, the River North submarket has three of the largest blocks of contiguous sublease space in the CBD. AT&T, Level 3 Communications and, most recently, Career Education Corporation are all marketing their respective spaces at 350 West Mart, 600 West Chicago and 222 Merchandise Mart.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Size (sf)
Building Class B
350 W Mart Ctr *
87,404
350 W Mart Ctr
87,393
B
222 Merchandise Mart Plz
68,829
B
350 W Mart Ctr
64,661
B
321 N Clark St
61,431
A
* Indicates future available space
There has been little investment activity since the second quarter, but two properties are being marketed. KBS REIT 2 is selling up to a 49 percent stake in the trophy tower at 300 North LaSalle, which could fetch upwards of $600 per square foot, and Joseph Lagoa has reduced the asking price for the loft building at 540 North LaSalle to $8.5 million. The borders of the River North submarket are defined as Division Street (North), Racine Avenue (West), State Street (East), Fulton Street, and the Chicago River (South). It has historically been home to small, older buildings catering to art galleries, furniture studios, and small businesses but has seen new development, which has brought law firms and financial institutions to the submarket.
A
B
C
Total
3,995,586
3,708,444
5,568,184
13,272,214
171,194
169,672
(22,129)
318,737
Direct Vacancy Rate
11.2%
5.8%
9.8%
9.1%
Total Vacancy Rate (Direct + Sublease)
12.4%
17.3%
13.6%
14.3%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
Fiserv renewed its lease of 50,000 square feet at 350 North Orleans, reinforcing River North’s stature as the technology hub of the Midwest. Insurance brokerage Hub International subleased 25,000 square feet at 300 North LaSalle.
RIVER NORTH SUMMARY
CENTRAL BUSINESS DISTRICT
RIVER NORTH
Numbers in parentheses are negative
RIVER NORTH SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
5
Woes continue for the CBD’s smallest submarket
Comprised of just over 2.2 million square feet, the South Loop is the smallest submarket and is subject to large swings in vacancy rates. Several trading and financial firms that have historically occupied space in the South Loop have been reducing space requirements or relocating to other submarkets across the CBD. This has caused direct vacancy in the South Loop to increase over 100 basis points to 27.3 percent, by far the highest rate in the CBD.
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
440 South LaSalle (One Financial Place), South Loop’s only Class A building, continues to struggle with the loss of MF Global in the second quarter. The building is marketing three contiguous blocks ranging from 53,000 to 163,000 square feet. Recent leasing activity and subsequent move-ins next quarter are expected to help lower the building’s roughly 30 percent direct vacancy rate.
* 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
1,166,135
2,185,460
(92,006)
(67,287)
(159,293)
Direct Vacancy Rate
29.7%
25.2%
27.3%
Total Vacancy Rate (Direct + Sublease)
30.8%
25.4%
27.9%
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. Yet with only one Class A and no Class B buildings and tenants looking to upgrade their office space to take advantage of attractive rents, it will likely trail the recovery because of its limited options.
SOUTH LOOP SUMMARY
CENTRAL BUSINESS DISTRICT
SOUTH LOOP
Numbers in parentheses are negative
SOUTH LOOP SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
6
Demand for Class A returns as occupancy improves in CBD’s largest submarket
Buoyed by a return of positive absorption in Class A buildings, the West Loop saw direct vacancy drop 30 basis points to its lowest level in over three years. Its proximity to major transportation and its inventory of some of the newest buildings in the CBD has made the West Loop the premier submarket in Chicago. With 133,000 square feet of net positive absorption, only the Central Loop outperformed the CBD’s largest submarket.
Size (sf)
Building Class
500 W Monroe St
338,131
A
233 S Wacker Dr
285,910
A
311 W Monroe St
214,490
C
300 S Riverside Plz *
198,302
B
540 W Madison St *
166,522
A
233 S Wacker Dr *
125,553
A
227 W Monroe St *
117,053
A
91,807
A
233 S Wacker Dr 30 S Wacker Dr
85,831
A
540 W Madison St
84,031
A
* Indicates future available space Italicized addresses indicate new blocks this quarter Even so, Class B is the only class to see net positive absorption during 2012, with a yearly occupancy increase of roughly 300,000 square feet. Class A and C posted slightly negative net absorption during the past year despite positive fourth quarters.
