SECTION TITLE SECTION SUBTITLE SECOND
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2014
R
CENTRAL BUSINESS DISTRICT
SECTION #
CHICAGO SUBURBAN
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FIRST QUARTER 2013 | CHICAGO MARKET OVERVIEW
1
S E C O N D Q UA RT E R
2014
TABLE OF CONTENTS SE CT ION ONE
CHICAGO
CHICAGO ECONOMY
MARKET OVERVIEW
SE CT ION T WO
01 Economic Analysis
SUBURBAN CHICAGO 02 Suburban Chicago Executive Summary
MARKET OVERVIEW
SUPPLY 03 New Developments 04 Sublease Space 05 Large Blocks of Direct Availability DEMAND 06 Vacancy Rates 07 Large Deals 08 Absorption FEATURES 09 10 11 12
2013 The Chicago Market Overview is published quarterly by MB Real Estate. To obtain additional copies or for further information, please contact: Alex Jin, Research Coordinator 181 West Madison Street, Suite 4700 Chicago, Illinois 60602 (312) 726-1700 www.mbres.com
Gross Asking Rents Investment Sales Forecast Market Statistics
SE CT ION T WO
SUBURBAN SNAPSHOTS SUBURBAN SUBMARKET SNAPSHOTS 13 14 15 16 17
Submarket Map 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 As of the June 2014 release of the latest U.S. Bureau of Labor Statistics census, the national unemployment rate had fallen to 6.1%. This 60 basis point drop from last quarter sees unemployment at the lowest level since September of 2008. The U.S. economy is experiencing the largest consecutive job growth since the late ‘90s tech boom, adding more than 200,000 jobs in each of the past five months.
CHICAGO ECONOMIC ANALYSIS
SECTION ONE
Nationally, professional and business services added 67,000 jobs from May to June. This exceeds the average monthly gain of 56,000 office jobs over the past 12 months. Chicago experienced its own recent office job growth with the city’s professional and business services employment rising by 1.7% year-to-date. This is the largest growth for the period of any nonfarm industry. Chicago business activity continues to expand, albeit at a slower rate in June than earlier in the year. Market News International’s Chicago Business Barometer fell back to 62.6 by quarter-end after achieving a seven-month high of 65.5 in May. However, this mark is still well above the 50.0 index baseline, and well exceeds the 52.0 from one year ago. Meanwhile, Chicago continues to grow as a premier destination for tourism. Released in May, 2013’s tourism statistics surpassed the previous years’ record-setting performance. The city was host 46.96 million domestic and 1.42 million international travelers, a 4.3 percent increase from 2012. In the midst of this generally positive news on employment and cultural relevance, Chicago still faces a host of internal issues. Huge pension problems and growing direct debt of around $19.5 billion are all being shouldered by a shrunken population. While the city grew by 5,862 people in the last year ending July 1st, this 0.2 percent growth is insignificant amongst major cities tracked by The Economist, and this marginal growth is a far cry from addressing the 200,000 residents the city lost in the first decade of the ‘00s. More concerning is the hot button issue of addressing the major unfunded pension liability which could come at direct cost to commercial real estate. Mayor Rahm Emanuel recently unveiled a proposal to increase property tax by another $200 million. Office building owners look to face $140 million of this tax, factoring directly into more expensive leases for tenants. Chicago already has the second highest commercial tax rate behind Detroit. This looming pension payment could drive the city to the highest commercial taxes in the U.S. The next quarter will be a significant one for the CBD. Chicagoans should be optimistic regarding the improving employment situation, growing business and continued relevance of the city, but our economic recovery still faces some substantial hurdles. Sources: MBRE Research, BLS, Crain’s Chicago Business, World Business Chicago, Manpower, Moody’s Economy.com
CHICAGO EMPLOYMENT WELL BELOW PEAK AND RECOVERING SLOWLY Chicago MSA Employment (thousands, SA)
4,700 4.593 million
Peak: 4.569 million
4,600 4,500 4,400
4.390 million
Peak-toTrough -7.46%
4,300 4,200 Trough: 4.228 million
4,100 4,000 Jul-00
Current: 4.451 million Jan-02
Jul-03
Jan-05
Jul-06
Jan-08
Jul-09
Jan-11
Jul-12
Jan-14
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
1
SUBURBAN CHICAGO
SECTION TWO
SUBURBAN CHICAGO EXECUTIVE SUMMARY Suburban Chicago experienced 609,854 square feet of positive absorption in the second quarter of 2014. Overall direct vacancy fell by 60 basis points to reach 21.25 percent. Along with the positive net change in occupancy, this vacancy rate can be partially attributed to a decrease in total suburban building area of 59,813 square feet. The North suburban submarket was the only one to experience negative absorption this quarter. The East-West submarket contributed the most positive absorption with 444,429 square feet. Key Indicators: •
Pharmaceutical company AbbVie’s 539,568 square foot sublease of Capital One’s former space in Mettawa was the single largest deal this quarter. While no other deals greater than 50,000 square feet were finalized, MBRE tracked at least seven in the 20-40k range.
•
790,033 square feet of suburban space was renewed or extended in eight large deals.
•
Class A performed best in second quarter representing 457,219 square feet (75%) of the total positive absorption.
•
The sale of Tellabs’ 819,000 square foot headquarters in Naperville for $187,551,000 is the largest building sale in the suburbs so far this year.
OUTLOOK: Though overall rent saw a slight increase this quarter, the suburban market is still seen as a tenant’s market. Landlords have to offer incentives to attract and retain companies who have an increased interest in relocating downtown with today’s workforce. Consecutive positive absorption quarters, a turn-around in rents, and continuing mid-sized leasing activity is an indicator that the market is inching along in its recovery.
