NAI Hiffman YER 2011.indd

Transcription

Committed to Chicago.
Connected to the World.™
NAI Hiffman Metropolitan Chicago
Market Review
& 2012 Forecast
hiffman.com
To our valued customers, partners and future clients...
We enter 2012 in much the same way that we entered 2011: hopeful but watchful,
cautious but optimistic. Our economists tell us we have reason to be tentative – it
being an election year, we’re unlikely to see much in the way of straight talk on the
economy as both sides jostle and jab each other, scrambling for votes. One side will
tell you things are better than they are; the other, that they’re worse. What’s missing
in all the back-and-forth is a strong voice and a clear direction – and over the past
few months, we’ve seen how important those things can be.
Many of us will watch the upcoming Super Bowl in a few days and we will even
wager our personal reputations on its outcome with great confidence. The
wager implies that the result is not a sure thing - statistics predicting completion
percentages or passing totals can get thrown out the window on game day with the
addition of adrenalin, cheering fans and the ephemeral element of “who shows up”.
It is undeniable that something deeper than pure numbers gives a team direction
and takes it to victory. A great part of the depth of a team depends on the leadership
qualities of its star players. Scouts call these qualities “intangibles”, and it is often
those very characteristics that determine success or failure. The commercial real
estate industry is no different. It is ironic that ultimately, all the hard numbers and
bottom lines of our industry hinge upon intangibles: Fear, and belief. One stifles
progress and smothers growth, the other inspires and builds confidence.
With the political picture unclear and contentious for the foreseeable future, the
commercial real estate industry can take a leadership role in helping to bring our
economy into focus for 2012. As real estate experts, we provide our clients with the
information necessary to find the best solutions to move their companies forward.
Guidance and expertise can be a powerful tool in fostering a positive business
environment; we hope that the latest snapshot of our economic world contained in
the following pages will assist you in the coming year.
Regards,
David A. Petersen, RPA
CEO, NAI Hiffman
CEO, NAI Hiffman Asset Management
Table of Contents
Market Review
& 2012 Forecast
Local Economy. . . . . . . . . . . . . . . . . . . . . . 4
Office Market Statistics . . . . . . . . . . . . . . . 7
Downtown Office Market Summary . . . . . . 8
Suburban Office Market Summary. . . . . . . 9
Office Market Overviews
1
West Loop. . . . . . . . . . . . . . . . . . . . . 10
2
Central Loop . . . . . . . . . . . . . . . . . . . 12
3
East Loop . . . . . . . . . . . . . . . . . . . . . 14
4
North Michigan Avenue . . . . . . . . . . 16
5
River North . . . . . . . . . . . . . . . . . . . . 18
6
North Suburban . . . . . . . . . . . . . . . . 20
7
Northwest Suburban. . . . . . . . . . . . . 22
8
O’Hare Area . . . . . . . . . . . . . . . . . . . 24
9
East-West Corridor . . . . . . . . . . . . . . 26
10
I-55 Corridor . . . . . . . . . . . . . . . . . . . 28
Medical Office Review . . . . . . . . . . . . . . . . 30
Industrial Market Statistics. . . . . . . . . . . . . 33
Industrial Submarket Overviews
1
Lake County . . . . . . . . . . . . . . . . . . . 36
2
Southeast Wisconsin . . . . . . . . . . . . 38
3
I-90/Northwest . . . . . . . . . . . . . . . . . 40
4
Northwest Cook . . . . . . . . . . . . . . . . 42
5
North Cook . . . . . . . . . . . . . . . . . . . . 44
6
Fox Valley . . . . . . . . . . . . . . . . . . . . . 46
7
Central DuPage . . . . . . . . . . . . . . . . 48
8
O’Hare. . . . . . . . . . . . . . . . . . . . . . . . 50
9
West Cook . . . . . . . . . . . . . . . . . . . . 52
10
Chicago . . . . . . . . . . . . . . . . . . . . . . 54
11
I-88 Corridor . . . . . . . . . . . . . . . . . . . 56
12
I-55 Corridor . . . . . . . . . . . . . . . . . . . 58
13
South Cook. . . . . . . . . . . . . . . . . . . . 60
14
I-80/Joliet Corridor . . . . . . . . . . . . . . 62
15
Northwest Indiana. . . . . . . . . . . . . . . 64
Industrial Market Summary . . . . . . . . . . . . 34
Logistics Review . . . . . . . . . . . . . . . . . . . . 66
Retail Review . . . . . . . . . . . . . . . . . . . . . . . 68
Investment Market Review . . . . . . . . . . . . . 69
Industrial Investment Review . . . . . . . . . . . 73
Submarket Maps . . . . . . . . . . . . . . . . . . . . 74
NAI Global . . . . . . . . . . . . . . . . . . . . . . . . . 76
Methodology/Definitions . . . . . . . . . . . . . . 77
NAI Hiffman/Company Roster . . . . . . . . . . 78
NAI HIFFMAN METROPOLITAN CHICAGO
MARKET REVIEW & 2012 FORECAST
3
Local Economy
POPULATION (2010 CENSUS)
9,461,105
POPULATION CHANGE (2000-2010)
+4.0%
NUMBER OF HOUSEHOLDS (2008)
3,516,729
MEDIAN HOUSEHOLD INCOME (2008 EST.)
$67,234
GROSS METRO PRODUCT (2010)
$532 BILLION
LABOR FORCE
4,075,100
TOTAL JOBS GAINED (12/10-12/11)
-31,269
CHICAGO AREA UNEMPLOYMENT RATE
9.8%
ILLINOIS UNEMPLOYMENT RATE
10.0%
U.S. UNEMPLOYMENT RATE
8.5%
Unemployment and Work Force Participation
12%
68%
Metro Chicago Unemployment Rate
U.S. Unemployment Rate
67%
10%
U.S. Labor Force Participation Rate
2011
2010
2009
2008
2007
2%
2006
63%
2005
4%
2004
64%
2003
6%
2002
65%
2001
8%
2000
66%
Source: Bureau of Labor Statistics
Case-Shiller Home Price Indices
200
Chicago Case-Shiller Index
Local Economy Review
The third largest metropolitan area in the U.S. after New York and Los
Angeles, Chicago is the most influential economic region between
the East and West Coasts. Foreign Policy Magazine recently ranked
Chicago sixth among world competition, measuring econometrics
from the number of Fortune 500 companies to the flow of goods and
services through airports and ports. Situated at the geographical
heart of the nation, Chicago’s locational advantages have fostered its
development into an international center for banking, securities, high
technology, air transportation, business services, wholesale and retail
trade, and manufacturing. In addition, Chicago is one of the principal
trading centers for commodities, financial, and derivative futures
products with the Chicago Mercantile Exchange and Board of Trade.
U.S. National Case-Shiller Index
150
100
2011
2010
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
50
Source: Standard & Poor’s
Total U.S. Employment
1,200,000
6%
800,000
4%
400,000
2%
0
0%
-2%
-400,000
Percent Change in Jobs from Previous Year
Monthly Net Change in Jobs
-800,000
2011
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
-1,200,000
-4%
-6%
Source: Commodity Systems, Inc. (CSI)
Year in Review
Two-and-a-half years into the economic recovery, where are we now?
In terms of the U.S. gross domestic product, 2010 was actually more
encouraging than 2011. The first quarter of 2011 saw such meager
growth, only 0.4% on an annual change basis, that the concerns of a
double-dip recession started sounding more and more real. Luckily,
GDP growth picked up through the rest of the year, though still
remained weak, at 1.3% growth during the second quarter and 1.8%
growth during the third quarter.
Each time the U.S. economy appears poised to pick up in earnest, a
significant event somewhere in the world seems to result in another
setback in the economic recovery, and 2011 was full of such events.
From political indecision and the Standard & Poor’s downgrade of
debt here in the U.S., to March’s devastating earthquake and resulting
tsunami and nuclear disaster in Japan, the debt crisis and potential
collapse of the Euro throughout Europe, an uprising in Libya that
ended in the assassination of Muammar Gaddafi, and the withdrawal
of American troops in Iraq, it’s a bit of a surprise that we didn’t see
another worldwide recession begin in 2011. Yet the economic recovery
Local Economy Review
Consumer Price Indices (CPI)
6%
4%
2%
0%
Core CPI 12-Month Percent Change
-2%
(excludes volatile food and energy prices)
CPI 12-Month Percent Change
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
-4%
2000
continues, as anemic and measured as it has been. Improvement
in the labor market has been a little more encouraging, and
even accelerated towards the end of the year, as job gains for
the month of December were above forecasts, and the U.S.
unemployment rate dropped to 8.5%. However, 5.8 million of
the jobs lost during the recession have still yet to be recovered,
and the current recovery is still seeing the slowest jobs rebound
since the Great Depression. This is further evidenced by the labor
force participation rate which remains low at 64%. To put this
in perspective, the participation rate was 66% in 2007 before
the downturn began. This two percentage point difference is the
equivalent of about three million fewer Americans working or
looking for work, even as the population continues to increase.
Crude Oil Prices
$150
50%
30%
$120
2011
2010
2009
2007
Source: WTRG Economics
Monthly Job Change vs. Consumer Sentiment
100
500,000
Monthly Job Change
Consumer Sentiment
90
300,000
100,000
80
-100,000
70
-300,000
-700,000
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
1Q09
4Q08
3Q08
2Q08
1Q08
4Q07
3Q07
2Q07
1Q07
50
-500,000
Disconnect between
job figures and consumer sentiment
60
-900,000
Source: Reis
U.S. Imports & Exports - Trade Balance
$250 B
November 2011
Trade Deficit -$47.8 B
Trade
Deficit
$200 B
$150 B
U.S. Imports
U.S. Exports
2011
2010
2009
2008
2007
2006
Looking Forward
Job growth will be one of the biggest, if not the biggest, issue
on the table during the 2012 election season. While 30% of the
private jobs lost over the course of the recession have been
regained and the rate of growth has picked up during recent
months, it still remains well below rates witnessed during past
recovery periods. Political gridlock and uncertainty continue to
stall the potential growth in the labor market, as many businesses
would still rather sit on record profits and see what transpires on
the political front rather than make significant expansion plans
amidst a world debt crisis. The path the recovery takes through
2012 and beyond will continue to be dictated by the type of
leadership role politicians assume and whether another globechanging event occurs. Most likely, barring any unforeseen major
natural disaster or significant event that sends the government
and businesses into panic mode, the economy will continue to
grow at a modest rate through much of 2012 as the election
season heats up. Hopefully a clearer picture of the recovery will
present itself as the year unfolds.
2005
$0
2003
-50%
2001
$30
1999
-30%
1997
$60
1995
-10%
1993
$90
1991
10%
1989
What these developments in the U.S. and world economies
mean for commercial real estate is still uncertain. Despite
little economic growth and ongoing job concerns, activity has
increased in leasing and investment sales across all property
types. Strong retail sales figures over the holiday season, yearover-year improvements in industrial production, record U.S.
exports, an uptick in the manufacturing industry, and record
high corporate profits are all encouraging trends that point to
the economic recovery continuing to gain momentum and
have resulted in increased real estate demand. During the peak
of the fear caused by the economic crisis in late 2008, many
had speculated that following the Lehman Brothers collapse,
commercial real estate would be next in line to take it on the chin
due to outstanding debt, resulting in severely depressed values
and an uncertain future. While this doomsday scenario didn’t
play out as projected, the real estate market still has a long way
to go to return to historically stable conditions.
Crude Oil Price
Monthly Percent Change
$100 B
Source: U.S. Census Bureau
5
Office Market Overviews
1
West Loop . . . . . . . . . . . . . . 10
2
Central Loop . . . . . . . . . . . . 12
3
East Loop . . . . . . . . . . . . . . 14
4
North Michigan
Avenue.
. . . 16
nry
McHenry
5
94
6
River North . . . . . . . . . . . . . 18
FAR
North Suburban. . . . . . . . . . 20
7
Northwest Suburban . . . . . . 22
Libertyville
8
O’Hare Area. . . . . . . . . . . . . 24
9
East-West Corridor . . . . . . . 26
10
I-55 Corridor . . . . . . . . . . . . 28
Waukegan
Regional Airport
FAR
NORTH
Buffalo
Grove
294
Des Plaines
290
North Aurora
Aurora
94
290
EASTERN
EAST-WEST
294
9
88
Chicago
CBD (Central Business
District)90
Downers
Westmont
Grove
Burr
Ridge
Naperville
Chicago
Chi
Mi
iid
d
Chicago
Midway
Midway
Airport
Airport
171
10
Romeoville
55
41
94
Oak St.
Chicago Ave.
90
I-55Darien
CORRIDOR
Bolingbrook
Chicago
Elmhurst
Lombard
WESTERN
EAST-WEST
90
Franklin Park
5
Ohio
43 St.12
290
4
20
41
12
20
Oak
Lawn
90
94
Wacke
rD
57
50
83
94
3
1
r.
Randolph St.
Michigan Ave.
355
Skokie
90
8 Rosemont
O’HARE
AREA
Addison
Carol Stream
Niles
Evanston
Wells St.
Dupage
Airport
Wood Dale
NEAR
NORTH
State St.
Elk Grove
Village
NORTH
DUPAGE
94
Glenview
Halsted St.
St Charles
Chicago Executive
Airport
SCHAUMBURG
Schaumburg AREA
South Elgin
Deerfield
Arlington
Heights
Hanover
Park
Highland Park
Northbrook
Palatine
Hoffman
Estates
Elgin
Lake Forest
CENTRAL
NORTH
7
90
6
Vernon Hills
Wacker Dr.
Cr
Crystal
Lakee
Dundee
Waukegan
Grayslake
2
Harvey
6
290
294
80
Winter 2011-2012
Market/
Submarket
# Bldgs.
(SF)
Total RBA
Direct
Vacancy
Sublease
Vacancy
Total
4Q11 Net
2011 YTD Net
Under
Asking
Vacancy Absorption (SF) Absorption (SF) Constr. (SF) Rental Rate
West Loop
Class “A”
Class “B”
 Class “C”
111
33
36
42
45,399,037
30,193,318
11,234,046
3,971,673
13.49% 
13.26% 
15.45% 
9.65% 
0.96% 
14.45% 
1.21% 
14.47% 
0.60% 
16.05% 
0.09%  9.74% 
310,090
297,620
8,447
4,023
1,045,971
650,431
249,914
145,626
0
0
0
0
$29.77 
$32.08 
$28.21 
$23.36 
Central Loop
Class “A”
Class “B”
Class “C”
84
24
33
27
39,137,724
19,661,779
15,790,580
3,685,365
12.86% 
12.08% 
14.75% 
8.85% 
1.05% 
13.91% 
1.35% 
13.43% 
0.85% 
15.60% 
0.36%  9.21% 
131,065
-94,462
210,822
14,705
432,243
56,402
384,696
-8,855
0
0
0
0
$28.59 
$31.38 
$27.16 
$19.28 
East Loop
 Class “A”
 Class “B”
 Class “C”
71
10
20
41
23,842,356
10,864,735
7,588,848
5,388,773
14.28% 
12.18% 
18.54% 
12.52% 
1.44% 
2.35% 
1.04% 
0.17% 
15.72% 
14.53% 
19.58% 
12.69% 
236,975
138,040
68,762
30,173
809,654
887,466
-39,214
-38,598
0
0
0
0
$26.25 
$28.48 
$24.51 
$21.10 
North Michigan Ave.