Investment activity in the West Loop continued to be robust in the fourth quarter as Harbor Group International finalized their acquisition of 1 South Wacker for $221 million. The American Recovery Property Trust partnered with Northwood Investors to acquire and recapitalize 525 West Van Buren for $95 million. In addition, two buildings were put on the market in the fourth quarter. JP Morgan Chase is marketing 225 West Wacker for $175 million and Kuchner Companies is seeking $275 million for 225 West Randolph. 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
27,129,650
9,739,144
6,350,345
43,219,139
(26,220)
302,265
(28,277)
247,768
Direct Vacancy Rate
14.5%
10.8%
15.8%
13.9%
Total Vacancy Rate (Direct + Sublease)
17.6%
12.3%
17.2%
16.3%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
Class A buildings rebounded from a disappointing third quarter, posting 120,000 square feet in positive absorption. Much of this absorption came from 233 South Wacker (Willis Tower), as its occupancy increased by over 60,000 square feet. Two of the largest transactions in the West Loop include Presence Health signing a 44,000 square foot lease at 200 South Wacker and Zones signing a 29,000 square foot lease (includes 19,000 square feet of sublease space) at Willis Tower.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS DISTRICT
WEST LOOP
Numbers in parentheses are negative
WEST LOOP SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
7
SUBURBAN CHICAGO
SUBURBAN MAP
SUBMARKET SNAPSHOTS FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
8
Widespread move-outs and space reductions in Class A lead to net negative absorption
Class B buildings in the East-West submarket experienced strong demand in the fourth quarter. But Class A buildings had the worst quarter of any segment throughout the market, experiencing negative absorption of 300,000 square feet. This offset the 250,000 square feet of net positive absorption seen in Class B and C buildings. As a whole, the East-West submarket was the worst performing submarket for the second straight quarter and will end 2012 with net negative absorption of 370,000 square feet.
City
Size (sf)
Building Class
700 Oakmont Ln
Westmont
256,767
A
3075 Highland Pky *
Downers Grove
241,519
A
2400 Cabot Dr
Lisle
217,718
A
28100 Torch Pky
Warrenville
79,830
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
4343 Commerce Ct *
Lisle
74,855
A
333 E Butterfield Rd
Lombard
70,897
B
* Indicates future available space
Asking rental rates continue to drop, down another 2.7 percent on a year-over-year basis, as landlords compete for tenants facing a large supply of blocks greater than 50,000 square feet of vacant space. The East-West submarket has 27 such blocks of direct vacant space and another seven of sublease availability. Three of the four largest blocks of direct vacant space in the Suburban market are in the East-West submarket. In addition to the direct space, Navistar is marketing 250,000 square feet of their space for sublease at 4201 Winfield Road in Warrenville. A joint venture of Investcorp International and Golub & Co. purchased the 11 property Oak Creek Center (2050-2080 Finley Road) in Lombard from KBS Realty Advisors for $92 per square foot. Arthur Goldner & Associates purchased 40 Shuman Boulevard in Naperville from KBS Real Estate Investment Trust for $80 per square foot. Both properties are approximately 87 percent leased.
SUBMARKET SNAPSHOTS
Widespread move-outs and downsizing occurred in Class A buildings. Two of the largest tenants to eliminate space were Crowe Horwath giving back 56,000 square feet at 1 Mid America Plaza in Oakbrook Terrace and Unilever giving back 23,000 square feet at 2200 Cabot Drive in Lisle.
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
A
B
C
Total
20,627,288
14,510,194
5,180,619
40,318,101
(457,450)
92,876
(5,912)
(370,486)
Direct Vacancy Rate
21.1%
23.0%
25.7%
22.4%
Total Vacancy Rate (Direct + Sublease)
23.7%
27.8%
21.8%
24.9%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
EAST-WEST SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
9
Class B leads rebound after dismal third quarter
The North submarket’s direct vacancy rate remained at 20.7 percent as an increase in Class A vacancy was offset by a decrease in Class B vacancy. Despite having the lowest direct vacancy rate in the Suburban market, landlords continue to cut asking rental rates, which are down 2.7 percent over last year.
LARGEST BLOCKS OF DIRECT AVAILABILITY City
Size (sf)
Building Class
1 Overlook Pt
Lincolnshire
117,798
A
2355 Waukegan Rd
Bannockburn
106,495
A
544 Lakeview Pky
Vernon Hills
84,237
B
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
1200 Lakeside Dr
Bannockburn
63,738
A
540 Lake Cook Rd **
Deerfield
63,298
A
** Indicates space available in current quarter
Fresenius Kabi signed the largest lease transaction of the quarter in the Suburban market. The international healthcare company will move mid-2013 into 101,000 square feet at 1 Corporate Drive in Long Grove. Brightstar signed a 48,000 square foot lease at 85060 Technology Way in Libertyville, adding to the over 45,000 square feet they already occupy in a neighboring building. After signing its single tenant, Aon Hewitt, to the largest suburban lease transaction in the past four years, Retail Properties of America sold the 819,000 square foot 4 Overlook Point in Lincolnshire to American Realty Capital Trust for $181 per square foot. 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
16,858,000
7,374,024
2,518,166
26,750,189
(365,450)
131,363
8,074
(226,013)
Direct Vacancy Rate
21.6%
17.9%
22.9%
20.7%
Total Vacancy Rate (Direct + Sublease)
26.1%
21.1%
24.6%
24.6%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET SNAPSHOTS
High sublease availability is hampering the direct market and pressuring direct asking rental rates. Last quarter’s reduction in sublease availability was erased in the fourth quarter as Class A and B buildings added over 100,000 square feet in new sublease availability. The 1 million square feet in Class A sublease vacancy constitutes 6 percent of total inventory, which is well above the market average.