SUBURBAN VACANCY AND 2ND QUARTER ABSORPTION SUMMARY
Direct Vacancy 1Q2014 East-West North Northwest O'Hare Suburban Chicago Total Net Absorption 1Q2014 East-West North Northwest O'Hare Suburban Chicago Total
A
Change from 4Q2013
B
Change from 4Q2013
C
Change from 4Q2013
Total
Change from 4Q2013
19.6% 20.5% 19.7% 17.1% 19.6%
-1.4% 0.2% -0.9% -0.5% -0.7%
21.6% 16.0% 29.8% 24.4% 23.0%
-0.8% -0.2% -0.1% -1.5% -0.6%
23.1% 17.0% 24.5% 37.0% 24.9%
-0.2% 0.2% -0.9% 1.2% 0.0%
20.8% 18.9% 23.2% 22.5% 21.2%
-1.0% 0.0% -0.7% -0.6% -0.6%
A
B
C
Total
321,106 (22,034) 124,475 33,673 457,219
93,523 16,103 932 67,145 177,703
(1,005) (10,166) 24,238 (38,134) (25,067)
413,624 (16,097) 149,644 62,684 609,854 Numbers in parentheses are negative
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
2
New additions to hit the market by year end There were no new deliveries in the suburbs in the past 90 days.
•
Zurich North America was able to finance their proposed headquarters in Schaumburg. They borrowed $333 million to construct a state-of-the-art 753,300 square foot campus, the largest build-to-suit project in the Chicago area since Tellabs Inc.’s 819,000 square foot headquarters was completed in 2001. The Zurich project construction is scheduled to be completed by late 2016.
•
The future headquarters of the American Academy of Orthopedic Surgeons, AAOS, remains under construction at the intersection of West Higgins Road and River Road in Rosemont. When completed in December of this year, it will add 180,000 square feet to the O’Hare submarket.
•
DHL Global Forwarding’s new office and warehouse is currently under construction as well. The $35 million project occurring in the O’Hare submarket will add 53,000 square feet of office space and 423,030 square feet of warehouse space.
•
Hamilton Partners is still proposing to build low to mid-rise Class A office buildings on Eola Road at Interstate-88. The land can accommodate 330,000 square feet, but they have yet to pre-lease any space.
SUPPLY
•
SUBURBAN CHICAGO
NEW DEVELOPMENT
NEW DELIVERIES PIPELINE 2014 Deliveries Building Address
Size (sf)
% Leased
Submarket
Delivery
Comments
1000 W. Irving Rd
16,000
79.6%
Northwest
1Q14
3,200 sf available on 1st floor
Total - 1 Property
Under Construction Building Address
Size (sf) % Pre-leased
Submarket
Due Date
Comments
Higgins and River Rd
180,000
100.0%
Northwest
December 2014
Class A office building, AAOS headquarters
DHL-O'Hare Airport
53,000
100.0%
O'Hare
November 2014
Office/warehouse space
1111-1112 Techny Rd
26,400
0.0%
North
February 2015
New North submarket construction
Submarket
Due Date
Comments
East-West
None
Hamilton Partners want to build low to mid rise Class A
Total - 2 Properties
Proposed Building Address Eola Rd at I-88
Size (sf) % Pre-leased 330,000
0.0%
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
3
Sublease vacancy continues to fall •
The amount of total sublease space increased slightly this quarter to 3,096,191 square feet.
•
The number of large contiguous blocks of sublease space (+50,000 square feet) fell from thirteen to eleven. The Capital One sublease of 492,948 square feet at 26525 N Riverwoods Blvd in Mettawa was taken by AbbVie Pharmaceuticals in the largest deal this quarter.
•
Class A buildings make up 67% of available sublease space with 2,085,934 square feet.
•
81% of total available sublease space is found in the East-West & North suburban markets. Only 4% of sublease space is from the O’Hare market.
SUPPLY
HISTORIC YEAR-END SUBLEASE AVAILABILITY: STEEP DROP IN CLASS A SUBLEASE
SUBURBAN CHICAGO
SUBLEASE SPACE
3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2002
2003
2004
2005
Class A
2006
2007
2008
2009
2010
Class B
2011
2012
2013
2014 YTD
Class C
LARGE BLOCKS (MORE THAN 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE Class A Building Address
Size (sf)
Occupancy
Expiration
Submarket
Sublandlord
1000 Milwaukee Ave, Glenview 4201 Winfield Rd, Warrenville 150 S Saunders Rd, Lake Forest 1200 Lakeside Dr, Bannockburn 2455 Corporate West Dr, Lisle 2441 Warrenville Rd, Lisle
289,613 249,996 126,595 106,147 54,808 50,033
Vacant Vacant Vacant Vacant June 2023 January 2016
February 2017 Negotiable April 2017 May 2014 July 2019 January 2016
North East-West North East-West Northwest East-West
Hewitt Associates Navistar AON Hillshire Brands Jewel-Osco SXC Health Solutions Group
Total - 6 Spaces
877,192 Size (sf)
Occupancy
Expiration
Submarket
Sublandlord
2001 Lakewood Blvd, Hoffman Estates 2707 Butterfield Rd, Oak Brook 750 N Commons Dr, Aurora 3333 Finley Rd, Downers Grove
239,250 120,156 112,605 94,257
Negotiable 90 Days 30 Days Vacant
Negotiable December 2021 September 2017 February 2021
Northwest East/West East/West East/West
AT&T Sanford LP Westell Technologies Floors 2-5
Total - 4 Spaces
926,268
Class B Building Address
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
4
Fewer Large Blocks •
The total number of direct, available large blocks (greater than 50,000 square feet) decreased by six properties this quarter to 88. Both A and B buildings contributed to this drop in large blocks.
Class C was the only class to increase in number of large available blocks as the addition of 150 S. Lincolnway bringing the total to five.
•
OUTLOOK: The total square footage of large block direct available space decreased by 616,256 square feet this quarter from last. While some of these block removals were the result of divisions of space, the outlook is looking far more positive than just last quarter.