 Class “A”
 Class “B”
 Class “C”
62
11
34
17
13,141,925
6,202,259
6,131,682
807,984
14.91% 
16.75% 
12.79% 
16.93% 
1.49% 
0.78% 
2.41% 
0.00% 
16.40% 
17.53% 
15.19% 
16.93% 
249,997
262,959
-7,355
-5,607
237,139
316,063
-48,183
-30,741
0
0
0
0
$29.52 
$33.42 
$25.78 
$22.64 
River North
 Class “A”
 Class “B”
 Class “C”
126
6
41
79
13,530,272
4,088,938
5,798,248
3,643,086
10.90% 
12.17% 
7.24% 
15.31% 
3.11% 
1.89% 
5.87% 
0.09% 
14.01% 
14.06% 
13.11% 
15.40% 
46,204
89,142
-34,753
-8,185
47,190
54,338
-60,203
53,052
0
0
0
0
$28.65 
$34.24 
$27.10 
$21.12 
Downtown Totals
 Class “A”
Class “B”
Class “C”
454
84
164
206
135,051,314
71,011,029
46,543,404
17,496,881
13.32% 
13.01% 
14.34% 
11.88% 
1.34% 
1.42% 
1.65% 
0.17% 
14.66% 
14.44% 
15.99% 
12.05% 
974,331
693,299
245,923
35,109
2,572,197
1,964,703
487,010
120,484
0
0
0
0
$28.56 
$31.92 
$26.55 
$21.50 
North Suburban
Class “A”
Class “B”
 Class “C”
524
132
256
136
29,943,140
17,109,270
9,904,917
2,928,953
16.30% 
14.25% 
19.89% 
16.15% 
2.69% 
4.60% 
0.11% 
0.22% 
18.99% 
18.85% 
20.01% 
16.37% 
194,273
174,669
-9,372
28,976
177,253
290,456
-73,203
-40,000
425,000
425,000
0
0
$20.21 
$20.94 
$19.43 
$17.80 
Northwest Suburban
Class “A”
Class “B”
Class “C”
584
102
336
146
33,746,831
16,635,158
14,096,648
3,015,025
25.05% 
24.14% 
27.22% 
19.95% 
1.10% 
0.89% 
1.27% 
1.49% 
26.15% 
25.03% 
28.48% 
21.44% 
-147,997
-99,877
-28,337
-19,783
96,347
351,532
-75,618
-179,567
0
0
0
0
$19.71 
$22.30 
$18.08 
$15.92 
O’Hare Area
 Class “A”
 Class “B”
 Class “C”
170
36
87
47
15,263,637
8,081,341
6,169,692
1,012,604
21.40% 
18.28% 
26.28% 
16.54% 
0.71% 
0.66% 
0.91% 
0.00% 
22.11% 
18.94% 
27.19% 
16.54% 
148,000
200,369
-40,107
-12,262
152,506
361,376
-162,525
-46,345
0
0
0
0
$20.25 
$23.80 
$18.52 
$17.34 
East-West Corridor
 Class “A”
 Class “B”
 Class “C”
664
141
346
177
42,710,999
20,870,182
16,844,042
4,996,775
19.01% 
16.24% 
23.29% 
16.17% 
2.93% 
3.99% 
2.49% 
0.00% 
21.94% 
20.24% 
25.78% 
16.17% 
41,480
-10,762
-20,333
72,575
550,943
612,169
-108,288
47,062
486,277
468,263
18,014
0
86
11
57
18
4,019,255
698,578
2,685,974
634,703
13.13% 
11.83% 
13.93% 
11.15% 
1.51% 
1.01% 
2.00% 
0.00% 
14.64% 
12.84% 
15.93% 
11.15% 
16,504
3,027
4,234
9,243
-54,571
13,698
-50,189
-18,080
0
0
0
0
Suburban Totals
 Class “A”
Class “B”
Class “C”
2,028
422
1,082
524
125,683,862
63,394,529
49,701,273
12,588,060
20.09% 
17.99% 
23.59% 
16.85% 
2.07% 
2.88% 
1.45% 
0.41% 
22.16% 
20.87% 
25.04% 
17.25% 
252,260
267,426
-93,915
78,749
922,478
1,629,231
-469,823
-236,930
911,277
893,263
18,014
0
$20.08 
$22.22 
$18.90 
$16.93 
Metro Chicago Totals
 Class “A”
Class “B”
Class “C”
2,482
506
1,246
730
260,735,176
134,405,558
96,244,677
30,084,941
16.59% 
15.36% 
19.12% 
13.96% 
1.69% 
2.11% 
1.54% 
0.27% 
18.28% 
17.47% 
20.66% 
14.23% 
1,226,591
960,725
152,008
113,858
3,494,672
3,593,934
17,187
-116,449
911,277
893,263
18,014
0
$24.32 
$27.07 
$22.73 
$19.21 
I-55 Corridor
 Class “A”
 Class “B”
 Class “C”
Office Market Statistics
Office Market Statistics
$20.16 
$22.74 
$18.68 
$17.17 
$20.07 
$21.30 
$19.81 
$16.40 
7
Office Market Summary
Downtown Office Market Summary
2011
Downtown Vacancy and Absorption
The Chicago Loop, Wacker Drive, North Michigan Avenue and the South
Michigan Avenue Streetwall are all iconic landmarks that represent
2,000,000
20%
1,000,000
17%
0
14%
-1,000,000
11%
Chicago worldwide. Historic buildings and modern high-rises define
Chicago’s famous skyline, home to several of the tallest buildings in
the country. The Chicago River cuts through the city’s Central Business
District, while Grant Park and Millennium Park provide large tracts of
2007
-2,000,000
2008
2009
Vacancy Rate (%)
verdant green space in the heart of the city. These landmarks, combined
2010
2011
8%
Net Absorption (SF)
with O’Hare International Airport and public transportation including the
“El”, commuter train lines and dozens of bus lines, all make Chicago’s
Downtown Direct & Overall Vacancy
24-hour downtown a world-class business center and tourist destination.
Year in Review
15.72%
14.66%
14.45%
13.32%
13.49%
13.91%
14.28%
16.40%
14.91%
14.01%
12.86%
10.90%
2011 marked a year of recovery for the downtown office market, as the
vacancy rate dropped by 184 basis points over the course of the year
to 14.66% by the end of December, the lowest rate recorded downtown
River
North
North
Michigan
Avenue
Direct Vacancy
space absorbed, totaling 974,331 SF. All five downtown submarkets
East
Loop
Central
Loop
West
Loop
SF for the year, with the fourth quarter seeing the largest chunk of that
Overall
Downtown
in two-and-a-half years. Net absorption totaled more than 2.5 million
Sublease Vacancy
experienced improving conditions throughout 2011, with the historically
active West Loop submarket seeing the absorption of more than 1
Looking Forward
million SF of vacant space alone, pushing the vacancy rate down 3.7%
More than half of the vacant space that was introduced
over the past two years. However, the typically quiet North Michigan
to the downtown office market during and following
Avenue submarket witnessed the largest vacancy adjustment of the
the economic recession has been absorbed during
fourth quarter, as two of the largest new leases of the year were signed
the past year-and-a-half. However, the majority of
in the Miles van der Rohe-designed building at 330 N Wabash Avenue,
this activity has been among high-quality class “A”
absorbing some of the space left behind when Jenner & Block left the
buildings. Eventually this demand will translate to the
building in 2009. This activity pushed the vacancy rate down nearly two
class “B” and “C” buildings throughout the market,
percentage points during the three month period, a major drop for one
adding momentum to the market recovery and pushing
of the smaller downtown submarkets.
the vacancy rate closer towards historical lows.
Significant Downtown Office Lease Transactions
4th Qtr 2011
Property Address
Submarket
Property Name
Leased (SF) Tenant
Comments
200 E Randolph St
East Loop
Aon Center
400,000
Aon Corporation
Lease renewal
500 W Monroe St
West Loop
371,000
GE Capital
Lease renewal/expansion
330 N Wabash Ave
North Michigan Avenue
330 North Wabash
273,456
American Medical Association
New lease
330 N Wabash Ave
North Michigan Avenue
330 North Wabash
111,081
SmithBucklin Corp.
New lease
300 S Riverside Plaza
West Loop
Riverside Plaza
77,000
DeVry Inc
New lease
111 E Wacker Dr
East Loop
One Illinois Center
66,000
Publicis Worldwide
Pictured Above: 330 N Wavash Avenue, where two of the largest new leases of the year were signed, pushing
the North Michigan Avenue submarket down nearly two percentage points during the fourth quarter
Office Market Overview
Office Market Summary
2011
Suburban Office Market Summary
Suburban Vacancy and Absorption
Comprised of several scattered pockets of office developments,
1,500,000
26%
750,000
23%
0
20%
-750,000
17%
corporate parks and high-rise office towers, the suburban office market
has experienced historically higher vacancy rates, larger swings in
absorption, and lower rents than Chicago’s downtown office market.
-1,500,000
Quarter in Review
2007
2008
2009
Vacancy Rate (%)
2010
2011
14%
Net Absorption (SF)
The recovery in the suburban office market hasn’t been as dramatic as
it has been in the downtown office market, but the area is still seeing
Suburban Direct & Overall Vacancy
improving conditions, particularly among class “A” buildings. The vacancy
26.15%
rate peaked during the third quarter of 2010 at 23.66% and has since
25.05%
22.16%
dropped by 1.5% to 22.16%, the rate recorded at the end of the year.
20.09%
During this period nearly 1.8 million SF of vacant space was absorbed
22.11%
21.94%
21.40%
18.99%
19.01%
14.64%
16.30%
13.13%
through new leases and tenants expanding into additional space. While
the third quarter of the year did see the improvement trend decelerate,
I-55
Corridor
Direct Vacancy
where the rate climbed to 26.15%. The area has had the highest vacancy
East-West
Corridor
O’Hare
Area
vacancy during the fourth quarter was the Northwest Suburban market,
Northwest
Suburban
by the fourth quarter. The only suburban market to register an increase in
North
Suburban
Overall
Suburban
as net absorption briefly turned negative, the market was back on track
Sublease Vacancy
rate of the five suburban office markets for several years, and conditions
are still deteriorating. In all markets with positive absorption, only Class
Looking Forward
“A” buildings, high-quality office buildings with excellent amenities and
The suburban office market is expected to
top-of-the-line finishes, were the only building class to record positive
continue its slow trod towards recovery. While
absorption for 2011, as both class “B” and class “C” buildings have
the downtown market is in a transition period and
been largely bypassed by the recovery, as evidenced by slightly negative
landlords are starting to tighten concessions and
absorption tallies for the year. The largest new lease signed during the
raise rents, such changes still feel a long way off in
fourth quarter involved Catalyst Rx leasing 105,460 SF at 1200 Lakeside
the suburban office market. Eventually, as hiring
Drive in Bannockburn, a big deal for the North Suburban market. Despite
picks up and the economy improves, demand will
increased activity, especially during the fourth quarter, a shift in the
spread to all property types in the market, and the
market in favor of landlords over tenants isn’t expected anytime soon.
rate of recovery will increase.
Significant Suburban Office Lease Transactions
4th Qtr 2011
Property Address
Market
City
Leased (SF)
Tenant
Comments
1200 Lakeside Dr
North Suburban
Bannockburn
105,460
Catalyst Rx
New lease
9550 W Higgins Rd
O’Hare Area
Rosemont
114,762
Cole Taylor Bank
Lease renewal
2001 York Rd
East-West Corridor
Oak Brook
164,000
Comcast Corp
3500 Lacey Rd
East-West Cooridor
Downers Grove
140,000
HAVI Global Solutions
New lease
8770 W Bryn Mawr Ave
O’Hare Area
Chicago
86,251
Lawson Products, Inc.
New lease
3333 Warrenville Rd
East-West Corridor
Lisle
77,139
Computer Associates International, Inc.
New lease
Pictured Above: 1200 Lakeside Drive in Bannockburn, where pharmacy
benefits manager Catalyst Rx leased 105,460 SF during the fourth quarter
9
Chicago
West Loop
Chicago
Midway
Airport
171
90
41
94
Oak St.
Chicago Ave.
# OFFICE BUILDINGS
111
MARKET SIZE (SF)
45,399,037
OVERALL VACANCY
6,559,743 SF (14.45%)
Ohio
43 St.12
DIRECT VACANCY
6,123,384 SF (13.49%)
20
SUBLEASE VACANCY
436,359 SF (0.93%)
4Q11 NET ABSORPTION (SF)
310,090
YTD NET ABSORPTION (SF)
1,045,971
UNDER CONSTRUCTION (SF)
0
AVERAGE ASKING RENTAL RATE
$29.77 PSF
State St.
90
41
12
20
Oak
Lawn
90
94
Wacke
rD
57
50
83
94
r.
Michigan Ave.
Wells St.
Wacker Dr.
Halsted St.
Randolph St.
Harvey
6
Submarket Trends
290
Vacancy
Rate
Net
Absorption
294
Asking
Rents
80
West Loop Overview
Vacancy and Absorption
600,000
20%
360,000
17%
120,000
14%
-120,000
11%
-360,000
8%
The last decade’s development cycle in Downtown Chicago transformed
the West Loop into the premier office submarket due to its proximity
to multiple transportation options. Wacker Drive lies at the heart of
-600,000
2007
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
Vacancy by Class Type
20%
16.05%
14.47%
15%
Vacancy Rate
5%
the submarket and has been the corridor of the most significant office
developments, including the recently delivered 155 N. Wacker Drive, a
towering class “A” facility boasting more than 1.1 million SF of office
space. No ongoing construction projects remain in the submarket.
The West Loop vacancy rate peaked at the beginning of 2010 at
9.74%
10%
18.15% and has declined 3.7% since, ending the year at 14.45%. The
submarket responded quickly to the economic recession beginning in
5%
2008, when 2.1 million SF of vacant space was added over the course
Class C
Class B
Class A
0%
of two years. During the seven quarters since conditions started to
improve, nearly 1.7 million SF, about 80%, of that space has been
absorbed through increased leasing activity and tenants expanding
Market Size by Class Type
within buildings. More than one million SF of space was absorbed
during 2011 alone, dropping the vacancy rate 2.3% during the year,
8%
certainly indicative of an ongoing recovery and active market. This
Class A
25%
Class B
67%
rapid pace of improvement has begun to spread to other downtown
markets over recent quarters, adding momentum to the recovery.
Class C
“More than one million SF of space was
absorbed during 2011, dropping the vacancy
rate 2.3% over the course of the year.”
Pictured Above: 250 S Wacker Drive, purchased by Credit Suisse
Asset Management for $90 million during the fourth quarter
6%
The asset management unit of Zurich, Switzerland-based Credit
Sublease Vacancy (%)
Suisse Group AG purchased the 16-story, 244,961 SF class “A”
4%
office building located at 250 S Wacker Drive in December. The
building, built in 1958 and renovated in 2006, sold for $90 million,
or about $367.00 PSF. It was 93% leased at the time of sale,
2%
West Loop Overview
Sublease Vacancy Rate
Transaction Activity
with MillerCoors being the largest tenant in the building, leasing
2011
2010
2009
2008
2007
2006
2005
2004
GE Capital, based in Connecticut and the financial services arm
2003
2002
2001
167,256 SF through the end of 2024.
0%
Weighted Asking Rents
or General Electric Co. expanded their lease by about 63,000 SF
$34.00
at 500 W Monroe Street, with an option to lease up to 400,000
SF in total. Along with expanding their footprint and adding jobs,
Weighted Asking Rents (Gross $ per SF per year)
$32.00
GE Capital renewed their existing lease in the 973,000 SF tower.
$30.00
The largest new lease of the fourth quarter involved for-profit
$28.00
higher education organization DeVry Inc. leasing 77,000 SF at
2011
2010
2009
and will support DeVry’s extensive online network of classes.
2008
new student services, admissions and financial aid employees
2007
2006
$26.00
Riverside Plaza. The new space will eventually house up to 1,000
Contiguous Block Analysis
100
# of Class “A” Blocks
Looking Forward
# of Class “B” Blocks
75
The West Loop is in the midst of a robust recovery period that has
yet to be witnessed elsewhere in Chicago’s office market. This
# of Class “C” Blocks
50
rebound is evidence that the West Loop remains Chicago’s most
25
in-demand office submarket due to its ideal location, excellent
0
Property Name
250 S Wacker Dr
4th Qtr 2011
Size (SF)
Sale Price
Price PSF Buyer
Seller
244,961
$90,000,000
$367.00
AEW Capital Management, LP
Credit Suisse Asset Management
Significant West Loop Lease Transactions
Property Address
Property Name
500 W Monroe St
Riverside Plaza
600 W Fulton St
s
Significant West Loop Sale Transactions
Property Address
ck
s
to take advantage of current market rents and leasing incentives.
ks
ck
oc
lo
companies, many sitting on record profits, will continue to look
o
SF Bl
0+ us
00 uo
0, ig
10 ont
C
significant adjustments to the vacancy rate remain unlikely,
l
SF B
+ us
00 uo
,0 ig
50 ont
C
SF B
+ us
00 uo
,0 ig
20 ont
C
transportation and high quality class “A” product. While sudden,
4th Qtr 2011
Leased (SF) Tenant
Comments
371,000
GE Capital
77,000
DeVry Inc
New lease
60,000
Epstein International
Lease renewal
Riverside Plaza
60,000
National Futures Association
222 W Adams St
Franklin Center
43,160
West Monroe Partners
New lease
155 N Wacker Dr
42,303
Savo Group
New lease
525 W Monroe St
41,101
LinkedIn
311 S Wacker Dr
40,000
Attourneys’ Liability Assurance Society
Lease renewal
11
Chicago
Central Loop
Chicago
Midway
Airport
171
84
MARKET SIZE (SF)
39,137,724
OVERALL VACANCY
5,443,342 SF (13.91%)
Ohio
43 St.12
DIRECT VACANCY
5,031,399 SF (12.86%)
20
SUBLEASE VACANCY
411,943 SF (1.05%)
131,065
432,243
0
$28.59 PSF
State St.
90
41
12
20
Oak
Lawn
90
83
94
Wacke
rD
57
50
94
r.
Michigan Ave.
Wells St.
Wacker Dr.
Halsted St.
Randolph St.
Harvey
6
Submarket Trends
290
Vacancy
Rate
Net
Absorption
294
Asking
Rents
80
Central Loop Overview
1,000,000
20%
600,000
17%
200,000
14%
-200,000
11%
-600,000
8%
Historically, the Central Loop submarket had been Chicago’s core
financial district. While this distinction has faded over the decades,
several banks still remain and it has become a central hub for many
2007
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
5%
local and national law firms. Chicago’s “El” train serves the submarket
well, as the area is surrounded by the trains’ “loop”. Unlike many of
the West Loop’s more modern and well-equipped structures, buildings
in the Central Loop tend to be older with smaller floor plates and less
in-building parking.
20%
Vacancy Rate
15.60%
15%
41
94
Oak St.
Chicago Ave.
# OFFICE BUILDINGS
-1,000,000
90
13.43%
While conditions improved in the Central Loop during 2011, things
9.21%
10%
are changing at a far slower rate than in the neighboring West Loop
submarket, where the vacancy rate dropped by more than 2% over
Class C
Class B
Class A
5%
the course of the year. During the fourth quarter, 131,065 SF of vacant
space was absorbed due to the new leases and existing tenants
expanding, bringing the tally for the year to 432,243 SF of absorption.
This has pushed the vacancy rate down 110 basis points since the
same time last year, recording a year-end vacancy rate of 13.91%.
10%
Although the recovery hasn’t been as robust yet in the Central Loop,
Class A
50%
40%
Class B
the area continues to enjoy the lowest vacancy rate of all the downtown
submarkets, a sign that while demand has not returned yet in earnest,
Class C
“Although the recovery hasn’t been as robust in the
Central Loop, the area enjoys the lowest vacancy
rate of all the downtown submarkets.”
Pictured Above: 22 W Washington St, the 439,434 SF building purchased by
Prudential Investment Management for $182 million during the fourth quarter
3%
14% and 15% for the better part of the past three years.
2%
The 17-story building located at 22 W Washington Street was
1%
purchased by Prudential Real Estate Investors in November for
Central Loop Overview
the area is historically stable, with a vacancy rate holding between
$182 million, or about $414.00 PSF. The 439,434 SF building was
2011
2010
2009
2008
2007
2006
2005
2004
CBS Channel 2 Chicago television affiliate.
2003
the building including the corporate headquarters of Morningstar
2002
2001
fully leased at the time of sale, with the two largest tenants in
0%
Investment bank, brokerage and investment management firm
Loop Capital signed the largest new lease of the fourth quarter
for about 30,000 SF at 111 W Jackson Boulevard. Expanding
by about 9,061 SF at 30 N LaSalle Street, non-profit group
International Fellowship of Christians and Jews moved their
offices from the building’s 24th and 26th floors to the top floor.