Building Address
SUBURBAN CHICAGO
NORTH
Numbers in parentheses are negative
NORTH SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
10
Little activity in most distressed submarket The fourth quarter brought little change to the Northwest submarket’s occupancy as direct vacancy stayed at a Suburban market high of 25.8 percent. Class B buildings continued to struggle, experiencing net negative absorption of 90,000 square feet and a direct vacancy rate of 33.6 percent.
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 space available in current quarter
Lemko signed the largest lease transaction and will occupy 22,000 square feet at 1 Pierce Place in Itasca. However, the new lease will not immediately result in positive absorption for the submarket, as the wireless networking firm is relocating from a similarly sized space at 1700 East Golf Road in Schaumburg. Investment activity was minimal during the fourth quarter, with no new listings on the market and only one notable sale. 3030 Salt Creek Atrium purchased the Class B building at 3030 West Salt Creek Lane in Arlington Heights for $23 per square foot from Equity Office.
SUBMARKET SNAPSHOTS
Tenants continue to have the upper-hand in lease negotiations, which has translated into landlords lowering asking rental rates by 4.6 percent on a year-over-year basis. Additionally, there are 27 direct contiguous blocks of at least 50,000 square feet available for lease; 13 of which are greater than 100,000 square feet. The largest blocks in each of the Suburban market’s three building classes are located in the Northwest submarket, with the largest being a 351,000 square foot block at 21440 Lake Cook Road in Deer Park.
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
18,500,654
9,669,129
2,348,148
30,517,931
379,728
(19,395)
41,909
402,242
Direct Vacancy Rate
21.1%
33.6%
30.0%
25.8%
Total Vacancy Rate (Direct + Sublease)
25.3%
35.5%
32.2%
29.0%
Inventory (square feet) Year to Date Absorption (square feet)
Numbers in parentheses are negative
NORTHWEST SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
11
Smallest submarket outperforms the overall market
Suburban Chicago’s smallest submarket was the exception to an otherwise unremarkable fourth quarter for the Suburban market. With net positive absorption of 117,000 square feet, the O’Hare submarket outperformed all other submarkets combined and saw direct vacancy fall 80 basis points to 24.9 percent. Class A buildings made up most of this positive absorption and remain one of the tightest segments in Suburban Chicago. While Class B and C direct vacancy rates remain above 30 percent, they fell from their third quarter rates.
City
Size (sf)
Building Class
5450 N Cumberland Ave 2350-2360 E Devon Ave
Chicago
143,525
A
Des Plaines
142,596
B
8420 W Bryn Mawr Ave
Chicago
104,164
A
4242 N Harlem Ave
Norridge
93,155
B
5100 River Rd **
Schiller Park
74,988
A
1350 E Touhy Ave
Des Plaines
71,367
B
9801 W Higgins Rd
Rosemont
70,926
B
9500 W Bryn Mawr Ave
Rosemont
69,701
A
10255 W Higgins Rd
Rosemont
69,695
A
8550 W Bryn Mawr Ave *
Chicago
66,895
B
* Indicates future available space ** Indicates space available in current quarter Italicized addresses indicate new blocks this quarter
The largest lease transaction of the quarter involved Brunswick Corporation relocating 70,000 square feet within the O’Hare submarket from 5100 River Road in Schiller Park to 9525 West Bryn Mawr in Rosemont. O’Hare saw one notable sale in the fourth quarter. Owner-occupier Americaneagle.com purchased the 65,000 square foot building at 2600 South River Road in Des Plaines from Property Casualty Insurers Association of America for $58 per square foot. 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
7,863,219
4,328,987
2,533,399
14,725,605
Year to Date Absorption (square feet)
81,456
26,266
17,442
125,164
Direct Vacancy Rate
18.2%
30.2%
36.9%
24.9%
Total Vacancy Rate (Direct + Sublease)
21.1%
31.5%
37.6%
27.0%
SUBMARKET SNAPSHOTS
Asking rental rates are down 2.2 percent on a year-overyear basis, including a 5.8 percent reduction in Class A. This suggests that increased occupancy in Class A buildings is likely a result of significantly lower asking rental rates rather than a pure demand increase.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
SUBURBAN CHICAGO
O’HARE
O’HARE SUBMARKET HISTORICAL DIRECT VACANCY
FOURTH QUARTER 2012 | 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
PATRICIA ALUISI Executive Vice President & Chief Administrative Officer/General Counsel
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
FOURTH QUARTER 2012 | CHICAGO SUBMARKET SNAPSHOTS
13