CLASS B Building Address
City
Size (sf)
Submarket
6200 S Route 53
Lisle Rolling Meadows Arlington Heights Schaumburg Niles Long Grove Chicago Des Plaines Wood Dale Oak Brook Aurora Schaumburg Rolling Meadows Buffalo Grove Arlington Heights Aurora Des Plaines Mount Prospect Vernon Hills Oak Brook Warrenville Rosemont Des Plaines Addison Downers Grove Schaumburg
360,000 252,266 200,681 182,600 152,950 150,000 143,525 142,596 125,323 120,156 112,655 109,373 98,888 98,105 96,213 82,000 71,367 71,310 68,452 66,882 62,440 62,063 59,710 58,833 52,980 51,513 3,052,881
East-West
2850 W Golf Rd 1421 W Shure Dr 1000 E Woodfield Rd 5990 W Touhy Ave 3890 Salem Lake Dr 5450 N Cumberland Ave 2350-2360 E Devon Ave 700 N Wood Dale Rd 2707 Butterfield Rd 750 N Commons Dr 953 American Ln 3800 Golf Rd 700 E Lake Cook Rd 703-709 W Algonquin Rd 1245 Corporate Blvd 1350 E Touhy Ave 1501 Feehanville Dr 544 Lakeview Pky 814 Commerce Dr 27545 Diehl Rd 9801 W Higgins Rd 999 E Touhy Ave 2250 W Pinehurst Blvd 2211 Butterfield Rd 1 E Commerce Dr 25 Blocks of Space
Northwest Northwest Northwest North Northwest O'Hare O'Hare Northwest East-West East-West Northwest Northwest North Northwest East-West O'Hare Northwest North East-West East-West O'Hare O'Hare Northwest East-West Northwest
Size (sf)
Submarket
269,014 101,714 89,634 77,006 58,450 595,818
Northwest East-West East-West O'Hare East-West
City
600 N US Highway 45 2001 N. Division St. 1000 Milwaukee Ave 263 Shuman Blvd 700 Oakmont Ln 4201 Winfield Rd 1 Parkway Blvd N 2550 W Golf Rd 2400 Cabot Dr 1707 N Randall Rd 200 N Martingale Rd 25 Tri State International 75 Tri State International 300 Tower Pky 1200 Lakeside Dr 1701 Golf Rd 26125 N Riverwoods Blvd 2655 Warrenville Rd 2441 Warrenville Rd 150 S Saunders Rd 8420 W Bryn Mawr Ave 1 Overlook Pt 2355 Waukegan Rd 1250 N Arlington Heights Rd 2651 Warrenville Rd 1500 W Shure Dr 535 E Diehl Rd 2895 Greenspoint Pky 3 Parkway Blvd N 8725 W Higgins Rd 3010 Highland Pky 4343 Commerce Ct 425 N Martingale Rd 480 Warrenville Rd 5100 River Rd 333 Knightsbridge Pky 1 Pierce Pl 3050 Highland Pky 485 E Half Day Rd 10255 W Higgins Rd 1000 Royce Blvd 3500 Lacey Rd 1200 N Arlington Heights Rd 4201 Lake Cook Rd 410 Warrenville Rd 1333 Butterfield Rd 2800 W Higgins Rd 1300 N Arlington Heights Rd 2275 Half Day Rd 1431 Opus Pl 9500 W Bryn Mawr Ave 3000 Lakeside Dr 2100 Sanders Rd 701 Warrenville Rd 1222 Hamilton Pky 7400 N Caldwell Ave 1700 W Higgins Rd 6 Parkway Blvd N 58 Blocks of Space
Libertyville Harvard Glenview Naperville Westmont Warrenville Deerfield Rolling Meadows Lisle Elgin Schaumburg Lincolnshire Lincolnshire Lincolnshire Bannockburn Rolling Meadows Mettawa Downers Grove Lisle Lake Forest Chicago Lincolnshire Bannockburn Itasca Downers Grove Arlington Heights Naperville Hoffman Estates Deerfield Chicago Downers Grove Lisle Schaumburg Lisle Schiller Park Lincolnshire Itasca Downers Grove Buffalo Grove Rosemont Oakbrook Terrace Downers Grove Itasca Northbrook Lisle Downers Grove Hoffman Estates Itasca Bannockburn Downers Grove Rosemont Bannockburn Northbrook Lisle Itasca Niles Des Plaines Deerfield
Size (sf)
Submarket
1,121,186 407,347 405,039 354,000 256,767 249,996 218,196 216,592 205,633 205,504 197,631 181,807 181,807 175,545 170,165 159,824 156,156 149,211 148,423 126,595 119,228 111,327 106,495 100,525 88,107 88,098 83,792 79,424 79,101 78,060 77,465 75,637 75,111 75,000 74,988 74,728 74,710 74,319 72,782 69,285 68,000 67,743 65,698 64,087 63,409 63,398 61,840 61,760 61,391 61,028 60,680 56,447 56,209 55,821 54,150 54,000 51,206 50,066 8,042,539
North Northwest North East-West East-West East-West North Northwest East-West Northwest Northwest North North North North Northwest North East-West East-West North O'Hare North North Northwest East-West Northwest East-West Northwest North O'Hare East-West East-West Northwest East-West O'Hare North Northwest East-West North O'Hare East-West East-West Northwest North East-West East-West Northwest Northwest North East-West O'Hare North North East-West Northwest North O'Hare North
SUPPLY
•
CLASS A Building Address
SUBURBAN CHICAGO
LARGE BLOCKS OF DIRECT AVAILABILITY
CLASS C Building Address
City
9401 W Grand Ave 3501 Algonquin Rd 600-680 Oakmont Ln 150 S Lincolnway 2100 Swift Dr 5 Blocks of Space
Franklin Park Rolling Meadows Westmont North Aurora Oak Brook
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
5
Direct vacancy rates continues decrease •
The direct vacancy rates in the overall suburban market decreased by 60 basis points from the 1st quarter to 21.25 percent. Every suburban submarket except the North submarket experienced an overall decrease in vacancy rates.