$32.00
$30.00
$29.00
$28.00
$27.00
90
of positive absorption, resulting in a vacancy rate that has
dipped below 14% for the first time in two-and-a-half years. This
2011
2010
2009
Loop submarket has now experienced two consecutive quarters
2008
Looking Forward
2007
2006
$26.00
Following a period of stagnation with little absorption, the Central
$31.00
60
improvement trend should continue over the coming quarters
as fewer vacancies are brought to the market and increased
30
leasing activity continues. While the area won’t see the rapid
0
Significant Central Loop Sale Transactions
ks
oc
SF Bl
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00 uo
0, ig
10 ont
C
ks
oc
ks
oc
Central Loop, adding momentum to the improvement trend.
l
SF B
+ us
00 uo
,0 ig
50 ont
C
is experiencing, this activity and demand should spread into the
l
SF B
+ us
00 uo
,0 ig
20 ont
C
pace of absorption that the neighboring West Loop submarket
4th Qtr 2011
Property Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
35 W Wacker Dr
1,118,042
$386,965,000*
$359.00*
UBS Global Asset Management Real Estate
Piedmont Office Realty Trust, Inc.
22 W Washington St
439,434
$182,000,000
$414.00
Prudential Investment Management
Golub & Company/BlackRock Inc.
55 W Monroe St
803,046
$136,000,000
$169.00
The Hearn Company
LaSalle Investment Management
Significant Central Loop Lease Transactions
4th Qtr 2011
Property Address
Property Name
Leased (SF)
Tenant
Comments
181 W Madison St
181 West Madison
68,221
Quantitative Risk Management
Lease renewal
111 W Jackson Blvd
30,000
Loop Capital
New lease
30 N LaSalle St
24,881
International Fellowship of Christians and Jews
79 W Monroe St
24,181
Columbia Insurance Group
New lease
24,025
Parillo, Weiss & O’Halloran
Lease renewal
19,000
Robbins, Salomon & Patt, Ltd.
New lease
77 W Wacker Dr
180 N LaSalle St
The United Building
*96.5% interest in building
13
Chicago
East Loop
Chicago
Midway
Airport
171
90
41
94
Oak St.
Chicago Ave.
# OFFICE BUILDINGS
71
MARKET SIZE (SF)
23,842,356
OVERALL VACANCY
3,748,533 SF (15.72%)
Ohio
43 St.12
DIRECT VACANCY
3,405,144 SF (14.28%)
20
SUBLEASE VACANCY
343,389 SF (1.44%)
236,975
809,654
0
$26.25 PSF
State St.
90
41
12
20
Oak
Lawn
90
83
94
Wacke
rD
57
50
94
r.
Michigan Ave.
Wells St.
Wacker Dr.
Halsted St.
Randolph St.
Harvey
6
Submarket Trends
290
Vacancy
Rate
Net
Absorption
294
Asking
Rents
80
East Loop Overview
600,000
25%
400,000
22%
200,000
19%
0
16%
-200,000
13%
Unlike neighboring submarkets such as the West Loop or Central
Loop, the East Loop submarket is far more diverse due to the presence
of several universities, not-for-profits, condominium conversions and a
2007
-400,000
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
15%
has benefited from a plethora of condo conversion projects that have
rejuvenated the area and its aging buildings. However, since the
economic downturn hit, the market for condo conversations has been
greatly diminished. The area does not benefit from the easy access to
25%
19.58%
20%
10%
growing retail component. Over the past several years, the submarket
Vacancy Rate
highways or commuter lines that neighboring submarkets enjoy, but it
is still within walking distance of the “El” trains, Millennium Park and
14.53%
12.69%
close to Lake Shore Drive.
10%
Class C
The East Loop vacancy rate experienced a significant drop during
Class B
0%
Class A
5%
2011, decreasing 3.4% by the end of December when compared to
the same period a year ago. The majority of this adjustment occurred
during the second quarter of the year, as several substantial lease
transactions occurred, including KPMG LLC leasing nearly 260,000 SF
in the Aon Center and Groupon leasing 196,000 SF at 303 E Wacker
22%
46%
Class A
Class B
Drive. Several new leases were signed during the fourth quarter as
well, leading to 236,975 SF of absorption for the three month period.
Class C
32%
“The East Loop has been ground zero for several
large lease announcements recently, pushing the
vacancy rate down 3.4% in a year.”
Pictured Above: 111 E Wacker Drive (center), a 1,002,950 SF office tower
purchased by CommonWealth REIT for $150.6 million during the fourth quarter
5%
The office tower known as One Illinois Center located at 111
E Wacker Drive sold at the end of the year for $150.6 million.
4%
The building, more than 1 million SF in size, was purchased
3%
by Massachusets-based investor CommonWealth REIT from
2%
Parkway Properties, Inc. as collateral for an existing loan. The
East Loop Overview
1%
building was about 95% leased at the time of sale. CommonWealth
2011
2010
2009
2008
2007
2006
2005
2004
Michigan Avenue from Parkway Properties, Inc. earlier this year.
2003
2002
2001
REIT also purchased the 1.1 million SF office building at 233 N
0%
Representing the largest office lease transaction of the year, Aon
$32.00
Corporation renewed their lease during the quarter for about
400,000 SF in their namesake building known as the Aon Center
$30.00
located at 200 E Randolph Street. The company leases space on
$28.00
12 floors and houses about 1,700 employees in the space.
$26.00
$24.00
Advertising giant Publicis Worldwide doubled their space at 111
2011
2010
2009
2008
total of 66,000 SF in the 32-story story office tower. A unit of their
2007
2006
$22.00
E Wacker Drive during the fourth quarter, expanding to occupy a
business, Performics, renewed space on the 15th floor, while
their research unit, ZenithOptimedia, leased the 16th floor.
75
Looking Forward
50
The East Loop submarket has been ground zero for several large
lease announcements over the last year or so. While few large
25
contiguous spaces remain vacant, leasing activity is expected to
0
Significant East Loop Sale Transactions
ks
ks
oc
oc
ks
oc
the area is the right place for companies to expand.
SF Bl
0+ us
00 uo
0, ig
10 ont
C
in the submarket are quickly growing companies, suggesting that
l
SF B
+ us
00 uo
,0 ig
50 ont
C
l
SF B
+ us
00 uo
,0 ig
20 ont
C
remain elevated over coming quarters. Many of the newer tenants
4th Qtr 2011
Property Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
111 E Wacker Dr
1,002,950
$150,600,000
$150.00
CommonWealth REIT
Parkway Properties, Inc.
203 N Wabash Ave
137,364
$14,800,000
$108.00
Virgin Hotels
UrbanStreet Properties LLC
Significant East Loop Lease Transactions
4th Qtr 2011
Property Address
Property Name
Leased (SF)
Tenant
Comments
200 E Randolph St
Aon Center
400,000
Aon Corporation
Lease renewal
111 E Wacker Dr
One Illinois Center
66,000
Publicis Worldwide
200 E Randolph St
Aon Center
50,000
UnitedHealthcare
New lease
1 N State St
One North State Building
46,552
Westwood College
New lease
200 S Michigan Ave
Borg-Warner Building
40,051
Johnson Publishing Company Inc.
New lease
111 E Wacker Dr
One Illinois Center
22,323
Discovery Communications
Sublease
300 E Randolph St
Blue Cross & Blue Shield Building
21,866
Roundarch
New lease
15
North Michigan Ave.
Chicago
Chicago
Midway
Airport
171
90
41
94
Oak St.
Chicago Ave.
# OFFICE BUILDINGS
62
MARKET SIZE (SF)
13,141,925
OVERALL VACANCY
2,155,893 SF (18.31%)
Ohio
43 St.12
DIRECT VACANCY
1,959,899 SF (16.52%)
20
SUBLEASE VACANCY
195,994 SF (1.79%)
249,997
237,139
0
$29.52 PSF
State St.
90
41
12
20
Oak
Lawn
90
83
94
Wacke
rD
57
50
94
r.
Michigan Ave.
Wells St.
Wacker Dr.
Halsted St.
Randolph St.
Harvey
6
Submarket Trends
290
Vacancy
Rate
Net
Absorption
Asking
Rents
294
80
North Michigan Avenue Overview
500,000
20%
300,000
17%
100,000
14%
-100,000
11%
-300,000
8%
One of the smallest office submarkets in Chicago’s Central Business
District, the North Michigan Avenue submarket is diverse, similar to the
East Loop submarket which borders it to the south. A distinguished
2007
-500,000
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
Vacancy Rate
17.53%
15%
Avenue is a Chicago icon renowned throughout the world. The office
submarket consists of primarily smaller-sized spaces. The submarket
is home to Northwestern Memorial Hospital and the future home of
Children’s Memorial Hospital. The presence of these large healthcare
25%
20%
5%
retail corridor interspersed with posh residential towers, North Michigan
15.19%
institutions should benefit the submarket for years to come.
16.93%
10%
The North Michigan Avenue vacancy rate experienced a significant
Class C
being signed leading to 249,997 SF of absorption. In such a small
Class B
adjustment during the fourth quarter due to multiple significant leases
0%
Class A
5%
submarket which typically sees limited transaction activity, this is
a significant figure that can cause a sudden adjustment. The overall
vacancy rate dropped to 16.4% by then end of December, nearly two
percentage points lower than the 18.31% rate recorded at the end
6%
of September. The leasing activity during the fourth quarter occurred
47%
47%
Class A
Class B
largely among two class “A” buildings. Class “B” and “C” buildings
continue to experience deteriorating conditions in the submarket.
Class C
“The vacancy rate dropped nearly two
percentage points during the fourth quarter
due to several significant leases being signed.”
Pictured Above: 330 N Wabash Avenue, where the American Medical Association signed a lease
for 273,456 SF and SmithBucklin Corp signed a lease for 111,081 during the fourth quarter
4%
The Miles van der Rohe-designed building at 330 N Wabash
Avenue has struggled since losing previous namesake tenant IBM
3%
Corp in 2006 and Jenner & Block LLP in 2009. About half of the
2%
building has sat vacant for the past two years, with large blocks
of vacant space being marketed to several tenants searching
1%
for sizeable spaces, but with limited interest. Finally, two of the
2011
2010
2009
2008
2007
its current home at 401 N Michigan Avenue. A third lease for
2006
SmithBucklin Corp., leasing 111,081 SF in the building, leaving
2005
SF, and the world’s largest association management company,
2004
moving their headquarters to the office tower by leasing 273,456
2003
fourth quarter, including the American Medical Association (AMA)
2002
2001
largest leases of the year were signed at the building during the
0%
North Michigan Avenue Overview
$34.00
$31.00
about 160,000 SF in the building is currently under negotiations
between the landlord and potential tenant Latham & Watkins
LLP, a Los Angeles-based law firm. These leases certainly mark
$28.00
$25.00
a major milestone for the building which has been plagued by
2011
2010
2009
2008
Looking Forward
2007
2006
$22.00
vacancy concerns for years, and for the submarket overall.
If Latham & Watkins LLP signs a lease at 330 N Wabash Avenue,
40
the vacancy rate will register another significant drop during the
first quarter of 2012. With much of the vacant space left behind
by the departure of IBM and Jenner & Block LLP absorbed
through these recent leases, few large vacant spaces will remain
30
20
10
in the submarket. Therefore, vacancy adjustments going forward
0
Size (SF)
Sale Price
Price PSF
ks
Property
oc
Significant North Michigan Avenue Sale Transactions
SF Bl
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newer, larger and offer better amenities in a more ideal location.
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submarket when compared to other areas where the buildings are
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C
will likely be more gradual, as demand is historically lower in the
4th Qtr 2011
Buyer
Seller
None to report
Significant North Michigan Avenue Lease Transactions
4th Qtr 2011
Property Address
Property Name
Leased (SF)
Tenant
Comments
330 N Wabash Ave
330 North Wabash
273,456
American Medical Association
New lease
330 N Wabash Ave
330 North Wabash
111,081
SmithBucklin Corp.
New lease
875 N Michigan Ave
John Hancock Center
41,000
SMS Assist
Sublease
5,590
Information Technology Partners, Inc.
Sublease
541 N Fiarbanks Ct
17
Chicago
River North
Chicago
Midway
Airport
171
126
MARKET SIZE (SF)
13,530,272
OVERALL VACANCY
1,895,886 SF (14.35%)
Ohio
43 St.12
DIRECT VACANCY
1,474,870 SF (10.61%)
20
SUBLEASE VACANCY
421,016 SF (3.75%)
46,204
47,190
0
$28.65 PSF
41
12
20
Oak
Lawn
90
83
94
Wacke
rD
57
50
94
r.
Michigan Ave.
Wells St.
Wacker Dr.
Halsted St.
Randolph St.
Harvey
6
290
Vacancy
Rate
Net
Absorption
294
Asking
Rents
80
River North Overview
1,200,000
20%
800,000
17%
400,000
14%
0
11%
Comprised of predominantly class “C” timber-loft style office buildings,
the River North submarket is also home to a few modern glass and steel
class “A” office towers. The recent construction in the neighborhood
-400,000
8%
2007
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
has also been of note, but only one available development site remains
at Wolf Point, so major new office developments will be rare. The
office submarkets, but offers sensational views along the Chicago River.
Vacancy Rate
Since the start of the economic recession and through the beginning of
18%
14.06%
5%
of high-end residential developments, retail and up-scale restaurants
submarket is the least accessible to transportation of all the downtown
13.11%
15.40%
the recovery, the submarket has benefitted from companies looking for
lower-cost loft buildings and unique office spaces.
12%
6%
Class C
Class B
Class A
0%
State St.
90
Submarket Trends
24%
41
94
Oak St.
Chicago Ave.
# OFFICE BUILDINGS
-800,000
90
The vacancy rate in the River North submarket experienced little
change during the year, a sign that demand remains weak and few
transactions have occurred. The year ended with a 14.01% rate,
slightly below the 14.36% rate recorded a year ago. Absorption for
the year totaled 47,190 SF, with the first and third quarters recording
negative net absorption, and the second and final quarter of the year
27%
30%
Class A
Class B
recording positive tallies. This space was absorbed among only class
“A” buildings, with both class “B” and “C” building experiencing
Class C
43%
“Space was absorbed among only class
“A” buildings, as class “B” and “C” buildings
experienced deteriorating conditions.”
Pictured Above: 350 W Mart Center, the two-tower 1,243,000 SF office facility
purchased by Shorenstein Properties, LLC for $228 million during the fourth quarter
River North Overview
deteriorating conditions over the course of the year. Few
4%
significant blocks of contiguous space remain available in the
submarket, suggesting that adjustments to the vacancy rate will
3%
be gradual going foward.
2%
1%
Shorenstein Properties LLC, a San Francisco-based investor,
2011
2010
2009
2008
2007
2006
2005
Center for $228 million. The building was purchased from New
2004
Merchandise Mart that was previously known as the Apparel
2003
2002
2001
purchased the 1.2 million SF office building just west of the
0%
York based real estate investment trust Vornado, who owns the
$32.00
Merchandise Mart next door, and was 96% leased at the time of
the sale.
$29.00
$26.00
The largest new lease of the fourth quarter involved the Chicagobased law firm Hogan Marren Ltd. leasing 11,704 SF at 321 N
$23.00
Clark Street. The firm, who had leased space at 180 N Wacker
2011
2010
2009
2008
2007
2006
$20.00
Drive, is moving to the building to expand their law practice and
are looking to stay long-term, signing a 10-year lease.
50
Looking Forward
40
The vacancy rate should remain relatively stable over coming
30
quarters, as the River North submarket experiences fewer
20
significant transactions than the larger, more active submarkets
10
in the Loop, and is subject to periods of little activity and relatively
0
4th Qtr 2011
Property
Size (SF)
Sale Price
Price PSF
Buyer
Seller
350 W Mart Center
1,243,000
$228,000,000
$183.00
Shorenstein Properties, LLC
Vornado Realty Trust
Significant River North Lease Transactions
Property Name
6 W Hubbard St
s
Significant River North Avenue Sale Transactions
Property Address
ck
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the real estate climate in the area.
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the area, as demand from the more active submarkets influences
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flat conditions. Over time conditions should gradually improve in
4th Qtr 2011
Leased (SF)
Tenant
Comments
16,252
Rakoczy Molino Mazzochi Siwik LLP
Lease renewal
321 N Clark St
321 N Clark at Riverfront Plaza
11,704
Hogan Marren Ltd.
New lease
350 W Hubbard St
Kingsbury Center
7,332
Rooney, Rippie & Ratnaswamy, LP
New lease
350 W Hubbard St
Kingsbury Center
4,924
Tip-Top Branding
New lease
19
North Suburban
173
41
45
# OFFICE BUILDINGS
524
MARKET SIZE (SF)
29,943,140
OVERALL VACANCY
5,694,154 SF (18.99%)
DIRECT VACANCY
4,888,768 SF (16.33%)
SUBLEASE VACANCY
805,386 SF (2.69%)
194,273
177,253
425,000
$20.21 PSF
Waukegan
Regional Airport
83
Gurnee
Grayslake
Waukegan
120
21
94
176
Libertyville
Lake Forest
Vernon Hills
ake Zurich
60
45
41
22
Highland Park
Buffalo
Grove
Deerfield
21
68
Northbrook
Chicago Executive
Airport
Market Trends
Vacancy
Rate
Net
Absorption
Asking
Rents
90
Arlington
Heights
94
Glenview
294
chaumburg
43
Niles
Evanston
Skokie
Ohare
Int'l Airport
North Suburban Overview
400,000
25%
200,000
22%
0
19%
-200,000
16%
-400,000
13%
The North Suburban market is diverse in industry, but best known as
a headquarters solution to many of Chicagoland’s largest employers.
With an unparalleled, qualified workforce, the north suburbs also lay
-600,000
2007
2008
2009
Vacancy Rate (%)
2010
Net Absorption (SF)
Inventory By City
10%
the area’s chief executives and advisors choose to reside. In previous
years, the market has fallen victim to large reductions in size from
companies such as Motorola and Hewitt & Associates, but historically
the market has been better served by its pharmaceutical-related
Northbrook
13%
staples including Walgreens, Baxter and Abbott Laboratories.