•
The East-West submarket saw a substantial decrease dropping one full percent to 20.80 percent. The majority of this decrease can be attributed to the performance of Class A buildings as their direct vacancy fell from 21.0 percent in the first quarter to 19.63 percent in the second quarter.
•
OUTLOOK: The overall suburban direct vacancy rate continues to fall based on strong performances in the East-West and North submarkets. However, leasing in the Northwest & O’Hare submarkets continues to be a struggle with 23.23 & 22.54 percent direct vacancy rates respectively.
30%
DEMAND
HISTORIC YEAR-END VACANCY RATES BY SUBMARKET: IMPROVEMENT ACROSS EVERY SUBMARKET
SUBURBAN CHICAGO
VACANCY RATES
25% 20% 15% 10% 5% 0% 2003
2004
2005
East-West
2006
2007
North
2008
2009
2010
Northwest
2011
O'Hare
2012
2013 2014 YTD
Total Suburban
HISTORIC YEAR-END VACANCY RATES BY CLASS: CLASS A DROPS BELOW TWENTY PERCENT 30% 25% 20% 15% 10% 5% 0% 2003
2004 Class A
2005
2006
2007 Class B
2008
2009 Class C
2010
2011
2012
2013 2014 YTD
Total Suburban
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
6
No New Deals Over 50,000 SF •
By far the largest deal signed in the second quarter belonged to pharmaceutical company AbbVie. AbbVie, a subsidiary of Abbott Laboratories, signed a lease for Capital One’s 558,859 square foot sublease in Mettawa.
•
There were no new deals greater than 50,000 square feet this quarter, however multiple mid-sized deals in the 20-40k range were signed. The largest of these tracked by MBRE was the 41,097 square foot lease by New Zealand-based eco-technology firm LanzaTech in Skokie.
•
The East-West Corridor saw the greatest number of large leasing transactions in the second quarter.
•
Both North and East-West Corridor submarkets saw a number of large renewals and expansions in the past quarter. Large tenants seem to be maintaining their space or expanding, while exclusively mid-sized tenants are taking new space.
SUBURBAN CHICAGO
LARGE DEALS
DEMAND
LARGE LEASE TRANSACTIONS NEW Tenant
Type
Submarket
Building Address
Size (sf)
LanzaTech ComEd Rexam CompuSystems Comcast Fidelity Information Systems Addus Healthcare
New New New New New New New
North East-West O'Hare East-West O'Hare East-West East-West
8045 Lamon Ave., Skokie 1 Lincoln Centre, Oakbrook Terrace 8770 W. Bryn Mawr Ave., O'Hare 2655 Warrenville Rd., Lisle 8725 W Higgins Rd., O'Hare 270 Remington Rd., Bolingbrook 2550 Warrenville Rd., Downers Grove
41,097 40,000 32,000 31,000 27,000 21,000 21,000
Total - 4 Deals
213,097
RENEWAL/EXPANSION/SUBLEASE Tenant
Type
Submarket
Building Address
AbbVie Pharmaceuticals Mondi USA Exelon Apatargroup Xerox GSA Dupage Medical Group Fortune Brands Home & Security Nanosphere
Sub Ren/Exp Ext Ext Ren Ren Ren Ren/Exp Exp
North East-West East-West North North East-West East-West North North
26525 N Riverwoods Blvd., Mettawa 1140 Arbor Dr., Romeoville 4300 Winfield Rd., Warrenville 801-901 Technology Way, Libertyville 5500 Pearl St., Rosemont One Oakbrook Terrace, Oakbrook Terrace 152 N Addison Ave., Elmhurst 520 Lake Cook Rd., Deerfield 4088 Commercial Ave., Northbrook
Total - 9 Deals
Size (sf) 539,568 171,812 150,000 137,679 89,817 81,493 63,320 53,170 42,742 1,329,601
Abbreviations: Cons - Consolidation / Cont - Contraction / Exp - Expansion / Ext - Extension / Relo - Relocation / Ren - Renewal / Sub - Sublease
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
7
East-West and Northwest Drive Strong Positive Absorption •
The second quarter saw positive absorption of 609,854 square feet. This was more than three times as much total positive absorption as last quarter.
•
This positive absorption was based largely on strong quarters from the East-West Corridor and Northwest submarkets ending with 413,624 square feet and 149,644 square feet respectively.
•
Class A was by far the best performer with 457,219 total square feet absorbed across all submarkets.
•
OUTLOOK: While large deals have been hard to come by in the suburbs, mid-sized companies continue to fill multi-tenant space to positive effect. The East-West Corridor submarket is the obvious highlight of recent growth, while the traditionally strong North submarket has remained relatively static despite negative absorption the last two quarters.