Deerfield
8%
43%
7%
7%
5% 5% 6%
2011
claim to Chicago’s popular “North Shore” communities where many of
7%
Skokie
Evanston
Gurnee
Results were mixed in the North Suburban market during 2011. After
Glenview
Libertyville
witnessing eight consecutive quarters of negative net absorption and
Buffalo Grove
climbing vacancy rates between mid-2008 and mid-2010, conditions
Other Suburbs
began to improve late last year, as space was absorbed and the
vacancy rate responded accordingly. 2011 saw three quarters of
positive absorption with only the third quarter reversing that trend,
keeping the vacancy rate bouncing around 19%. Absorption for the
10%
fourth quarter totaled 194,273 SF, pushing the vacancy rate down 68
Class A
33%
57%
Class B
basis points to 18.99%, nearly two full percentage points below the
20.71% peak rate recorded during the third quarter of 2010.
Class C
“The North Suburban market is well-positioned to
absorb additional space and already enjoys one of
the lowest vacancy rates.”
Pictured Above: 2211 Sanders Road in Northbrook, the 195,116 SF building fully leased to
CVS Caremark Corp. purchased by Cole Real Estate Investments during the fourth quarter
5%
The largest sale transactions of the fourth quarter involved
Phoenix-based Cole Real Estate Investment paying about $227
4%
PSF for the 195,116 SF class “A” building known as Caremark
3%
Tower II in Northbrook. While the building traded for a price
2%
lower than the $60 million it garnered in 2007, the strong price
1%
is indicative of what fully-leased buildings are selling for in the
2011
2010
2009
2008
2007
2006
2005
2004
12 years left on their lease.
2003
2002
2001
market. The building’s only tenant, CVS Caremark Corp., still has
North Suburban Overview
0%
Northwestern Memorial Hospital purchased the 130,000 SF
$22.00
office building located at 2701 Patriot Blvd in Glenview’s Glen
development this December. The hospital plans to use the space
$21.00
for doctors offices and additional office space.
$20.00
The largest new lease signed during the fourth quarter in the
North Suburban market involved pharmacy benefits manager
2011
2010
2009
2008
2007
2006
$19.00
Catalyst Rx leasing 105,460 SF at 1200 Lakeside Drive in
Bannockburn. The Maryland-based company recently acquired
Walgreen’s Health Initiative Inc. pharmacy benefits management
business, and will use their new space to absorb the employees
80
involved in the acquisition.
60
Looking Forward
40
The North Suburban market attempted to find its footing during
20
2011, experiencing both positive and negative periods. Looking
0
Significant North Suburban Sale Transactions
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lowest vacancy rates among the suburban office market.
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absorb additional space and already experiences one of the
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towards 2012 and beyond, the market is well-positioned to
4th Qtr 2011
Property Address
City
Size (SF) Sale Price
Price PSF
Buyer
Seller
2211 Sanders Rd
Northbrook
195,116
$44,250,000
$227.00
Cole Real Estate Investments
Angelo, Gordon & Co/Fulcrum Asset Advisors
2701 Patriot Blvd
Glenview
130,000
$Undisclosed
$Undisclosed
Northwestern Memorial Hospital OPUS North Corporation
1020 Milwaukee Ave
Deerfield
64,858
$2,600,000
$40.00
Marc Realty
U.S. Bank
Significant North Suburban Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
1200 Lakeside Dr
Bannockburn
105,460
Catalyst Rx
New lease
300 Tri State International
Libertyville
64,000
LTD Commodities
Lease renewal
475 Half Day Rd
Lincolnshire
21,439
TDK Corporation of America
Lease renewal
1275 Tri-State Parkway
Gurnee
19,585
CNU Online Holdings, LLC
New lease
750 Estate Dr
Deerfield
18,182
Celergo
6200 Capitol Dr
Wheeling
11,199
National Lewis University
Lease renewal
Italics denotes NAI Hiffman transaction
21
Northwest Suburban
# OFFICE BUILDINGS
584
MARKET SIZE (SF)
33,746,831
OVERALL VACANCY
8,825,478 SF (26.15%)
173
45
Fox Lake
McHenry
DIRECT VACANCY
8,454,371 SF (25.05%)
SUBLEASE VACANCY
371,107 SF (1.10%)
-147,997
96,347
0
$19.71 PSF
120
Waukegan
Regional Airport
Gurnee
Waukegan
12
94
14
176
Crystal Lake
60
Vernon Hills
Lake Zurich
83
Highland Park
22
12
31
14
25
Dundee
68
Palatine
53
Northbrook
Chicago Executive
Airport
94
72
20
Market Trends
Vacancy
Rate
Net
Absorption
Asking
Rents
294
Arlington
Hoffman
Heights
Estates 90
Elgin
59
Schaumburg
20 Hanover
Elk Grove
South Elgin
Rosemont
Park
Village Int'lOhare
Airport
Wood Dale
Bloomingdale
290
Dupage
Addison
Airport
355
E
Skoki
90
290
Northwest Suburban Overview
400,000
30%
200,000
27%
0
24%
-200,000
21%
-400,000
18%
The Northwest Suburban market is highly influenced by activity in the
Schaumburg submarket (65% of total market inventory), which includes
the municipalities of Schaumburg, Hoffman Estates, Rolling Meadows,
2007
-600,000
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
Inventory By City
15%
Arlington Heights and Palatine. Companies such as Motorola, AT&T,
Sears and Allstate have long been staple tenants in the market, but
have produced continual negative absorption to the point that they
have now become competitors to other third part owners. The area has
been plagued with overall negative absorption and elevated vacancy
Schaumburg
Arlington Heights
17%
rates since 2006, in part due to area mortgage companies giving back
space in excess of one million SF.
Elgin
34%
14%
Hoffman Estates
Rolling Meadows
Palatine
4%
4% 5% 6% 7%
10%
Crystal Lake
Mt. Prospect
Other Suburbs
The Northwest Suburban vacancy rate peaked at 27% during the third
quarter of 2010, and began to improve thereafter, witnessing three
consecutive quarters of improvement through the first half of 2011.
Since then, the vacancy rate has resumed its climb, as new vacancies
have outnumbered new leases, resulting in negative net absorption
that pushed the vacancy rate to 26.15% by the end of the year. Net
9%
absorption for the fourth quarter totaled negative 147,997 SF, lowering
49%
42%
Class A
the annual tally to only 96,347 SF, a disappointing figure for such a
Class B
large market supposedly in a recovery phase. Sears Holding Corp,
Class C
“The Northwest Suburban market was the only
to record negative net absorption and a rising
vacancy rate during the fourth quarter.”
Pictured Above: 500 Park Blvd and 1 Pierce Pl in Itasca’s Hamilton Lakes Office Park,
purchased by Long Wharf Real Estate Partners LLC during the fourth quarter
4%
headquarters campus, negotiated a renewal of state and
local business incentives that were set to expire in 2012, and
3%
has decided to stay put. AT&T is still looking to sublease their
2%
3-building, 1.5-million SF campus in Hoffman Estates with limited
to no interest. Should AT&T decide to vacate their headquarters
1%
campus, the vacancy left behind would further complicate
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
vacancy concerns in the Northwest Suburban market.
0%
Northwest Suburban Overview
who was considering leaving their sprawling Hoffman Estates
Two buildings totaling just over one million SF located in Itasca’s
$22.00
Hamilton Lakes Office Park were purchased by Boston-based
Long Wharf Real Estate Partners LLC, representing the largest
$21.00
sale of the fourth quarter.
$20.00
Advocate Physician Partners, a joint venture between the
$19.00
Advocate Health Care system and physicians at Advocate
2011
2010
2009
2008
2007
2006
$18.00
hospitals, leased 47,364 SF at Tower II of Continental Towers
in Rolling Meadows. The company will be relocating their
headquarters to the building from Mount Prospect.
150
Looking Forward
120
Among the suburban office markets, the Northwest Suburban
90
market was the only to record negative net absorption and a
60
rising vacancy rate during the fourth quarter. The area continues
30
to struggle with the highest vacancy rate in Chicago’s office
0
Significant Northwest Suburban Sale Transactions
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as an alternative.
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tenants have started to look at the Northwest Suburban market
SF Bl
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buildings has recently tightened in the O’Hare market, and some
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market. The only positive news is that as the market for class “A”
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
500 Park Blvd & 1 Pierce Pl
Itasca
1,029,351
$73,750,000
$72.00
Long Wharf Real Estate Partners LLC
MEPT/New Tower Trust
1 Salem Lake Dr
Long Grove
150,000
$3,000,000
$20.00
Asset Recovery Fund I Joint Venture
CF Industries Holdings, Inc
3030 W Salt Creek Ln
Arlington Heights 100,952
$5,875,406
$58.00
The Blackstone Group
Duke Realty Corporation
Significant Northwest Suburban Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
1701 Golf Rd (Tower II)
Rolling Meadows
47,364
Advocate Physician Partners
New lease
100 Mittel Rd
Wood Dale
37,447
US Cellular
New lease
1002 E Algonquin Rd
Schaumburg
15,000
Tate & Lyle
Lease renewal
915 National Pky
Schaumburg
14,261
Aerotek
New lease
475 N Martingale Rd
Schaumburg
12,562
Global Brass & Copper
New Lease
882 S Rohlwing Rd
Addison
10,000
PST Sales & Marketing
New lease
220-248 Spring Lake Dr
Itasca
6,915
Line Drive Unlimited
New lease
23
Northbrook
O’Hare Area
Chicago Executive
Airport
# OFFICE BUILDINGS
170
MARKET SIZE (SF)
15,263,637
OVERALL VACANCY
3,375,537 SF (22.11%)
DIRECT VACANCY
3,266,472 SF (21.40%)
SUBLEASE VACANCY
109,065 SF (0.71%)
148,000
152,506
0
$20.25 PSF
94
Glenview
294
Arlington
Heights
Des Plaines
12
45
Park Ridge
Ohare
Int'l Airport
Rosemont
72
90
Wood Dale
83
Market Trends
19
290
Vacancy
Rate
Net
Absorption
Asking
Rents
Franklin Park
O’Hare Area Overview
200,000
30%
100,000
27%
0
24%
-100,000
21%
-200,000
18%
Historically not a large tenant market, consolidations have happened
more frequently in the O’Hare Area submarket, especially among
banking entities including MB Financial Bank, Wintrust Financial
2007
-300,000
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
Inventory By City
8%
15%
and Banco Popular. These consolidations, often brought about by
recent economic factors, have focused on O’Hare for two reasons location and transportation. Geographically, O’Hare sits in the center
of the major suburban submarkets providing the “middle ground” for
employees coming from disparate locations, not to mention immediate
access to the airport for multi-market companies. Additionally, O’Hare
4%
2%
Des Plaines
26%
Chicago (O’Hare Area)
Park Ridge
16%
Rosemont
is the only submarket providing access to the CTA’s elevated train lines
from the city, allowing convenient public transportation for typically
younger city-dwelling staff members.
Bensenville
Schiller Park
26%
18%
Franklin Park, Norridge,
Harwood Heights
Despite a brief setback during the third quarter, the O’Hare Area market
resumed an improvement trend during the fourth quarter with 148,000
SF of space absorbed, pushing the vacancy rate down to 22.11% by
the end of December, a rate 137 basis point below a year ago and
6%
41%
more than 3.5% below the 25.65% peak recorded at the beginning
53%
Class A
of 2010. The absorption witnessed in the O’Hare market in 2011 took
Class B
place among the area’s class “A” properties. Class “B” and class “C”
Class C
“The majority of vacant space added to the
O’Hare market during the downturn has been
absorbed over the past two years.”
Pictured Above: 6133 N River Road, part of the Riverway office complex, where three buildings were
purchased by The Blackstone Group during the fourth quarter as part of a 79-property portfolio sale
6%
blocks of space are few and far between in the O’Hare market,
causing companies to look at other nearby markets instead.
4%
2%
Five Rosemont properties were sold during the fourth quarter
O’Hare Area Overview
facilities each recorded negative absorption for the year. Large
as part of a portfolio sale purchased by New York-based The
2011
2010
2009
known as Riverway East, Riverway West and Riverway III.
2008
Center, and three buildings in the Riverway office complex
2007
SF in size on Higgins Road known as O’Hare International Office
2006
office facilities consisted of two buildings each about 258,000
2005
in several key markets throughout the country, the Rosemont
2004
office and industrial buildings. While the buildings were located
2003
2002
2001
Blackstone Group from Duke Realty Corporation consisting of 79
0%
$24.00
$23.00
$22.00
$21.00
The largest new lease signed during the fourth quarter involved
Lawson Products, Inc., an industrial distributor of maintenance
$19.00
2011
2010
2009
2008
$18.00
2007
2006
and repair supplies, leasing 86,313 SF at 8770 Bryn Mawr
$20.00
Avenue in Rosemont’s Triangle Plaza for their new headquarters.
With the new lease, the company, who has been headquartered
in Des Plaines, will be the largest tenant in the building.
50
40
Looking Forward
30
The O’Hare Area market has come along way since vacancy
20
rates peaked in early 2010, and the majority of the vacant space
added to the market during the downturn has been absorbed.
10
0
Significant O’Hare Area Sale Transactions
s
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generous over time.
SF B
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as asking rates increase and market concessions become less
l
SF B
+ us
00 uo
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20 ont
C
The vacancy rate will continue to decline over coming quarters
4th Qtr 2011
Property
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
5 building portfolio
Rosemont
1,375,490
$121,100,558
$54.00
Significant O’Hare Area Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
9550 W Higgins Rd
Rosemont
114,762
Cole Taylor Bank
Lease renewal
Chicago
86,251
Lawson Products, Inc.
New lease
10275 W Higgins Rd
Rosemont
73,753
Advance Transformer Co.
Lease renewal/downsize
8700 W Bryn Mawr Rd
Chicago
31,455
Fidelity Insurance
New lease
8725-8745 W Higgins Rd
Chicago
17,086
CH2M Hill, Inc.
New lease
Chicago
12,000
HR Plus
New lease
Chicago
10,976
eClinicalWorks
New lease
25
Palatine
East-West Corridor
Elgin
664
MARKET SIZE (SF)
42,710,999
OVERALL VACANCY
9,372,740 SF (21.94%)
31
DIRECT VACANCY
8,120,564 SF (19.01%)
SUBLEASE VACANCY
1,252,176 SF (2.93%)
41,480
550,943
486,277
$20.16 PSF
294
90
Des Plaines
Schaumburg
Elk Grove
Village Int'lOhare
Rosem
Airport
# OFFICE BUILDINGS
Hoffman
Estates
Chicago Executive
Airport
25
290
64
Dupage
Airport
St Charles
64
Elmhurst
355
38
Lombard
38
North Aurora
Oakbrook 56
Terrace Oak Brook
294
88
53
Aurora
83
Naperville
Downers
Westmont
Grove
34
55
55
30
Market Trends
25
Bolingbrook
31
Vacancy
Rate
Net
Absorption
Asking
Rents
Romeoville
55
355
355
East-West Corridor Overview
500,000
25%
300,000
23%
100,000
21%
-100,000
19%
-300,000
17%
Largest of the suburban office markets, the East-West Corridor is also
diverse in many ways. Split into western and eastern sections by I-355,
the western half of the market consists of relatively new product and
2007
-500,000
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
15%
the majority of the larger blocks of space. Historically home to large
technological users including Alcatel-Lucent and Tellabs, Inc. and
other sizeable corporations such as Navistar and BP Amoco, the
western half of the market is more prone to sudden changes in vacancy
Inventory By City
and absorption. The characteristically more stable eastern section
is defined by more diverse multi-tenant buildings, smaller blocks of
Naperville
14%
31%
Oak Brook
12%
9%
5%
6%
6% 8%
9%
space, and older product.
Lombard
Downers Grove
Lisle
Aurora
Oakbrook Terrace
Wheaton
Other Suburbs
Conditions have been improving in the East-West Corridor for five
consecutive quarters. The vacancy rate peaked during the third quarter
of 2010 at 23.77% and has since dropped by nearly two full percentage
points, ending the year at 21.97%, the lowest rate the market has
seen since mid-2009. This improvement trend has been carried by an
increase in leasing activity, resulting in significant absorption of some
12%
of the vacant space added to the market during the downturn. Nearly
49%
39%
Class A
800,000 SF has been absorbed since conditions began to improve,
Class B
about 60% of the 1.3 million SF of vacant space added to the market.
Class C
“Increased leasing activity has resulted in the
absorption about 60% of the 1.3 million SF
of vacant space added to the market.”
Pictured Above: 2001 York Road in Oak Brook, where Comcast Corp extended
their lease and expanded by an additional 39,000 SF during the fourth quarter
38
6%
Five buildings in the East-West Corridor were involved in the
79-property office and industrial portfolio sale purchased by The
4%
Blackstone Group from Duke Realty Corporation in December.
The three-building Executive Towers West office development
2%
on Opus Place in Downers Grove, the 111,659 SF building in
Westmont known as the Oakmont Tech Center and a 94,375 SF
2011
2010
2009
2008
2007
2006
2005
2004
sale, which was valued at over one billion dollars.
2003
2002
2001
building in Lisle’s Corporate Lakes office park were all part of the
0%
East-West Corridor Overview
Comcast Corp expanded their footprint by about 39,000 SF in
$22.00
the class “A” office building at 2001 York Road in Oak Brook. The
building was hit with a foreclosure suit in October, shortly after
$21.00
a loan had come due. With the expansion and lease extension,
$20.00
Comcast now leases 164,000 SF in the building.
$19.00
2011
2010
2009
2008
2007
2006
$18.00
HAVI Global Solutions leasing about 140,000 SF in the Esplanade
II building at 3500 Lacey Road in Downers Grove. The space had
been leased by Sara Lee Corp, who plans to move into their new
headquarters location in the West Loop by 2013.
120
100
Looking Forward
80
The East-West Corridor has historically been one of the most
60
active suburban office markets, and this trend has returned
40
20
over the past five quarters evidenced by several thousand SF
0
the interest and activity in the East-West Corridor will translate
ks
market to the north, where conditions have yet to turn around.
oc
s
ks
ck
oc
lo
to other nearby markets, particularly to the Northwest Suburban
SF Bl
0+ us
00 uo
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10 ont
C
l
SF B
+ us
00 uo
,0 ig
50 ont
C
SF B
+ us
00 uo
,0 ig
20 ont
C
of absorption and a dropping vacancy rate. Over time, hopefully
Significant East-West Corridor Sale Transactions
4th Qtr 2011
Property
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
Executive Towers West (3 bldgs)
Downers Grove
653,727
$100,424,049*
$154.00*
1200 Warrenville Rd
Naperville
329,770
$30,998,500
$94.00
BMO Harris Bank NA
Wanxiang America Corp.
600-680 Oakmont Ln
Westmont
111,659
$10,199,142*
$91.00*
2275 Cabot Dr
Lisle
94,375
$14,497,672*
$154.00*
Significant East-West Corridor Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
2001 York Rd
Oak Brook
164,000
Comcast Corp
3500 Lacey Rd
Downers Grove
140,000
HAVI Global Solutions
New lease
3333 Warrenville Rd
Lisle
77,139
Computer Associates International, Inc.
New lease
2500-2550 Warrenville Rd
Downers Grove
71,000
Sentinel Technologies
1011 Warrenville Rd
Lisle
32,270
Smuckers
New lease
3030 Warrenville Rd
Lisle
29,000
Hapag Lloyd USA
New lease
*allocated cost based on entire portfolio sale
27
I-55 Corridor
294
# OFFICE BUILDINGS
86
MARKET SIZE (SF)
4,019,255
OVERALL VACANCY
588,457 SF (14.64%)
DIRECT VACANCY
527,621 SF (13.13%)
SUBLEASE VACANCY
60,836 SF (1.51%)
Downers
Grove
Naperville
Burr
Ridge
83
355
355
16,504
-54,571
0
$20.07 PSF
Westmont
53
Darien
Bolingbrook
55
Market Trends
Romeoville
Vacancy
Rate
Net
Absorption
Asking
Rents
I-55 Corridor Overview
200,000
23%
150,000
20%
100,000
17%
50,000
14%
0
11%
2007
-50,000
2008
2009
Vacancy Rate (%)
2010
2011
Net Absorption (SF)
Inventory By City
8%
Although small in volume of space, the I-55 Corridor market benefits
from convenient access to area expressways and tollways including
I-55, I-294 and the recently completed I-355 extension. Drawing from
an excellent labor pool, the area is an ideal choice for companies who
don’t want to move as far north as Oak Brook, providing a convenient
location for their employees living in the southwest suburbs. Growth in
the I-55 Corridor market is tied to the rapid growth of Will County. User
types are mixed with a large presence of industrial services, catering to
the large industrial base in the area and medical services, supporting
8%
5%
28%
12%
Burr Ridge
Woodridge
the area hospitals in La Grange, Hinsdale, and the new Adventist
Bolingbrook Hospital.
Bolingbrook
Willowbrook
Darien
14%
18%
Countryside
Romeoville,
Downers Grove
15%
The I-55 Corridor vacancy rate continued to climb through much of
2011, ending the year at 14.64%, up a full percentage point from the
rate a year ago. While the annual absorption tally was only negative
54,571 SF, a small number when compared to neighboring markets,
the relatively small size of the I-55 Corridor means these types of
16%
17%
changes in occupied space can have an appreciable effect on the
Class A
vacancy rate. While the first three quarters of the year experienced
Class B
deteriorating conditions, the fourth quarter saw slightly positive
Class C
67%
“The vacancy rate climbed through 2011,
ending the year a full percentage point above
the rate recorded a year ago.”
Pictured Above: 7155 Janes Ave in Woodridge, where for-profit educator Westwood
College of Technology renewed their lease for 29,344 SF during the fourth quarter
8%
class “A” buildings, while class “B” and class “C” buildings, more
numerous in the area, recorded negative net absorption.
6%
4%
20%
Vacancy Rate
2%
absorption. This absorption happened among the market’s few
15.93%
2011
2010
2009
2008
2007
2006
0%
10%
$22.00
Class C
Class B
Class A
5%
2005
11.15%
2004
12.84%
2003
2002
2001
15%
$21.00
$20.00
$19.00
2011
2010
2009
2008
2007
2006
$18.00
For-profit higher education program Westwood College renewed
the lease for their DuPage Campus at 7155 Janes Ave, where the
company leases 29,344 SF. The college has campus locations
throughout the country and online programs as well.
8
6
Looking Forward
4
Not susceptible to large swings in vacancy or net absorption,
conditions should remain more or less the same over the coming
2
quarters in the I-55 Corridor. The market remains an affordable
0
Property
City
1219-1221 Lakeview Ct Romeoville
s
Significant I-55 Corridor Sale Transactions
ck
ks
oc
ks
oc
locational advantages.
o
SF Bl
0+ us
00 uo
0, ig
10 ont
C
to attract tenants based on value and its transportational and
l
SF B
+ us
00 uo
,0 ig
50 ont
C
l
SF B
+ us
00 uo
,0 ig
20 ont
C
alternative to parts of the East-West Corridor and will continue
4th Qtr 2011
Size (SF)
Sale Price
Price PSF
Buyer
Seller
18,287
$2,525,000
$138.00
Private trust
Glen Ellyn LLC
Significant I-55 Corridor Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
7155 Janes Ave
Woodridge
29,344
Westwood College of Technology
Lease renewal
540 W Boughton Rd
Bolingbrook
10,000
Kiddie Academy
New lease
361 S Frontage Rd
Burr Ridge
9,422
United Technologies Chemtron Division
New lease
900 S Frontage Rd
Woodridge
9,000
Cardiovascular Management of Illinois
New lease
1219-1221 Lakeview Ct
Romeoville
2,195
ARS Surveying
New lease
1450 Plainfield Rd
Darien
1,800
KMA Worldwide Logistics
New lease
29
Medical Office Review
NAI Hiffman Market Review
& 2012 Forecast
Medical Office Review
them to pool resources, streamline operational efficiencies,
Healthcare Reform, otherwise known as the Patient Protection
more affluent and highly insured patient groups.
add specialty practices, build new facilities, and compete for
and Affordable Care Act, continues to have an effect on the
local and national healthcare real estate industries as hospital
Loyola University Health System announced in March that
systems and occupiers of medial office space continue to
they were merging with Novi, MI based Trinity Health. Loyola
take a conservative approach to their real estate needs.
issued a statement saying, “In the light of the changing
The United States Supreme Court is set to begin hearing
healthcare environment and the passage of healthcare
arguments on the constitutionality of the bill in March of 2012
reform, it is logical for healthcare providers to consider new
and expect to render a decision by June of 2012.
approaches to meet the challenges of a reformed system.”
Also in March, Loyola opened a $50-millon outpatient facility
Here in Chicagoland, across a 11-million square foot
in Southwest suburban Burr Ridge which will be staffed
inventory of medial office assets, vacancy held at 14% with
by 70 full-time physicians and bring together primary care,
flat net absorption over the past 12 month period. Speculative
rehabilitation, orthopedics, neurology and other specialties.
development of medical office buildings was extremely
limited, while certain hospital systems did deliver replacement
Cadence Health System was created earlier this year by the
hospitals and specialty care facilities that had been planned
merger of Central DuPage Hospital in Winfield and Geneva-
and under construction for the past several years.
based Delnor Health System. The merger was driven by
a desire to extend their reach in an affluent market and
Local Acquisitions, Mergers, & Expansions
increase operational efficiencies as mandated by healthcare
In the last year, Chicagoland saw an acceleration in hospital
reform. Also, in December Delnor Hospital announced plans
merger and partnership discussions. As the expected influx
for a 38,000 square foot outpatient cancer center to be
of newly insured patients arrive in the next several years,
constructed on their Geneva campus. This was no doubt a
the Patient Protection and Affordable Care Act demands
move to compete with other West Suburban hospital systems
that hospitals become “centers of excellence” by creating
that are constructing or have brought on-line their own cancer
efficiencies to lower costs to the patients, while at the same
centers including: Edward Hospital in Naperville, Sherman
time providing high quality care with fewer costly hospital
Hospital in Elgin, DuPage Medical Group in Lisle, University
readmissions and mistakes.
of Chicago at the new Silver Cross Hospital in New Lenox
Due to these mandates,
several Chicagoland health systems are being proactive in
and Rush-Copley Hospital in Aurora.
partnership, merger and/or expansion plans that will allow
Pictured Above: The new 14-story, 830,000-square foot Rush University Medical
Center was completed during 2011, the first full-service, “green hospital”
Medical Office Overview
In June, Elmhurst Memorial Healthcare opened the doors of
Also in December, Northwestern Memorial Health Care
its brand new 866,000 square foot, $450-million replacement
began pitching physician practices on committing to
hospital. This was followed very shortly by news of their
move into their proposed $334-million, 1-million square
merger discussions with Northwestern Memorial Health
foot outpatient tower in Streeterville. But, at a time when
Care. New facilities used to be a sure way for systems to
Medicare reimbursement rates are expected to be cut,
attract patients and increase revenues, but in the current
some doctors are reluctant to commit to a long term new
economy and state of the nation’s healthcare industry,
lease at what could be a 30% increase in rent over renewing
some local systems are having a tough time supporting the
their current leases in buildings nearby.
weight of the long term debt that these new facilities carry.
This can been seen by the increased discussions between
Looking Forward
other local independent hospital systems with new facilities
As we move through 2012, look for continued merger and
merging or partnering with larger networks or institutions
partnership discussions between local hospitals and larger
including Sherman Health System’s discussions with both
national health systems or teaching hospitals. We expect
Centegra Health System and Advocate Health System, as
demand and absorption to remain flat pending the Supreme
well as Silver Cross Hospital’s partnership with University
Court’s decision on the constitutionality of the Healthcare
of Chicago.
Bill next summer. Local new development will remain limited
to current projects in the pipeline including the opening
In September, Alexian Brothers Health System signed a
of the 1.25-million square foot Ann & Robert H. Lurie
definitive agreement to become a part of St. Louis-based
Children’s Hospital of Chicago in June, and other smaller
Ascension Health, the largest Catholic health system in the
specialty care facilities throughout the Chicagoland area.
nation. It was mentioned in a press release that recognizing
the challenges facing hospitals around the country and the
imminent demands of healthcare reform, Alexian Brothers
and its health system’s leadership pursued a strategy to
identify a partner in order to continue to successfully serve
its communities.
In December, Rush University Medical Center opened its
new $654-millon hospital tower that is the cornerstone of
a planned 10 year transformation of its West side campus
along the Eisenhower Expressway. Perkins+Will Architects
designed the tower’s unique “butterfly” shaped floor plates
after interviewing the hospital’s physicians, nursing staff,
and patients to determine the critical features necessary to
create the most efficient, safe, and comfortable environment
to improve patient outcomes.
31
Geneva
Beloit
2
Westosha
Airport
Wisconsin
Industrial Submarket Overviews
Pleasant Prairie
Illinois
1
2
Lake County . . . . . . . . . 36
90
Southeast Wisconsin . . 38
3
I-90/Northwest . . . . . . . 40
4
Northwest Cook . . . . . . 42
kford 5
Rockford
North Cook . . . . . . . . . . 44
6
Fox Valley . . . . . . . . . . . 46
7
Central
DuPage. . . . . . . 48
Valleyy
8
O’Hare. . . . . . . . . . . . . . 50
9
West Cook . . . . . . . . . . 52
10
Chicago. . . . . . . . . . . . . 54
11
I-88 Corridor . . . . . . . . . 56
Waukegan
Regional Airport
1
Crystal Lake
C
y
Cherry
14
helle
15
94
Lake Forest
Vernon Hills
Lake Zurich
Highland Park
Buffalo
Grove
Northbrook
Chicago Executive
Airport
3
Arlington
Heights
4
90
Elgin
Schaumburg
12 I-55 Corridor . . . . . . . . . 58
39
13
Waukegan
Grayslake
94
294
5
Des
Plaines
Niles
Elk Grove
Village Int'lOhare
Airport
South Cook. . . . . . . . . . 60
Evanston
Skokie
Wood Dale8
alb
DeKalb
I-80/Joliet Corridor . . . . 62
Northwest Indiana. . . . . 64
7
Addison 290
Dupage
Airport
6
St Charles
Carol
Stream
West
Chicago
North Aurora
11
9
Elmhurst
94
290
10
Chicago
55
La Grange
Downers
Grove Burr
Bedford
Ridge
Woodridge
Park
Willow
Springs
88
Naperville
Aurora
355
90
Franklin
Park
Montgomery
Bolingbrook
55
12
Chicago Midway
Airport
294
Romeoville
Plainfield
13
355
90
57
Palos
Heights
94
Gary/Chicago Airpo
Hammond
Tinley Park
14
39
Monee
Elwood
57
80
55
Schererville
Park Forest
Minooka
La Salle
80 94
Matteson
New Lenox
Indiana
Joliet
Munster
80
Illinois
Mokena
15
M
Industrial Market Statistics
Industrial Market Statistics
Winter 2011-2012
Submarket
# Bldgs.
Total RBA
Vacant
Vacancy
(SF)
(SF)
Rate (%)
4Q11 NET
2011 YTD Net New Supply Under Constr.
Absorption (SF) Absorption(SF)
(SF)
(SF)
Chicago North
1,108
64,205,298
4,952,175
7.7% 
-72,336
-545,539
0
0
Chicago South
1,702
150,250,489
14,875,973
9.9% 
-278,390
-831,340
0
0
North Cook
709
45,842,324
2,971,947
6.5% 
164,670
487,105
0
0
West Cook
740
60,392,784
6,857,809
11.4% 
90,412
360,146
0
0
Southwest Cook
490
39,226,488
3,145,721
8.0% 
-53,884
-169,748
0
307,000
1,126
85,528,194
9,748,401
11.4% 
62,074
211,854
0
267,000
81
13,701,467
2,315,209
16.9% 
2,064,540
1,967,938
1,350,000
0
Lake County
931
66,965,523
6,178,157
9.2% 
687,013
1,754,510
0
0
Northwest Cook
524
28,431,207
2,394,830
8.4% 
82,587
447,764
0
0
O’Hare
1,720
99,976,303
10,769,882
10.8% 
-10,633
1,326,483
0
0
Central DuPage
1,096
66,974,146
5,231,767
7.8% 
1,272,692
1,632,821
0
140,000
I-55 Corridor
655
80,357,318
6,370,097
7.9% 
-310,793
2,718,457
0
415,000
McHenry County
435
25,395,823
3,148,568
12.4% 
58,590
-51,611
0
0
I-90/Northwest
432
25,720,933
2,674,766
10.4% 
60,497
152,960
0
0
Fox Valley
495
32,225,276
3,328,755
10.3% 
315,712
509,825
147,000
0
I-88 Corridor
771
61,834,957
6,356,231
10.3% 
503,378
823,031
0
0
I-80/Joliet Corridor
614
63,388,294
8,415,319
13.3% 
38,246
2,067,702
555,292
265,000
57
6,970,869
464,706
6.7% 
6,800
190,450
0
0
220
24,153,891
4,628,674
19.2% 
72,363
159,563
100,000
140,000
Southeast Wisconsin 523
44,614,814
4,561,139
10.2% 
93,304
353,721
0
462,754
432
35,746,307
2,741,668
7.7% 
-35,305
575,545
0
0
72,520,894
10,766,511
14.8% 
-142,774
-208,436
0
71,000
16,391 1,194,423,599 122,898,305
10.3% 
4,668,763
13,933,201
2,152,292
2,068,254
South Cook
I-57/Will Corridor
DeKalb County
I-39 Corridor
Northwest Indiana
Flex Space Summary
Total Flex Space
1,530
Total Market
Summary
The data compiled in the Chicago Industrial and Office Market Reviews is the legal property of NAI Hiffman. Reproduction or dissemination of the information contained herein is
strictly prohibited without the expressed written consent of NAI Hiffman. This review contains information, including information available to the public, which has been relied upon
by NAI Hiffman on the assumption that it is accurate and complete without independent verification by NAI Hiffman. NAI Hiffman accepts no responsibility if this should prove to be
inaccurate or incomplete. No warranty or representation, express or implied, is made by NAI Hiffman as to the accuracy or completeness of the information contained herein, and
same is submitted subject to errors, omissions, and changes in market conditions.
33
Market Review
& 2012 Forecast
# INDUSTRIAL BUILDINGS
16,391
MARKET SIZE (SF)
1,194,423,599
Market Summary
VACANCY
122,898,305 SF (10.3%)
4,668,763
13,933,201
NEW SUPPLY (SF)
2,152,292
2,068,254
10 MM
15%
5 MM
13%
0
11%
-5 MM
9%
2007
-10 MM
2008
2009
Vacancy Rate (%)
2010
2011
7%
Net Absorption (SF)
Historical Deliveries
30 MM
Total Deliveries (SF)
25 MM
Average (SF)
20 MM
15 MM
10 MM
5 MM
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0 MM
Source: CoStar
Total Sale Transactions and Price PSF
$1,000,000+ Transactions
100 MM
$70.00
Total SF Sold
80 MM
# Total # of Sales
Average Price PSF
$60.00
60 MM
$50.00
40 MM
593
395
825
$40.00
470
403
226
2010
2008
202
2009
2006
2007
2005
2004
2003
2002
2001
2000
0
384
762
286
$30.00
2011
20 MM
409
658
Data: CoStar
$20.00
Chicago is the second largest industrial market in the U.S. with nearly
1.2 billion SF of inventory. The Chicago industrial market remains the
most influential in the Midwest, due to its growing prominence as an
inland port and its diverse, comparatively low-cost labor force. It has the
second largest workforce in the country and is the largest manufacturing
market. Chicago’s strategic location and transportation infrastructure
make it the most important transportation center in the country. Located
in the path of three of the nation’s busiest transcontinental expressways
(I-80, I-90 and I-94), Chicago also claims 70 percent of the nation’s rail
and intermodal activity. The metropolitan area sits at the convergence
of all six class-one railways and within a day’s drive of one-third of the
country’s population.
Year in Review
Conditions continued to improve in the Chicago industrial market
through 2011, as additional vacant space was absorbed and the
vacancy rate dropped each quarter of the year. The market recovery
began a year-and-a-half ago, when instead of retrenching or downsizing,
which had become so commonplace during the economic recession,
companies began to address expansion plans as retail sales picked up,
product inventories began to shrink, and industrial production figures
increased. New leases, expansions of existing leases and user sales
began to outnumber the new vacancies being brought to the market,
and net absorption turned positive for the first time since early 2008.