SUBURBAN CHICAGO
ABSORPTION
SUBURBAN CHICAGO ABSORPTION BY CLASS: MOMENTUM GATHERS STEAM 1,500,000 DEMAND
1,000,000 500,000 0 (500,000) (1,000,000) (1,500,000) 2006
2007
2008
2009
Class A
2010
2011
2012
Class B
2013
2014 YTD
Class C
EAST-WEST
2006
2007
2008
2009
2010
2011
2012
2013
2014 YTD
Class A
366,688
542,281
(259,973)
(595,372)
(219,164)
299,247
(457,450)
(244,250)
319,730
Class B
484,869
(203,072)
(2,062)
(259,196)
67,827
(152,069)
92,876
(126,654)
120,706
Class C
(125,850)
(108,813)
(87,441)
(179,177)
7,017
55,114
(5,912)
24,289
3,993
Total
725,707
230,396
(349,476)
(1,033,744)
(144,319)
202,292
(370,486)
346,615
444,429
NORTH
2006
2007
2008
2009
2010
2011
2012
2013
2014 YTD
Class A
(100,049)
615,115
(240,617)
(207,914)
(312,238)
(261,008)
(365,450)
23,960
(65,808)
Class B
316,207
355,510
(60,982)
(38,575)
(319,078)
33,814
131,363
107,166
(25,984)
Class C
(39,440)
26,935
(2,048)
(104,195)
(40,044)
(90,151)
8,074
100,580
11,184
Total
176,718
997,560
(303,647)
(350,684)
(671,360)
(317,345)
(226,013)
231,686
(80,608)
NORTHWEST
2006
2007
2008
2009
2010
2011
2012
2013
2014 YTD
Class A
(488,651)
10,333
(302,930)
(388,945)
(21,262)
(632,282)
379,728
(14,767)
283,546
Class B
12,266
(164,112)
(261,498)
(310,263)
(295,928)
(383,730)
(19,395)
218,201
3,625
Class C
(15,371)
(51,429)
(28,362)
(35,167)
(192,091)
(48,617)
41,909
39,325
48,108
(491,756)
(205,208)
(592,790)
(734,375)
(509,280)
(1,064,629)
402,242
242,758
335,279
2014 YTD
Total
O'HARE
2006
2007
2008
2009
2010
2011
2012
2013
Class A
189,235
11,636
(256,325)
(134,526)
209,180
40,666
81,456
61,413
(5,949)
Class B
7,915
(81,167)
(51,601)
(80,925)
70,376
14,041
26,266
(144,235)
130,689
Class C
90,170
(50,022)
(35,696)
62,815
(10,855)
(14,567)
17,442
(29,258)
(15,115)
Total
287,320
(119,553)
(343,622)
(152,637)
268,701
40,140
125,164
112,080
109,625
TOTALS
2006
2007
2008
2009
2010
2011
2012
2013
2014 YTD
Class A
(32,777)
1,179,365
(1,059,845)
(1,326,757)
(343,484)
(553,378)
(361,716)
(173,665)
531,519
Class B
821,257
(92,841)
(376,143)
(688,960)
(476,802)
(487,944)
231,110
54,478
229,036
Class C
(90,491)
(183,329)
(153,547)
(255,724)
(235,972)
(98,221)
61,512
134,936
48,170
Total
697,989
903,195
(1,589,535)
(2,271,441)
(1,056,259)
(1,139,542)
(63,094)
15,749
808,725
Numbers in parentheses are negative
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
8
Free Fall in Asking Rents Put On Pause •
This quarter saw an overall increase in gross asking rents to a $20.37 average across all submarkets.
•
A substantial rise in asking rent for North suburban properties sees this submarket as the most expensive in the suburbs this quarter at $22.67.
•
The East-West submarket was the only market to decline in gross asking rent over the last year. It also has the lowest rent on average overall at $19.13 per square foot.
•
OUTLOOK: After multiple consecutive quarters of decreased rental rates, this is the first positive sign of rate change since the recession. This rise in rates comes in conjunction with consecutive quarters of positive absorption.
SUBURBAN CHICAGO
GROSS ASKING RENTS
AVERAGE GROSS ASKING RATES BY CLASS AND SUBMARKET
East-West North Northwest O'Hare Suburban Chicago Total
A
Change over last year
B
Change over last year
C
Change over last year
Total
Change over last year
$21.10 $25.36 $20.94 $24.67 $22.63
-4.6% 29.4% 2.8% 14.0% 8.3%
$17.81 $18.75 $17.93 $18.90 $18.17
0.2% -2.6% 14.1% 4.7% 3.5%
$15.16 $16.03 $13.41 $16.51 $15.20
-2.5% 14.1% 4.4% 2.5% 0.2%
$19.13 $22.67 $19.37 $21.63 $20.37
-3.3% 18.3% 5.8% 10.0% 6.0%
FEATURES
Average Direct Gross Asking Rent
ASKING RATES CONTINUE TO HIT RECORD LOWS $26 $24 $22 $20 $18 $16 $14 2Q2002 2Q2003 2Q2004 2Q2005 2Q2006 2Q2007 2Q2008 2Q2009 2Q2010 2Q2011 2Q2012 2Q2013 2Q2014 Class A
Class B
Class C
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
9
Buildings Continue To Come To Market •
MBRE has tracked at least seven buildings which came to market in second quarter.
•
Two of these new to market buildings, Columbia Centre in Rosemont and Meadows Corporate Center in Rolling Meadows, are greater than 500,000 SF+.
•
There were three notable sales this quarter in the suburbs. This quarter’s sale of Tellabs headquarters to Select Income REIT was the largest sale in the suburbs so far this year at $187,551,000.
•
The Salvation Army bought a building in the Northwest submarket for $8.68 million. The building at 5550 Prairie Stone Dr. is 193,000 square feet.
On the Market: 2nd Quarter 2014 Building Address
Submarket
600 N US Highway 45, Libertyville
North
Columbia Centre I-III, Rosemont
Size (sf)
Price
PSF *
Class Seller
Status (Listing Agent)
1,121,186
Undisclosed
**
A
Motorola Mobility
On Market (Binswanger)
O'Hare
620,000
Undisclosed
**
A
White Oak Realty Partners
On Market (HFF)
Meadows Corporate Center, Rolling Meadows
Northwest
569,000
Undisclosed
**
A
John Buck Company
On Market (NAI Hiffman)
2100 E Lake Cook Rd, Buffalo Grove
North
258,995
Undisclosed
**
A
Undisclosed
On Market (JLL)
Oakwood Commerce Centre, Wood Dale
Northwest
238,202
Undisclosed
**
B
Undisclosed
On Market (NAI Hiffman)
75 N Fairway Dr., Vernon Hills
North
189,686
Undisclosed
**
A
Chicago Trust Co.