These numbers have been encouraging ever since, as the vacancy rate
has dropped to 10.3%, about 170 basis points below the peak 12.1%
rate recorded in mid-2010, pushed down by more than 18 million SF
of absorption. This represents more than 62% of the 29.5 million SF of
vacant space introduced to the market during 2009 and much of 2010.
The last time Chicago’s industrial market witnessed a 10.3% vacancy
rate was three years ago at the end of 2008, when the economic crises
was quickly escalating and the real estate market was responding
accordingly.
The improvement witnessed during 2011 was largely due to a significant
Pictured Above: 702 Commerce Center Drive in University Park’s Commerce Center development,
leased by Georgia Pacific during the fourth quarter, and lhe largest new industrial lease of 2011
Vacancy
Rate
Net
Absorption
Asking
Rents
increase in leasing activity, of spaces both large and small. The
largest new lease of the year involved tissue, packaging and
paper manufacturer Georgia Pacific leasing a previously vacant
696,540 SF building in University Park’s Commerce Center
development. Several of the area’s historically active submarkets
each experienced more than one million SF of absorption during
the year, primarily due to this increase in leasing activity. These
submarkets include the South Cook, I-57/Will Corridor, O’Hare,
Central DuPage, I-55 Corridor and I-80/Joliet Corridor areas.
63,388,294 SF
I-88 Corridor
61,834,957 SF
West Cook
60,392,784 SF
North Cook
45,842,324 SF
Southeast Wisconsin 44,614,814 SF
Southwest Cook
39,226,488 SF
Northwest Indiana
35,746,307 SF
Fox Valley
32,225,276 SF
Northwest Cook
28,431,207 SF
O’Hare
99,976,303 SF
I-90/Northwest
25,720,933 SF
South Cook
85,528,194 SF
McHenry County
25,395,823 SF
I-55 Corridor
80,357,318 SF
I-39 Corridor
24,153,891 SF
I-57/Will Corridor
13,701,467 SF
DeKalb County
6,970,869 SF
Central DuPage 66,974,146 SF
66,965,523 SF
Lake County
2011 Net Absorption (SF) by Submarket
3 MM
Chicago North
I-39 Corridor
I-90/Northwest
DeKalb County
Southeast Wisconsin
South Cook
West Cook
North Cook
Northwest Cook
Fox Valley
Northwest Indiana
I-88 Corridor
Central DuPage
O’Hare
Lake County
I-57/Will Corridor
-1 MM
0
Chicago South
1 MM
Southwest Cook
2011 Total Net
Absorption: 13,933,201 SF
2 MM
I-55 Corridor
Total Industrial Base
1.3 Billion
Total Industrial Base (SF)
1.2 Billion
1.1 Billion
1.0 Billion
0.9 Billion
0.8 Billion
0.7 Billion
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Looking Forward
As the brunt of the recession continues to fade from memory,
businesses are addressing their previously sidelined longterm expansion plans with renewed confidence. The resiliency
of Chicago’s industrial market continues to be demonstrated
through elevated demand and transaction activity as the market
recovery picks up speed. This has resulted in limited options for
distribution companies looking for spaces several thousand SF in
size, resulting in the first significant uptick in construction activity
since the recession began. While development has been limited to
expansions and build-to-suit assignments, such as the new 1.35
million SF facility completed for cleaning products and chemical
manufacturer Clorox during the fourth quarter, new speculative
construction likely isn’t far off in certain submarkets.
McHenry County
Sales activity has picked up as well, especially among investment
sales, as investment firms with money to spend look to take
advantage of depressed prices left behind from the recession.
While this activity is nowhere near the historical highs witnessed
a few years ago, it has returned to respectable levels well above
what was seen in 2009 and much of 2010. Well-leased, core assets
are still the favored target among investors, but buildings with
substantial vacancy are beginning to trade as well, as the overall
market outlook for the near term continues to improve.
Suburban Submarkets by Size
Industrial Market Summary
Industrial Market Trends
Significant Industrial Lease Transactions
4th Qtr 2011
Property Address
Submarket
City
Leased (SF) Tenant
Comments
702 Commerce Center Dr
I-57/Will Corridor
University Park
696,540
Georgia Pacific
New lease
2780 McDonough St
Joliet
476,988
OHL
New lease
30120 N Skokie Hwy
Lake County
North Chicago
397,000
Uline
New lease
520 E North Ave
Central DuPage
Carol Stream
314,574
Angelo Caputo’s Fresh Markets
New lease
CenterPoint Intermodal Center
Elwood
264,600
Resource Mangement Companies
Build-to-suit lease
1165 Crossroads Pky
I-55 Corridor
Romeoville
236,882
Distribution 2000, Inc.
New lease
35
Lake County
POPULATION
703,462
2000–2010 POPULATION CHANGE
+9.2%
931
MARKET SIZE (SF)
66,965,523
VACANCY
Wisconsin
Illinois
173
6,178,157 SF (9.2%)
4Q11 NET ABSORPTION
687,013
YTD NET ABSORPTION
1,754,510
NEW SUPPLY (SF)
0
0
45
Fox Lake
cHenry
Waukegan
Regional Airport
83
Gurnee
Grayslake
12
Waukegan
120
94
North
Chicago
21
Libertyville
Mundelein
176
Net
Absorption
Asking
Rents
176
60
ake
Submarket Trends
Vacancy
Rate
Zion
41
Lake Forest
Vernon Hills
Lake Zurich
22
12
P l ti
45
41
22
Buffalo
Grove
Highland Park
294
Lake County Overview
800,000
14%
400,000
12%
0
10%
The Lake County industrial submarket is notable for its roster of
-400,000
8%
2007
-800,000
2008
2009
Vacancy Rate (%)
2010
corporate headquarters and heavy concentration of owner-occupied
real estate, all located within close proximity to the I-94 Tri-State
Tollway. Entrepreneurial owners and corporate managers residing along
the lakefront and northwest Lake County make this area attractive for
2011
6%
Net Absorption (SF)
investment. Corporate neighbors including Abbott, Baxter, Caremark,
Takeda, Walgreens and WMS join privately held companies such as
Inventory By City
CDW, Medline and ULINE to form a vibrant base of employment. Lake
County’s relatively low property tax rates attract companies from Cook
Waukegan
23%
33%
the playing field.
Gurnee
Buffalo Grove
11%
7%
County, although infrastructure demands have begun to slightly even
Libertyville
7%
9%
Lake Zurich
10%
North Chicago
Other Lake County Suburbs
An area where changes are typically gradual and trends slow to emerge,
the Lake County submarket just experienced a significant adjustment
for the second consecutive quarter. Several sizeable new leases and
user sales combined to result in 687,013 SF of absorption for the fourth
Construction Deliveries 2000-2011
1,200,000
quarter, bringing the tally for the surprise second half of 2011 to nearly
1,000,000
1.5 million SF of vacant space absorbed. This elevated activity has
800,000
pushed the Lake County vacancy rate down to 9.2%, which is 2.4%
600,000
lower than the rate recorded last December.
400,000
200,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“The Lake County vacancy rate has dropped
to its lowest level since 2008, when the
recession was just getting underway.”
Pictured Above: 30120 N Skokie Highway in North Chicago, which was vacated by Uline last year
with their move to Wisconsin, was leased again by the packaging company during the fourth quarter
Available Space Profile
Development activity is at a standstill in Lake County until
conditions in the overall industrial market begins return to
1.6 MM
1.1 MM
1,000 – 19,999 SF Available
desirable levels.
20,000 – 49,999 SF Available
2.3 MM
1.4 MM
50,000 – 99,999 SF Available
100,000 – 199,999 SF Available
Nearby Northbrook-based ForeFront Properties purchased the
Lake County Overview
Construction
200,000+ SF Available
2.4 MM
345,232 SF manufacturing building located at 3818 Grandville
Avenue in Gurnee for $3,925,000, or about $11.00 PSF, in
120
December. The building, although in good condition at the time of
# of Buildings
100
the sale, was vacant. The buyer plans to lease the entire building
80
over the coming years or sell it again.
60
40
The largest lease of the fourth quarter involved Uline leasing the
20
397,000 SF building at 30120 N Skokie Highway in the North
0
e
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00 ila
0, va
20 A
9
SF
99
9,
19
– e
0 bl
00 ila
0, va
10 A
SF
99
,9
99
– ble
00 ila
,0 va
50 A
SF
99
,9
49
– ble
00 ila
,0 va
20 F A
S
99
,9
19 ble
–
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00 va
1, F A
S
Chicago Business Park that they had vacated last year as part of
their move to their new 1.2 million SF headquarters in Pleasant
Prairie, Wisconsin. The company had left behind roughly 600,000
SF of space in Lake County with the move to Wisconsin.
Looking Forward
While the Lake County submarket has historically been
dominated by user-owner buildings amid large swaths of
residential developments, numerous speculative facilities were
constructed during the height of the real estate boom. Now
that demand has returned to the area, many of these recently
constructed facilities are starting to fill up. A lot of entrepreneurial
talent lives in the area and owners want to be in close proximity to
their homes and employee base, which makes the Lake County
submarket ideal for some.
Significant Lake County Sale Transactions
4th Qtr.
Qtr 2011
3rd
2010
Property Address
City
Price PSF
Buyer
Seller
3818 Grandville Ave
Gurnee
345,232
$3,925,000
$11.00
ForeFront Properties, LLC
John Hancock Life Insurance Co
2200 Tempel Dr
Libertyville
238,000
$3,500,000
$15.00
MBA Building Supplies
Tempel Steel Company
610 Schelter Rd
Lincolnshire
98,735
$8,065,000
$82.00
LaSalle investment Management
Panattoni Development Company
1731 S Lakeside Dr
Waukegan
61,000
$3,500,000
$57.00
Marquette 1731 LLC
Age LLC
340 E Main St
Lake Zurich
57,541
$1,600,000
$28.00
Morgan Bronze Products
Kavo Dental Corporation
Significant Lake County Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
30120 N Skokie Hwy
North Chicago
397,000
Uline
New lease
1515 Franklin Blvd
Libertyville
193,653
Zeller Plastik
Lease renewal
500 Bond St
Lincolnshire
70,957
HomeWerks, Inc.
New lease
900 Corporate Grove Dr
Buffalo Grove
68,943
Baxter Healthcare Corporation
Lease renewal
880 Lakeside Dr
Gurnee
50,395
Jump America, LLC
New lease
37
Southeast Wisconsin
POPULATION
254,027
+5.1%
523
Burlington
MARKET SIZE (SF)
44,614,814
83
VACANCY
4,561,139 SF (10.2%)
4Q11 NET ABSORPTION
93,304
YTD NET ABSORPTION
353,721
NEW SUPPLY (SF)
0
462,754
Sturtevant Racine
142
Kenosha
Regional
Airport
Kenosha
31
50
94
32
45
Westosha
Airport
41
165
Pleasant
Prairie
Wisconsin
Illinois
Zi
Submarket Trends
Vacancy
Rate
Net
Absorption
Asking
Rents
Southeast Wisconsin Overview
1,500,000
17%
1,000,000
15%
500,000
13%
0
11%
The primary advantages of the Southeast Wisconsin submarket are
the availability of affordable land for “big box” development as well
as lower utility costs, property taxes and workers’ compensation
-500,000
9%
2007
-1,000,000
2008
2009
2010
Vacancy Rate (%)
2011
7%
Net Absorption (SF)
when compared to submarkets in Illinois. The Lakeview Corporate
Park in Pleasant Prairie, Wisconsin accounts for the lion’s share of our
statistical tracking in the Southeast Wisconsin industrial submarket.
This 1,500-acre business park boasts 25 million SF of industrial space
Inventory By City
and is home to an international roster of companies including S.C.
Johnson, IRIS, Yamaha and Jelly Belly.
6%
16%
Racine
34%
17%
Pleasant Prairie
Sturtevant
The Southeast Wisconsin submarket responded quickly to the economic
Kenosha
recession in late 2008 and early 2009, when the vacancy rate increased
Burlington
27%
from 9.2% to over 14% in a matter of only a few months. The area is
susceptible to these significant swings in absorption and vacancy due
to the large size of many buildings in the submarket’s business parks
that cater to distribution and warehousing users. Since the vacancy
2,500,000
rate peaked in mid-2009, it has been on the decline. 2010 saw multiple
2,000,000
large leases signed and the completion of several construction projects,
1,500,000
resulting in nearly 5 million SF of absorption. Things have leveled off
a bit in 2011, however, with the submarket tallying only 353,721 SF of
1,000,000
500,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“The Southeast Wisconsin vacancy rate has
improved by 4% during the past two-and-a-half
years due to nearly 5 million SF of absorption.”
Pictured Above: 10616 82nd Avenue in Pleasant Prairie, a 82,104 SF building that has sat vacant
since it was built in 2008, and was leased by Hospira Worldwide during the fourth quarter
by the end of December, only 80 basis points below the rate a
year ago. This year’s limited activity demonstrated that the area
0.3 MM
0.6 MM
is subject to periods of inactivity and flat conditions which can
20,000 – 49,999 SF Available
2.4 MM
be followed with a several thousand SF swing in absorption the
1.5 MM
following quarter due to the large size of many transactions in
the submarket.
100,000 – 199,999 SF Available
1.0 MM
Construction
50,000 – 99,999 SF Available
32
# of Buildings
Several build-to-suit projects remain under construction,
including a new 323,610 SF building for Italy-based Seda
International Packaging Corp. that is nearing completion and a
Southeast Wisconsin Overview
abosorption for the year, and recording a 10.2% vacancy rate
24
16
78,888 SF facility for Racine Metal Fabriaction.
8
0
e
0+ bl
00 ila
0, va
20 A
9
SF
99
9,
19
– e
0 bl
00 ila
0, a
v
10 A
SF
99
,9
99
– ble
00 ila
,0 va
50 A
SF
99
,9
49
– ble
00 ila
,0 va
20 A
SF
99
,9
19 ble
–
0 ila
00 va
1, F A
S
The most significant transaction of the fourth quarter involved
global specialty pharmaceutical and medication delivery
company Hospira Worldwide leasing the 82,104 SF building at
10616 82nd Avenue in Pleasant Prairie’s LakeView Corporate
Park East.
Looking Forward
The Southeast Wisconsin vacancy rate has improved by 4%
during the past two-and-a-half years. While 2011 saw fewer deals
completed in the submarket than 2010, interest in Southeast
Wisconsin from companies in Illinois remains elevated due to the
location, business incentives and modern product in the area,
and additional absorption is expected over coming quarters.
Significant Southeast Wisconsin Sale Transactions
Property Address
City
Size (SF)
Sale Price
4th Qtr 2011
Price PSF
Buyer
Seller
None to report
Significant Southeast Wisconsin Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
10616 82nd Ave
Pleasant Prairie
82,104
Hospira Worldwide
New lease
9900 58th Pl
Kenosha
18,888
Bucher Hydraulics
Lease renewal
39
I-90/Northwest
POPULATION
212,832
+26.4%
432
MARKET SIZE (SF)
25,720,933
VACANCY
2,674,766 SF (10.4%)
4Q11 NET ABSORPTION
60,497
YTD NET ABSORPTION
152,960
NEW SUPPLY (SF)
0
0
25
31
Carpentersville
Hampshire
90
72
East
Dundee
47
20
Elgin
Submarket Trends
31
Vacancy
Rate
Net
Absorption
Asking
Rents
South Elgin
I-90/Northwest Overview
400,000
14%
200,000
12%
0
10%
The I-90/Northwest industrial submarket is attractive to companies
-200,000
8%
2007
-400,000
2008
2009
Vacancy Rate (%)
2010
looking for excellent interstate access, relatively low taxes, potential
incentives and a strong labor pool. Most of the industrial inventory
base in the submarket is located within minutes of a 4-way
intersection with I-90. This serves to make the I-90/Northwest
2011
6%
Net Absorption (SF)
submarket a good distribution point for companies that are serving the
I-90/upper-midwest supply chain. Relatively low taxes are a benefit
Inventory By City
throughout the submarket and TIF incentives are available in some
areas. Additionally, the Elgin area provides an abundant, educated
3%
5%
9%
labor pool. Population along and near the Fox River has increased
Elgin
7%
Carpentersville
dramatically over the past decade. More than 76% of the total
South Elgin
submarket inventory is located in Elgin.
East Dundee
Dundee, Genoa, Marengo,
Hampshire, etc.
76%
The vacancy rate in the I-90/Northwest submarket decreased by 60
basis points during 2011, ending the year at 10.2%, the lowest rate the
area has witnessed since the first quarter of 2008, before the economic
1,500,000
recession took hold of Chicago’s industrial market. The rate at the end
1,200,000
of the year is 1.5% below the peak rate of 11.7% recorded in mid-
900,000
2010, due to nearly 500,000 SF of vacant space being absorbed during
that time, with much of that occurring during the second half of 2010.
600,000
300,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“The I-90/Northwest vacancy rate has returned to
pre-recession levels due to nearly 500,000 SF of
absorption of the past six quarters.”
Pictured Above: 1331 Davis Road in Elgin, purcahsed by Zilber Property Group from Seigle’s Cabinet
Center during the fourth quarter, who then leased back space in the 126,252 SF building
Construction in the I-90/Northwest submarket will remain limited
to build-to-suit projects and building expansions until more
0.3 MM
0.4 MM
vacant space is absorbed and the overall market recovers.
0.7 MM
1.1 MM
20,000 – 49,999 SF Available
50,000 – 99,999 SF Available
100,000 – 199,999 SF Available
Investment firm Zilber Property Group purchased the 126,252 SF
1.1 MM
I-90/Northwest Overview
Construction
warehouse building at 1331 Davis Road in Elgin during October
from home cabinet distributor Seigle Cabinet Center, who
50
# of Buildings
then leased space in the building as part of the sale/leaseback
transaction. Also leasing space at 1331 Davis Road, hydraulic
drive and control technologies provider Bucher Hydraulics leased
40
30
20
42,521 SF in the building which was built in 1980.