On Market (CBRE)
Woodfield Financial Center
Northwest
182,000
Undisclosed
**
A
Varde Partners
On Market (JLL)
701 E 22nd St., Lombard
East-West
174,098
Undisclosed
**
A
GID Investment Advisers
On Market (JLL)
1717 Deerfield Rd, Deerfield
North
141,186
Undisclosed
**
A
Undisclosed
On Market (JLL)
9501 Technology Way, Rosemont
O'Hare
121,117
Undisclosed
**
A
Ryan Companies
On Market (Colliers)
750 N Commons Dr, Aurora
East-West
112,665
Undisclosed
**
B
Westell Inc.
On Market (Colliers)
6300 N River Rd., Rosemont
O'Hare
112,345
Undisclosed
**
B
AAOS
On Market (AAOS)
FEATURES
INVESTMENT SALES: INVESTMENT ACTIVITY ACCELERATES
SUBURBAN CHICAGO
INVESTMENT SALES
Investment Sales: 2nd Quarter 2014 Building Address
Submarket
Size (sf)
Price
PSF *
Class Seller
Buyer
1415 W Diehl Rd., Naperville
East-West
819,000
$187,551,000 $229.00
A
Tellabs
Select Income REIT
2200-2222 Kensington Ct., Oak Brook
East-West
206,030
$37,000,000 $179.59
B
Inland Private Capital
Griffin Capital
5550 Prairie Stone, Hoffman Estates
Northwest
193,000
$8,685,000 $45.00
A
Piedmont Office Realty
Salvation Army
*Price per square foot - based off estimated selling price for new to market buildings
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
10
Recovery continues for the time being The second quarter ended with a substantial positive absorption of 609,854 square feet. The direct vacancy rate decreased by 60 basis points and ended at 21.25 percent. While there haven’t been any large deals leading to landmark shifts in the suburban market, the East-West and Northwest submarkets have experienced growth related to smaller mid-sized companies moving in to newly multi-tenanted space.
The suburban flight trend, which has seen many large corporations seeking new space downtown either in full or as a satelliete campus, is drawing absorption away from the suburbs. Pharmaceutical giant Walgreens made headlines when it came to market this quarter. The company occupies 1.1 million square feet in the North submarket and if it joined Capital One, Hillshire Brands, and Motorola Mobility in vacating the suburban market, the vacancy would be difficult to recover from. Outside this potential significant departure, MB Real Estate predicts that the trend of positive absorption and decreasing vacancy will continue for the remainder of 2014.
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD 2014 2015
Total Historic and Forecasted Inventory (sf)
Total Historic & Forecasted Occupancy (sf)
90,601,193 91,989,948 95,078,215 98,744,696 103,270,399 108,254,000 109,769,838 110,090,266 110,423,452 111,030,084 110,806,221 111,175,875 112,080,944 112,218,212 112,374,614 112,250,112 112,311,826 111,789,663 111,482,389 111,482,389
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 87,749,147 88,689,147
2004-2013 Absorption Avg:
(164,256)
2014 YTD Absorption:
808,725
Direct Vacancy % 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% 21.3% 20.4%
FEATURES
At this trajectory we could expect to see continued recovery in the suburban market, however some recent trends and new obstacles do stand in the way of achieving pre-recession levels.
Year
SUBURBAN CHICAGO
FORECAST
Total projected inventory based on addition of projects currently under construction Occupancy is forecast based on proprietary assumptions regarding the Chicago MSA’s total employment change and the office industry’s historical performance which trails the overall economy.
HISTORIC & PROJECTED VACANCY: 115,000,000
25%
110,000,000 20% 105,000,000 100,000,000 95,000,000
15%
10%
90,000,000 5% 85,000,000 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD 2015 2014 Total Historic and Forecasted Inventory (sf) Total Historic & Forecasted Occupancy (sf) Direct Vacancy %
80,000,000
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
11
2nd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
319,730
321,106
3,966,536
19.6%
16,238,034
697,122
23.1%
120,706
93,523
3,126,100
21.6%
11,336,083
668,151
26.2%
5,089,987
3,993
(1,005)
1,177,259
23.1%
3,912,728
13,857
23.4%
Total
39,756,739
444,429
413,624
8,269,895
20.8%
31,486,845
1,379,130
24.3%
NORTH
RBA (sf)
2nd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
16,808,242
(65,808)
(22,034)
3,447,049
20.5%
13,361,193
926,659
26.0%
Class B
7,366,840
(25,984)
16,103
1,176,646
16.0%
6,190,194
163,249
18.2%
EAST-WEST
RBA (sf)
Class A
20,204,570
Class B
14,462,183
Class C
Absorption (sf) YTD
Absorption (sf) YTD
2,455,957
11,184
(10,166)
418,602
17.0%
2,037,355
27,036
18.1%
Total
26,631,039
(80,608)
(16,097)
5,042,297
18.9%
21,588,742
1,116,944
23.1%
NORTHWEST
RBA (sf)
2nd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
18,409,811
283,546
124,475
3,621,388
19.7%
14,788,423
344,569
21.5%
Class B
9,534,079
3,625
932
2,837,177
29.8%
6,696,903
110,984
30.9%
Absorption (sf) YTD
Class C
2,560,545
48,108
24,238
627,559
24.5%
1,932,986
19,496
25.3%
Total
30,504,436
335,279
149,644
7,086,124
23.2%
23,418,312
475,049
24.8%
O'HARE
RBA (sf)
2nd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
7,881,007
(5,949)
33,673
1,345,770
17.1%
6,535,237
117,584
18.6%
Class B
4,198,986
130,689
67,145
1,022,875
24.4%
3,176,111
5,794
24.5%
Class C
2,450,182
(15,115)
(38,134)
906,283
37.0%
1,543,900
1,690
37.1%
Total
14,530,175
109,625
62,684
3,274,928
22.5%
11,255,248
125,068
23.4%
TOTALS
RBA (sf)
2nd Quarter Absorption (sf)
Direct Vacancy (sf)
Direct Vacancy %
Occupancy (sf)
Sublease Vacancy (sf)
Total Vacancy Rate (Vacancy + Sublease) %
Class A
63,303,630
531,519
457,219
12,380,742
19.6%
50,922,888
2,085,934
22.9%
Class B
35,562,089
229,036
177,703
8,162,797
23.0%
27,399,291
948,178
25.6%
Absorption (sf) YTD
Absorption (sf) YTD
Class C
12,556,671
48,170
(25,067)
3,129,703
24.9%
9,426,968
62,079
25.4%
Total Suburban
111,422,389
808,725
609,854
23,673,242
21.2%
87,749,147
3,096,191
24.0%
FEATURES
Class C
SUBURBAN CHICAGO
MARKET STATISTICS
Numbers in parentheses are negative
SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
12
SUBURBAN CHICAGO
SUBMARKET MAP
FEATURES SECOND QUARTER 2014 | CHICAGO MARKET OVERVIEW
13
Most Positive Absorption In The Suburbs The East-West submarket experienced a substantial absorption of 413,624 square feet this quarter. Three quarters of this growth can be attributed to Class A properties. The direct vacancy rate decreased from 21.8 percent in the first quarter to 20.8 percent.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
Follet Corporation commenced its lease, signed in 3rd quarter 2013, at 3 Westbrook Corporate Center for 160,000 square feet and KeHe Distributors moved into Naperville Corporate Center for 54,857 square feet. ComEd was the largest new lease signed for the East-West submarket at 40,000 square feet in Oakbrook Terrace.
City
Size (sf)
Building Class
6200 S Route 53
Lisle
360,000
B
263 Shuman Blvd
Naperville
354,000
A
700 Oakmont Ln
Westmont
256,767
A
4201 Winfield Rd
Warrenville
249,996
A
2400 Cabot Dr
Lisle
205,633
A
2655 Warrenville Rd
Downers Grove
149,211
A
2441 Warrenville Rd
Lisle
148,423
A
Oak Brook
120,156
B
750 N Commons Dr
Aurora
112,655
B
3501 Algonquin Rd
Rolling Meadows
101,714
B
Mondi USA renewed and expanded at 1140 Arbor Dr. in Romeoville for 171,812 square feet. Class A buildings made up 321,106 square feet of the total positive absorption for the submarket. 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
20,204,570
14,462,183
5,089,987
39,756,739
319,730
120,706
3,993
444,429
Direct Vacancy Rate
19.6%
21.6%
23.1%
20.8%
Total Vacancy Rate (Direct + Sublease)
23.1%
26.2%
23.4%
24.3%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET FEATURES SNAPSHOTS
2707 Butterfield Rd
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
EAST-WEST
Numbers in parantheses are negative
EAST-WEST SUBMARKET HISTORICAL DIRECT VACANCY 25% 20% 15%
17.1%
17.2%
18.9%
21.5%
22.1%
21.6%
22.4%
2004
2005
2006
2007
2008
2009
2010
2011
2012
20.8%
19.3%
2003
22.1%
20.1%
5%
22.6%
10%
0% 2013 2014 YTD
SECOND QUARTER 2014 | CHICAGO SUBMARKET SNAPSHOTS
14 16
Signed The Largest Deals Of The Quarter The North submarket had another 16,097 square feet of negative absorption this quarter bringing the submarket total at the mid-year to negative 80,608 square feet. Direct vacancy rose by just seven basis points to 18.93 percent, but total vacancy rose 28 basis points as 53,250 square feet of sublease space came to market. While a number of smaller move-ins largely balanced new space additions at 1751 Lake Cook Rd & 9 Parkway Blvd, overall Class A buildings continue to experience the largest negative absorption in the submarket this year.
City
600 N US Highway 45
Libertyville
1,121,186
A
1000 Milwaukee Ave
Glenview
405,039
A
1 Parkway Blvd N
Deerfield
218,196
A
25 Tri State International
Lincolnshire
181,807
A
75 Tri State International
Lincolnshire
181,807
A
300 Tower Pky
Lincolnshire
175,545
A
1200 Lakeside Dr
Bannockburn
170,165
A
26125 N Riverwoods Blvd
Mettawa
156,156
A
150 S Saunders Rd
Lake Forest
126,595
A
1 Overlook Pt
Lincolnshire
111,327
A
Size (sf)
Building Class
The largest lease execution for new space was also in the North submarket as New Zealand based biofuel company LanzaTech took 41,097 square feet in Skokie for their US Headquarters. Overall, the North market still boasts the lowest vacancy rates in the Chicago suburbs. The North submarket is located within portions of Cook and Lake Counties, with major cities including Bannockburn, Deerfield, Evanston,
NORTH SUMMARY
A
B
C
Total
16,808,242
7,366,840
2,455,957
26,631,039
(65,808)
(25,984)
11,184
(80,608)
Direct Vacancy Rate
20.5%
16.0%
17.0%
18.9%
Total Vacancy Rate (Direct + Sublease)
26.0%
18.2%
18.1%
23.1%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET FEATURES SNAPSHOTS
Fortunately, the North submarket also saw the largest deal of the quarter as AbbVie Pharmaceuticals signed for 539,568 square feet of sublease space at 26525 N Riverwoods Blvd in Mettawa.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
NORTH
Numbers in parantheses are negative
NORTH SUBMARKET HISTORICAL DIRECT VACANCY 25% 20% 15%
16.1%
12.5%
14.5%
17.5%
19.6%
20.6%
20.7%
2004
2005
2006
2007
2008
2009
2010
2011
2012
18.9%
16.5%
2003
19.9%
17.6%
5%
17.5%
10%
0% 2013 2014 YTD
SECOND QUARTER 2014 | CHICAGO SUBMARKET SNAPSHOTS
15 17
Despite Absorption, Still Highest Vacancy The Northwest submarket had another quarter of positive absorption taking its mid year total to 335,279 square feet. The direct vacancy rate also saw a decrease of 67 basis points to 23.23 percent in the first quarter.