10
The 97,600 SF building located at 833-855 Commerce Parkway
0
e
0+ bl
00 ila
0, va
20 A
9
SF
99
9,
19
– e
0 bl
00 ila
0, a
v
10 A
SF
99
,9
99
– ble
00 ila
,0 va
50 A
SF
99
,9
49
– ble
00 ila
,0 va
20 A
SF
99
,9
19 ble
–
0 ila
00 va
1, F A
S
was sold for $2.65 million, or about $27.00 at the end of the year.
The building was 27% vacant at the time of the sale, which the
buyer plans to occupy.
Looking Forward
Conditions in the I-90/Northwest submarket continue to
gradually improve. The area’s vacancy rate, while not as hard hit
by the downturn as other submarket’s rates, has returned to prerecession levels. A slowly falling vacancy rate is expected over
the coming quarters, as demand from some of the more active
neighboring submarkets spreads into the area, and companies
look to take advantage of the relatively low taxes, incentives,
educated work force and locational advantages of the I-90/
Northwest submarket.
Significant I-90/Northwest Sale Transactions
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
1331 Davis Rd
Elgin
126,252
$4,787,623
$38.00
Zilber Property Group
Seigle Cabinet Center
833-855 Commerce Pky Carpentersville
97,600
$2,650,000
$27.00
855 Commerce LLC
HMP Properties Inc
1370 Gateway Dr
Elgin
42,280
$2,600,000
$61.00
ADMO Inc.
Knebl Real Estate LLC
1450 N McLean Blvd
Elgin
35,150
$1,775,000
$51.00
Wesa Group, LLC
The Elgin Company Holdings I, LLC
Significant I-90/Northwest Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
2580 Technology Dr
Elgin
89,052
Ryerson, Inc.
Lease renewal
825 Tollgate Rd
Elgin
83,166
Hydrox Labs
Lease renewal
1331 Davis Rd
Elgin
42,521
Bucher Hydraulics
New lease
1331 Davis Rd
Elgin
Seigle Cabinet Center
Sale-leaseback
1490 Crispin Dr
Elgin
Alex Lyon & Sons Auctioneers
New lease
40,425
41
Northwest Cook
POPULATION
524,482
+1.7%
524
MARKET SIZE (SF)
28,431,207
VACANCY
2,271,266 SF (8.4%)
4Q11 NET ABSORPTION
82,587
YTD NET ABSORPTION
447,764
NEW SUPPLY (SF)
0
0
Lake Zurich
Buffalo
Grove
Barrington
68
14
Palatine
59
12
East
Dundee
58
Arlington
Heights
90
Hoffman
Estates
Vacancy
Rate
Net
Absorption
Asking
Rents
294
Mt. Prospect
72
Schaumburg
20
gin
Chicago
Executive
Airport
62
gin
Submarket Trends
53
19
Des Plaines
290
Elk Grove
Village
Streamwood
Bartlett
Bloomingdale
Ohare
Int'l Airport
Wood Dale
355
Northwest Cook Overview
750,000
15%
450,000
13%
150,000
11%
-150,000
9%
-450,000
7%
2007
-750,000
2008
F
2009
Vacancy Rate (%)
2010
2011
5%
Net Absorption (SF)
The Northwest Cook submarket is a desirable business location for
entrepreneurial owners and corporate managers who reside in the area’s
suburban communities. The submarket is conveniently located close
to Chicago’s O’Hare International Airport and has excellent access to
Chicago and the western suburbs using I-90, I-290 and Route 53. The
user base generally consists of specialized manufacturing and service
companies. Many international companies, particularly Asian and
Inventory By City
European, have located their North American headquarters here due
to the proximity to the airport. Few distribution facilities exist relative
11%
8%
Mt. Prospect
35%
cramped O’Hare submarket looking for more space or a location closer
Palatine
8%
8%
12%
to neighboring submarkets. Many users come from the comparatively
Schaumburg
Barrington
to their residences, but don’t want to move all the way west to Elgin
Bartlett
or beyond. While high Cook County taxes may be prohibitive to some
Rolling Meadows
19%
users, landlords continue to offer lower net rents to attract tenants.
Hoffman Estates,
Streamwood, etc.
The Northwest Cook vacancy rate has been improving for more than
1,000,000
two years, decreasing an impressive 5.4% since it peaked at 13.8%
800,000
during the third quarter of 2009. At the end of the year, the vacancy rate
600,000
had dropped to 8.4%, the lowest rate the submarket has seen in several
years. Net absorption has been positive for nine consecutive quarters,
400,000
200,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“The Northwest Cook submarket has witnessed
one of the quickest recoveries of all the submarkets
and now boasts one of the lowest vacancy rates.”
Pictured Above: 1400 Algonquin Road in Mt. Prospect, where JAS
Forwarding Worldwide leased 78,700 SF during the fourth quarter
kli
2011 to 447,764 SF. This has largely been due to an increase in
transaction activity and fewer vacancies being introduced to the
0.3 MM
market as companies are no longer retrenching and downsizing,
0.6 MM
0.8 MM
20,000 – 49,999 SF Available
but beginning to address their expansion needs.
50,000 – 99,999 SF Available
1.0 MM
Construction
100,000 – 199,999 SF Available
0.9 MM
Northwest Cook Overview
totaling 82,587 SF for the fourth quarter, bringing the tally for
Largely a developed “infill market”, the majority of construction
projects are building additions.
75
# of Buildings
60
The Christian Pentecostal Church purchased the 20,000 SF
45
industrial showroom building located at 727 E Algonquin Road in
30
Schaumburg in October for about $58.00 PSF. The buyer plans
15
to convert the property into a church.
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20 A
9
SF
99
9,
19
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0, a
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10 A
SF
99
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99
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50 A
SF
99
,9
49
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,0 va
20 A
SF
99
,9
19 ble
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00 va
1, F A
S
Global freight forwarder and logistics provider JAS Forwarding
Worldwide leased 78,700 SF at 1400 Algonquin Road in Mt.
Prospect, a 237,350 SF industrial warehouse building in the
Briarwood Business Center.
Looking Forward
The Northwest Cook submarket has witnessed one of the quickest
recoveries and now boasts one of the lowest vacancy rates of
all of the submarkets in the Chicago Industrial Market. Vacancy
should remain low over the coming quarters as companies look
to expand their operations and few new vacancies are introduced
to the market.
Significant Northwest Cook Sale Transactions
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
727 E Algonquin Rd
Schaumburg
20,000
$1,150,000
$58.00
Christian Pentecostal Church
Sears Holdings
Significant Northwest Cook Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
1000 E Business Center Dr
Mount Prospect
110,086
Cyber Development
New lease
1400 Algonquin Rd
Mount Prospect
78,700
JAS Forwarding Worldwide
New lease
3121 Tollview Dr
Rolling Meadows
22,644
Goodman Distribution, Inc.
New lease
43
North Cook
POPULATION
414,171
+1.7%
709
MARKET SIZE (SF)
45,842,324
VACANCY
2,941,153 SF (6.5%)
4Q11 NET ABSORPTION
164,670
YTD NET ABSORPTION
487,105
NEW SUPPLY (SF)
0
0
Grove
Wheeling
21
ago Executive
Airport
294
43
n
s
58
Des Plaines
Submarket Trends
Net
Absorption
Asking
Rents
500,000
10%
300,000
8%
100,000
6%
-100,000
4%
-300,000
2%
2007
2008
14
Evanston
41
Niles
Skokie
Lincolnwood
90
Chicago
North Cook Overview
-500,000
Ohare
Int'l Airport
94
Morton
Grove
Park Ridge
e
Vacancy
Rate
Glencoe
68
Northbrook
2009
Vacancy Rate (%)
2010
2011
0%
Net Absorption (SF)
Desirable for users seeking quick access to Chicago, major area
expressways, and the northern suburbs, the North Cook Submarket
is also attractive to long-term Chicago-based users looking to stay
close to the city while escaping Chicago congestion. The area has
the advantage of an inventory of buildings with better specifications
than many of the antiquated buildings found in the city of Chicago.
It tends to be a primarily owner/user market, with limited leasing
Inventory By City
opportunities. The user base generally consists of service providers
and light manufacturers who tend to remain in their locations for
14%
28%
8%
Wheeling
extended periods of time, resulting in limited transaction velocity in the
Niles
submarket. The inventory base is mostly comprised of 1960s–1970s-
Skokie
era buildings with lower ceilings and low parking ratios. Higher taxes
Northbrook
13%
20%
17%
Morton Grove
may be a deterrent for some users, while others are willing to pay the
Evanston, Glenview,
Lincolnwood, Northfield, etc.
price for the location.
Each quarter of 2011 witnessed improving conditions in the North
600,000
Cook submarket, which up until the start of the year had been plagued
by nine consecutive quarters of negative net absorption and a climbing
400,000
vacancy rate. By the end of the year, this rate had declined 1.4% when
compared to the rate a year ago. The 6.5% vacancy rate recorded at the
200,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“Conditions improved in the North Cook
submarket through 2011, resulting in the lowest
vacancy rate experienced since mid-2009.”
Pictured Above: 7520 Long Avenue in Skokie, the former home of WH Salisbury & Co,
purchased by neighbor Command Transportation LLC during the fourth quarter
mid-2009, when the negative effects from the economic recession
were really starting to take hold on the area. Net absorption for
0.8 MM
the fourth quarter totaled 164,670 due to recent transactional
1.7 MM
20,000 – 49,999 SF Available
activity and tenants taking occupancy of their recently leased
50,000 – 99,999 SF Available
1.3 MM
space, bringing the annual tally to 487,105 SF of absorption.
100,000 – 199,999 SF Available
North Cook Overview
end of December is the lowest rate the submarket has seen since
1.1 MM
Construction
The North Cook submarket has experienced very little new
100
# of Buildings
development in recent years due to its status as a mature market.
80
60
International logistics and brokerage company Command
40
Transportation LLC purchased the 44,118 SF industrial building
20
on 1.84 acres of land for the land value of the property, with plans
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SF
99
9,
19
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0, va
10 A
SF
99
,9
99
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50 A
SF
99
,9
49
– ble
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,0 va
20 F A
S
99
,9
19 ble
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00 va
1, F A
S
to demolish the existing building. The company is headquartered
next door and recently built an expansion on their building and
plans to use the recently acquired property as a parking lot to
accommodate employees in their current facility.
Looking Forward
Over the past year, the North Cook submarket has seen more
than a quarter of the vacant space added to the market during
the following the economic downturn absorbed through new
leases, expansions and user sales. While there is still a long way
to go until conditions return to pre-recession levels, the area has
certainly witnessed a turnaround and currently boasts one of the
lowest vacancy rates in the Chicago industrial market.
Significant North Cook Sale Transactions
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
7520 Long Ave
Skokie
44,118
$1,850,000
$42.00
Command Transportation LLC
Sitex Realty Group, LLC
420 Northgate Pky
Wheeling
46,863
$1,850,000
$39.00
Martin Lahart
Private Trust
Significant North Cook Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
730-770 S Wolf Rd
Wheeling
112,500
Segerdahl Corp
New lease
7001 Central Park Ave
Lincolnwood
42,489
TenFab
Lease renewal
8220 N Austin Ave
Morton Grove
39,159
Fear City
New lease
7101-7111 N Capitol Dr
Lincolnwood
35,000
STI Moving & Storage
New lease
7400-7410 Niles Center Rd
Skokie
8,500
Suiscio
New lease
3131-3141 MacArthur Blvd
Northbrook
8,435
Restruction General Contractors
New lease
45
Fox Valley
POPULATION
111,686
+14.1%
495
MARKET SIZE (SF)
32,225,276
VACANCY
3,242,932 SF (10.3%)
4Q11 NET ABSORPTION
315,712
YTD NET ABSORPTION
509,825
NEW SUPPLY (SF)
147,000
0
Elgin
Streamwoo
South Elgin
25
31
64
Dupage
47
38
St Charles Airport
Geneva
59
64
West Chicago
Ca
38
Batavia
Submarket Trends
Vacancy
Rate
Net
Absorption
Asking
Rents
600,000
15%
300,000
13%
0
11%
-300,000
9%
-600,000
7%
2007
2008
Sugar Grove
30
88
Aurora
Naperville
Fox Valley Overview
-900,000
North Aurora
2009
Vacancy Rate (%)
2010
2011
5%
Net Absorption (SF)
The Fox Valley submarket lies between the I-90/Northwest submarket
to the north and the I-88 Corridor submarket to the south and has
limited access to major expressways. It is primarily an owner/user
market with leasing opportunities in the small to mid-size range. The
user base generally consists of manufacturing companies that serve
the area within close proximity to users’ homes. Much of the inventory
is composed of mid-1980s buildings in contrast to the modern “big-
Inventory By City
box” distribution warehouses of neighboring submarkets. Many users
choose to be in the Fox Valley submarket due to need and remain in
the submarket long-term, resulting in limited transaction velocity.
11%
West Chicago
35%
St. Charles
26%
Batavia
For the second quarter in a row, strong absorption caused by several
Geneva
28%
new leases and tenants taking occupancy of recently-leased space
pushed the Fox Valley vacancy rate lower, ending the year at 10.3%, a
figure 1.7% below the 12% rate recorded a year ago. Net absorption
for the fourth quarter totaled 315,712 SF due to increased leasing
1,500,000
activity and a new 147,000 SF building being delivered to the market.
1,200,000
The flurry of activity witnessed during the fourth quarter brings the tally
900,000
for the year to 509,825 SF of absorption. The past two quarters have
600,000
300,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“The past two quarters have been very active in
the Fox Valley, with significant absorption pushing
the vacancy rate down 1.6% in six months.”
Pictured Above: 1800 Averill Road in Geneva, a 243,000 SF building that was part of the
nine-property portfolio purchased by Duke Realty Corporation during the fourth quarter
to own their own buildings and stick around long-term.
0.5 MM
Construction
0.6 MM
20,000 – 49,999 SF Available
Construction was completed on a new 147,000 SF build-to-suit
0.7 MM
50,000 – 99,999 SF Available
0.8 MM
Community Nutrition and Food Distribution Center for Northern
Food Bank during the fourth quarter, doubling the size of its
Fox Valley Overview
been particularly active for a submarket where companies tend
100,000 – 199,999 SF Available
0.7 MM
former headquarter in St. Charles. Otherwise, no development
projects are underway in the submarket.
60
# of Buildings
40
Duke Realty Corporation’s Chicago office acquired a ninebuilding portfolio of industrial buildings during the fourth quarter,
20
two of which are located in the Fox Valley submarket. The 243,000
SF warehouse building at 1800 Averill Road in Geneva and the
0
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20 A
9
SF
99
9,
19
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10 A
SF
99
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99
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50 A
SF
99
,9
49
– ble
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,0 va
20 A
SF
99
,9
19 ble
–
0 ila
00 va
1, F A
S
150,000 SF building at 1250 Carolina Drive in West Chicago
were purchased by Duke Realty from TA Associates Realty. Both
buildings are 100% leased to long-term tenants.
Looking Forward
The elevated transaction activity and significant absorption
witnessed during the past two quarters is uncommon for this
smaller submarket where velocity tends to be lower due to
owners and tenants historically residing in the area long-term,
but it is a promising sign that demand has returned. While the
rate of improvement seen over recent months is unlikely to be
sustained, the vacancy rate will continue to decrease over the
coming year and beyond.
Significant Fox Valley Sale Transactions
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF Buyer
Seller
1800 Averill Rd
Geneva
243,000
$16,198,500
$67.00
TA Associates Realty
1250 Carolina Dr
West Chicago
150,000
$6,300,000
$42.00
3940-3950 Stern Ave
St. Charles
147,628
$4,631,500
$31.00
Venture One Real Estate LLC
Colony, Inc.
741 Winston St
West Chicago
39,584
$2,000,000
$51.00
James Jett
David Freidman
Significant Fox Valley Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
900 Douglas Rd
Batavia
76,638
AccelColor
New lease
1645 Downs Dr
West Chicago
73,935
Constar
New lease
3575 Stern Ave
St. Charles
22,000
Signature Homestyles
New lease
1540 Louis Bork Dr
Batavia
17,463
Green Ladder Technologies
New lease
47
Central DuPage
POPULATION
392,229
+0.7%
1,096
MARKET SIZE (SF)
66,947,146
VACANCY
5,023,444 SF (7.8%)
4Q11 NET ABSORPTION
1,272,692
YTD NET ABSORPTION
1,632,821
NEW SUPPLY (SF)
0
140,000
Schaumburg
Elk Grove
Village
5353
Ohare
Int'l Airport
19
20
Bloomingdale
290
294
Glendale
Heights
Addison
Elmhurst
64
Carol Stream
Submarket Trends
355
est Chicago
Vacancy
Rate
Net
Absorption
Asking
Rents
83
Glen Ellyn
Lombard
88
Central DuPage Overview
1,500,000
12%
1,000,000
10%
500,000
8%
0
6%
-500,000
4%
The well-positioned Central DuPage industrial submarket benefits from
advantages including relatively low taxes, newer building inventory and
an educated workforce. The recent completion of the I-355 extension,
2007
-1,000,000
2008
2009
Vacancy Rate (%)
2010
2011
2%
Net Absorption (SF)
Chicago’s newest expressway, has improved access to the area and
spurred interest in the mature market. Users in the Central DuPage
submarket vary by type and are not limited to primarily distribution like
other nearby submarkets.
Inventory By City
18%
27%
Addison
Several significant new leases, combined with owner-user sales of
Carol Stream
previously vacant buildings and tenants assuming occupancy of
7%
Glendale Heights
9%
Elmhurst
10%
29%
recently leased space, resulted in an astounding nearly 1.3 million SF
Hanover Park
of absorption during the fourth quarter. This release of pent-up demand
Bloomingdale, Lombard,
Roselle, Villa Park, Wheaton
pushed the vacancy rate down nearly two full percentage points during
the three month period, the largest adjustment the submarket has
seen in several years. By the end of the year, this rate stood at 7.8%,
the lowest it has been in five years and 2.7% below the 10.5% peak
recorded two years ago.
2,500,000
2,000,000
Construction
1,500,000
One of the first speculative construction projects since the economic
1,000,000
500,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“Nearly 1.3 million SF of vacant space was
absorbed in the fourth quarter, the largest
adjustment seen in several years.”