LARGEST BLOCKS OF DIRECT AVAILABILITY
Omron Corporation commenced its 71,139 square foot lease this quarter at 2895 Greenspoint Parkway in Hoffman Estates. Merrill Lynch moved in at 10 N Martingale Rd taking 20,022 square feet and Mitsubishi Engine North America also commenced a lease for 20,453 square feet at Two Pierce Place.
City
2001 N. Division St
Harvard
407,347
A
9401 W Grand Ave
Franklin Park
269,014
C
2850 W Golf Rd
Rolling Meadows
252,266
B
2550 W Golf Rd
Rolling Meadows
216,592
A
1707 N Randall Rd
Elgin
205,504
A
Size (sf)
Building Class
1421 W Shure Rd
Arlington Heights
200,681
B
200 N Martingale Rd
Schaumburg
197,631
A
1000 E Woodfield Rd
Schaumburg
182,600
B
1701 Golf Rd
Rolling Meadows
159,824
A
3890 Salem Lake Dr
Long Grove
150,000
B
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
18,409,811
9,534,079
2,560,545
30,504,436
283,546
3,625
48,108
335,279
Direct Vacancy Rate
19.7%
29.8%
24.5%
23.2%
Total Vacancy Rate (Direct + Sublease)
21.5%
30.9%
25.3%
24.8%
Inventory (square feet) Year to Date Absorption (square feet)
SUBMARKET FEATURES SNAPSHOTS
No large transactions were inked in the submarket in the last three months, however the massive Zurich North America Insurance build-to-suit project in Schaumburg kicked off with a $333 million loan. When completed in 2016, it will be the largest single-tenant suburban development in 13 years.
Building Address
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
NORTHWEST
Numbers in parantheses are negative
NORTHWEST SUBMARKET HISTORICAL DIRECT VACANCY 30% 25% 20% 15%
18.1%
18.8%
21.3%
22.7%
24.4%
27.7%
25.8%
2004
2005
2006
2007
2008
2009
2010
2011
2012
23.2%
16.5%
2003
24.9%
15.2%
5%
18.8%
10%
0% 2013 2014 YTD
SECOND QUARTER 2014 | CHICAGO SUBMARKET SNAPSHOTS
16 18
Class B Leads In Absorption Through Mid-Year The O’Hare submarket experienced 62,684 square feet of absorption in the last quarter bringing the year-to-date total to 109,625 square feet.
Class B buildings are driving positive absorption in the submarket through the mid-year. The year-to-date absorption for Class B is at 130,689 square feet. While Class A & B have experienced incremental positive growth in the period, Class C continues to struggle under 37.0 percent direct vacancy.
LARGEST BLOCKS OF DIRECT AVAILABILITY Building Address
City
Size (sf)
Building Class
5450 N Cumberland Ave 2350-2360 E Devon Ave
Chicago
143,525
B
Des Plaines
142,596
8420 W Bryn Mawr Ave
B
Chicago
119,228
A
Chicago
78,060
A
150 S Lincolnway
North Aurora
77,006
C
5100 River Rd
Schiller Park
74,988
A
1350 E Touhy Ave
Des Plaines
71,367
B
10255 W Higgins Rd
Rosemont
69,285
A
9801 W Higgins Rd
Rosemont
62,063
B
9500 W Bryn Mawr Ave
Rosemont
60,680
A
Can manufacturer Rexam signed a 32,000 square foot lease at Triangle Plaza, and Advocate expanded at International Tower for 27,000 square feet. While no deals larger than 50,000 square feet were struck in the last quarter, smaller leases have been creating positive momentum for the submarket. Direct vacancy has continued to fall, going from 23.1 percent to 22.5 percent in the last quarter.
O'HARE SUMMARY Inventory (square feet)
A
B
C
Total
7,881,007
4,198,986
2,450,182
14,530,175
Year to Date Absorption (square feet)
(5,949)
130,689
(15,115)
109,625
Direct Vacancy Rate
17.1%
24.4%
37.0%
22.5%
Total Vacancy Rate (Direct + Sublease)
18.6%
24.5%
37.1%
23.4%
SUBMARKET FEATURES SNAPSHOTS
8725 W Higgins Rd
CENTRAL BUSINESS SUBURBAN CHICAGODISTRICT
O’HARE
Numbers in parantheses are negative
O’HARE SUBMARKET HISTORICAL DIRECT VACANCY 30% 25% 20% 15%
18.2%
19.0%
21.4%
27.3%
26.1%
26.0%
24.9%
2004
2005
2006
2007
2008
2009
2010
2011
2012
22.5%
20.8%
2003
24.9%
19.4%
5%
20.0%
10%
0% 2013 2014 YTD
SECOND QUARTER 2014 | CHICAGO 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 quality. 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 first 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.
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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. 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 arelocated within. 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 181 West Madison, Suite 4700 Chicago, Illinois 60602 phone: 312.726.1700 fax: 312.807.3853
EAST COAST REGIONAL HEADQUARTERS 335 Madison Avenue, 14th Floor New York, New York 10017 phone: 212.350.2300 fax: 212.350.2301
DEPARTMENT LEADERSHIP PATRICIA ALUISI Executive Vice President & Chief Administrative Officer/General Counsel
MARK A. BUTH Executive Vice President & Managing Director of Leasing Services
ANDREW J. DAVIDSON Executive Vice President & Managing Director of Corporate Services & Tenant Advisory
GARY A. DENENBERG Executive Vice President & Managing Director of Leasing Services
DAVID R. GRAFF Senior Vice President of Project Services
COMPANY LEADERSHIP PETER E. RICKER Chairman & CEO
CRAIG G. WALCZYK Senior Vice President/Chief Accounting Officer & Managing Director
KEVIN M. PURCELL Executive Vice President & Chief Operating Officer
JOHN T. MURPHY President
PETER J. WESTMEYER Executive Vice President & Managing Director of Investment Services & MBRE Healthcare Group
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