Pictured Above: The façade of the Domtar Paper Company’s 453,361 SF facility at 350 S
Rohlwing Road in Addison, where they renewed their lease during the fourth quarter
W
Turnberry Lakes Business Park. The 140,000 SF building is
expected to be completed during the first quarter of 2012.
2.1 MM
1.0 MM
20,000 – 49,999 SF Available
1.9 MM
Several Carol Stream industrial buildings were purchased as part
50,000 – 99,999 SF Available
100,000 – 199,999 SF Available
1.5 MM
of multi-property portfolios during the fourth quarter. Duke Realty
2.1 MM
Central DuPage Overview
downturn is under construction at 301 Gary Avenue in Roselle’s
Corporation, looking to expand their investment in industrial
assets, purchased the 360,684 SF manufacturing building at
120
720-780 Center Avenue and the 75,538 SF warehouse building
# of Buildings
100
at 189-199 Easy Street, both in Carol Stream. AEW Capital
80
Management, based in Boston, purchased three warehouse
60
buildings on Carol Court in Carol Stream’s Carol Point Business
40
Center totaling 427,192 SF for $22.35 million.
20
0
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20 A
9
SF
99
9,
19
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0, va
10 A
SF
99
,9
99
– ble
00 ila
,0 va
50 A
SF
99
,9
49
– ble
00 ila
,0 va
20 F A
S
99
,9
19 ble
–
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00 va
1, F A
S
The two largest leases of the quarter were renewals, with paper
manufacturer Domtar Paper Company LLC renewing their
lease for 453,361 SF at 350 S Rohlwing Road in Addison and
Office Depot extending their lease and expanding by 128,576
SF to occupy the entire 385,344 SF building at 515-585 Kehoe
Boulevard in Carol Stream. Several new leases were signed
during the quarter, including Navistar leasing the 248,748 SF
distribution building at 1000 N County Line Road in Elmhurst.
Looking Forward
The coming quarters will dictate whether the Central DuPage
submarket will witness another period of significant transaction
activity and adjustments to the vacancy rate. The vacancy rate at
the end of the year was similar to the rate in late-2006, suggesting
the submarket has recovered from the effects of the recession.
Significant Central DuPage Sale Transactions
4th Qtr 2011
Property Address
City
Price PSF Buyer
Seller
2 property portfolio
Carol Stream
436,222
$32,000,000
$73.00
Bristol Group, Inc.
Carol Stream
427,192
$22,350,000
$52.00
AEW Capital Management, LP
LaSalle Investment Management
401 S Rohlwing Rd
Addison
240,000
$5,250,000
$22.00
Porter Pipe & Supply Co.
Ingersoll-Rand Company
395 Mission St
Carol Stream
170,219
$6,708,331
$39.00
C&C Power
RR Donnelley & Sons Company
Significant Central DuPage Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
350 S Rohlwing Rd
Addison
453,361
Domtar Paper Company LLC
Lease renewal
515-585 Kehoe Blvd
Carol Stream
385,344
Office Depot
520 E North Ave
Carol Stream
314,574
Angelo Caputo’s Fresh Markets
New lease
1000 N County Line Rd
Elmhurst
248,748
Navistar
New lease
135-195 E Elk Trail
Carol Stream
224,831
The Pampered Chef
New lease
882-898 Carol Ct
Carol Stream
135,508
Ingram Micro, Inc.
Sublease
49
O’Hare
POPULATION
136,169
-2.9%
1,720
MARKET SIZE (SF)
99,976,303
VACANCY
10,137,053 SF (10.8%)
4Q11 NET ABSORPTION
-10,633
YTD NET ABSORPTION
1,326,483
NEW SUPPLY (SF)
0
0
Morto
Grov
Heights
90
mburg
Des Plaines
72
Elk Grove
Village
Itasca
N
45
Park Ridge
Ohare
Int'l Airport
83
Wood Dale
ngdale
Submarket Trends
290
Vacancy
Rate
Net
Absorption
Asking
Rents
Bensenville
355
dale
ghts
19
294
Franklin Park
Addison
Elmhurst
Melrose
O’Hare Overview
2,000,000
15%
1,200,000
13%
400,000
11%
The O’Hare submarket is unique due to its close proximity to O’Hare
International Airport and its central location at the crossroads of
Chicago’s expressway system. The O’Hare submarket holds the most
-400,000
9%
-1,200,000
7%
2007
-2,000,000
2008
2009
2010
Vacancy Rate (%)
2011
5%
Net Absorption (SF)
industrial inventory of all of the Chicagoland submarkets. Elk Grove
Village alone is the nation’s largest industrial park, boasting more than
40 million SF of industrial and flex space. Many of the buildings in the
submarket are older and functionally obsolete. Redevelopment and
Inventory By City
construction has slowed dramatically since the economic downturn
took hold in 2008.
9% 1%
Elk Grove Village
Des Plaines
11%
42%
Bensenville
The O’Hare vacancy rate has decreased by two percentage points since
Itasca
18%
18%
Wood Dale
its peak a year-and-a-half ago at 12.8%, ending the year at 10.8%.
Rosemont
This rate hasn’t been this low since late 2008, when the economic
downturn was gaining steam and the industrial real estate market was
responding. Net absorption for the fourth quarter was negligible at
negative 10,633 SF, suggesting that demand was weaker than recent
quarters and new vacancies offset leases signed during the quarter.
1,200,000
However, the absorption tally for 2011 totals more than 1.3 million SF, a
900,000
sign that demand has returned to the submarket in earnest.
600,000
300,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“Vacancy in the O’Hare submarket has decreased
by 2% in the past year-and-a-half with steady
improvement expected over the coming year.”
Pictured Above: 2201 Arthur Avenue in Elk Grove Village, sold by Runge Paper Co. to DCT
Industrial for $4.7 million, then leased back by Runge Paper Co. during the fourth quarter
New construction activity has been non-existent since 2009, as
developers quickly responded to the dire economic outlook and
2.2 MM 2.0 MM
a struggling real estate climate. This trend should continue until
the vacancy rate returns to historically low levels, asking rents
increase, and development begins in other submarkets.
3.5 MM
4.9 MM
20,000 – 49,999 SF Available
O’Hare Overview
Construction
50,000 – 99,999 SF Available
100,000 – 199,999 SF Available
4.2 MM
DCT Industrial Trust, a Denver-based industrial REIT, purchased
250
# of Buildings
the 107,350 SF distribution building located at 2201 Arthur
Avenue in Elk Grove Village as part of a sale/leaseback
transaction. Runge Paper Co., who has been in the building
200
150
for many years, sold the building for $4.7 million in December,
100
leasing it back for their paper goods distribution operation.
50
0
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0, va
20 A
9
SF
99
9,
19
– e
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0, va
10 A
SF
99
,9
99
– ble
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,0 va
50 A
SF
99
,9
49
– ble
00 ila
,0 va
20 F A
S
99
,9
19 ble
–
0 ila
00 va
1, F A
S
The largest new lease of the fourth quarter involved transportation,
logistics and e-business technology solution provider CTL
Global, Inc. leasing 133,954 SF at 560-590 Supreme Drive in
the Bensenville Industrial Park. The company is moving their
operation from their former location in Northlake.
Looking Forward
Freight tonnage at O’Hare International Airport and Midwest
manufacturing output as tracked by the Federal Reserve Bank of
Chicago are two of the leading indicators that anticipate demand
in the O’Hare market. While both of these indicators have
improved significantly since their lows in 2009, neither indicates
substantial growth in the near future. Conditions in the O’Hare
market will likely follow these indicators, with gradual, steady
improvement expected.
Significant O’Hare Sale Transactions
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
2201 Arthur Ave
Elk Grove Village
107,350
$4,700,000
$44.00
DCT Industrial Trust
Runge Paper Co.
751 Expressway Dr
Itasca
63,305
$4,100,000
$65.00
1880 Busse Rd
Elk Grove VIllage
60,000
$3,000,000
$50.00
Sheile Group
Jasper Campise
854 Fairway Dr
Bensenville
52,326
$2,100,000
$40.00
854 Fairway LLC
Chicago Title Land Trust
Significant O’Hare Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
560-590 Supreme Dr
Bensenville
133,954
CTL Global Inc.
New lease
921-925 Ardmore Ave
Itasca
116,880
4C Logistics
Lease renewal
2201 Arthur Ave
Elk Grove Village
107,350
Runge Paper Co.
Sale/leaseback
2050 Clearwater Dr
Des Plaines
90,780
Ambius
New lease
1500 Chase Ave
Elk Grove Village
77,486
Mainfreight
New lease
747-777 Chase Ave
Elk Grove Village
61,600
Acme Industries
New lease
51
West Cook
POPULATION
250,582
-1.9%
740
MARKET SIZE (SF)
60,392,784
VACANCY
6,857,809 SF (11.4%)
4Q11 NET ABSORPTION
90,412
YTD NET ABSORPTION
360,146
NEW SUPPLY (SF)
0
0
Niles
k Grove
Village
Ohare
Int'l Airport
Bensenville
294
90
Schiller
Park
90
19
94
Franklin Park
290
Skokie
43
Chicago
45
Elmhurst
Submarket Trends
Vacancy
Rate
Net
Absorption
64
20
Asking
Rents
1,000,000
15%
600,000
13%
200,000
11%
Melrose
Park
Bellwood
Oak Park
290
West Cook Overview
The West Cook submarket draws companies from the city of Chicago
looking for a more functional building and additional amenities
compared to the aging, often obsolete inventory of properties in
-200,000
9%
-600,000
7%
2007
-1,000,000
2008
2009
Vacancy Rate (%)
2010
2011
5%
Net Absorption (SF)
Chicago. Additionally, companies migrate to the area from the nearby
O’Hare submarket where interstate and airport access is similar, but
rental rates tend to be higher. The West Cook submarket benefits from
good access to the city of Chicago, close proximity to area interstates
Inventory By City
and rail providers and relatively low rental rates. It is primarily an owner/
user market, but leasing opportunities have increased as institutional
12%
and private owners have entered the submarket.
Franklin Park
5%
Melrose Park
37%
8%
Bellwood
Schiller Park
9%
29%
Berkeley
Similar to neighboring submarkets, the West Cook vacancy rate
Harwood Heights, Hillside,
Maywood, Norridge, River Grove
decreased through much of 2011, as increased leasing activity resulted
in the absorption of several thousand SF of vacant space. The year
ended with a vacancy rate of 11.4%, the lowest rate recorded in the
submarket in nearly three years, when rates were quickly rising due
1,500,000
to the market’s reaction to the worsening economic situation. Net
1,200,000
absorption totaled 360,146 SF over the course of the year, with 90,412
SF of that space absorbed during the fourth quarter.
900,000
600,000
300,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“The West Cook vacancy rate has
decreased to its lowest level in nearly three
years due to increased leasing activity.”
Pictured Above: 200 Champion Way in Northlake, purchased as part of
9-property portfolio by Duke Realty Corporation during the fourth quarter
There are no ongoing construction projects in the West Cook
0.5 MM
submarket. The former Central Grocers site, a 24.8 acre parcel,
1.5 MM
2.7 MM
is still awaiting a build-to-suit opportunity and can accommodate
20,000 – 49,999 SF Available
a building up to 700,000 SF in size.
50,000 – 99,999 SF Available
2.1 MM
100,000 – 199,999 SF Available
West Cook Overview
Construction
2.8 MM
The Union Pacific Railroad Company purchased two buildings
on Lake Street in Northlake in December. The buildings include
50
# of Buildings
a 303,935 SF truck terminal facility and a 65,796 SF utility substation on three parcels of land totaling 40.72 acres. The railroad
company purchased the buildings primarily for land value, with
40
30
plans to expand their neighboring rail yard onto the purchased
20
land in the future.
10
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50 A
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20 A
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99
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Electrolytic nickel distributor King Supply renewed their lease for
64,800 SF at 9201 W Belmont Avenue in Franklin Park during
the fourth quarter. Cosco Industries, Inc., manufacturer and
marketer of marking devices and stamps, reduced their space in
the 103,000 SF building at 7220 W Wilson Avenue to 49,000 SF.
Lawrence Screw leases the remainder of the building.
Looking Forward
The past three quarters of positive absorption and a declining
vacancy rate have been encouraging, suggesting that the West
Cook submarket is beginning to feel the effects of the recovery
and demand is returning to the area as new leases are signed
in previously vacant spaces. Conditions should continue to
gradually improve through 2012 and beyond.
Significant West Cook Sale Transactions
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
303 & 317 W Lake St
Northlake
369,731
$32,000,000
$87.00
Union Pacific Reailroad Company
CenterPoint Properties
200 Champion Way
Northlake
238,064
$17,350,000
$73.00
3311-3333 Charles St
Franklin Park
174,082
$3,250,000*
$19.00*
Chicago Records Management
MB Financial Bank
11600 W Grand Ave
Melrose Park
150,000
$4,200,000
$28.00
Northlake Grand LLC
Tin Inc.
2001-2045 N Cornell Ave
Melrose Park
149,000
$2,000,000*
$13.00*
Bolpe Sergio
MB Financial Bank
11440 Addison Ave
Franklin Park
111,588
$2,750,000
$25.00
Significant West Cook Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
9201 W Belmont Ave
Franklin Park
64,800
King Supply
Lease renewal
7220 W Wilson Ave
Harwood Heights
49,000
Cosco Industries, Inc.
Lease renewal
10415 United Pky
Schiller Park
48,232
Blue Sky Parking LTD
New lease
*REO sale
53
Chicago
POPULATION
2,695,598
-6.9%
2,810
MARKET SIZE (SF)
214,455,787
VACANCY
18,812,104 SF (8.8%)
ale Wood Dale
4Q11 NET ABSORPTION
-350,726
355
YTD NET ABSORPTION
1,376,879
NEW SUPPLY (SF)
0
290
94
Des Plaines
rg
Elk Grove
Village
Niles
Skokie
Ohare
Int'l Airport
41
Chicago North
Franklin Park
Elmhurst
64
Melrose
Park
Oak Park
41
90
94
290
Cicero
0
55
La Grange
Chicago Midway
Airport
Burr
Ridge
Bedford
Park
Bridgeview
Submarket Trends
41
Chicago
South
ook
Vacancy
Rate
Net
Absorption
Asking
Rents
294 Alsip
Palos
Heights
355
57
Blue Island
94
90
Gary/Chicago Airp
Chicago Overview
2,000,000
11%
1,000,000
10%
0
9%
-1,000,000
8%
-2,000,000
7%
The industrial market within the city limits is as diverse as its residents.
Much of the modern development in recent years has taken place
in neighborhoods close to downtown, such as Pilsen/Bronzeville
2007
-3,000,000
2008
2009
Vacancy Rate (%)
2010
2011
6%
Net Absorption (SF)
(Near South), Kinzie Corridor/Avondale (Near North), and Back of the
Yards/Crawford (Near Southwest). Typical firms that take advantage
of this proximity to densely-populated areas include food and home
improvement-related distribution companies. There are still many
industrial companies that operate in less-functional buildings, but
make the trade-off for a readily available labor pool. Since 1987, the
2,000,000
City of Chicago has seen a slowing of the erosion of its industrial base,
1,500,000
through the creation of Planned Manufacturing Districts (PMDs). These
PMDs make it nearly impossible to change the zoning, which has kept
1,000,000
the underlying cost of industrial land low. Companies that would have
500,000
otherwise been forced to greenfield developments in the suburbs have
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
remained within Chicago city limits.
The submarket has yet to respond to the slowly improving economic
recovery, due in part to the prevalence of aging, less desirable buildings
in the area and the tendency of area users to own their facilities long-
“Major adjustments to the vacancy rate are
unlikely due to the unique product and type
of user found in the city.”
Pictured Above: 5353 W Armstrong Avenue, purchased by Chicago Taxi Medallion
Management for their new fleet maintenance facility during the fourth quarter
city limits likely ended up there for specific reasons. The area
does not see the type of demand the more active suburban
2.0 MM
7.6 MM
submarkets do.
4.3 MM
20,000 – 49,999 SF Available
50,000 – 99,999 SF Available
Construction
100,000 – 199,999 SF Available
4.5 MM
No new developments are underway in the city. Aside from
Chicago Overview
term. Businesses located in an industrial building within the
7.1 MM
building expansion and speciality construction projects, this will
likely remain the case until significant absorption occurs.
200
# of Buildings
150
The 110,646 SF building located at 5353 W Armstrong Avenue
in the city’s Jefferson Park neighborhood was sold by metal
products manufacturer Pyramid Mouldings to Chicago Taxi
Medallion Management for $2.3 million in October. The buyer
100
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10 A
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99
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50 A
SF
99
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20 F A
S
99
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1, F A
S
plans to convert the building into a fleet maintenance facility for
their growing fleet of more than 500 city cabs.
Ford Motor Company purchased the 102,107 SF building on
5.8 acres located at 2638 E 126th Street for $2.2 million in
November. Ford plans to tear down the existing building to create
an employee parking lot for their plant located across the street.
Looking Forward
The unique product in the industrial parts of the city and the type
of users interested in calling Chicago home suggests the major
adjustments to the area’s vacancy rate are unlikely. Space will be
gradually absorbed over the coming quarters.
Significant Chicago Sale Transactions
4th Qtr 2011
Property Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
5353 W Armstrong Ave
110,646
$2,300,000
$21.00
Chicago Taxi Medallion Management
Pyramid Mouldings Inc
2638 E 126th St
102,107
$2,200,000
$22.00
Ford Motor Land Development
CenterPoint Properties
4200 & 4300 W 35th St
73,713
$7,050,000
$96.00
The Peoples Gas Light & Coke Company
Wonderview Corporation
2500 S Dearborn St
71,000
$2,600,000
$37.00
Chee’s Keeley Market
Service Web Offset Corp
2551-2555 N Elston Ave
41,100
$3,200,000
$78.00
CC Elston LLC
Appetizers & Inc
Significant Chicago Lease Transactions
4th Qtr 2011
Property Address
Leased (SF)
Tenant
Comments
Calumet Business Center
86,470
Noble Americas
Lease renewal (two spaces)
4850 S Kilbourn Ave
63,529
A. Lava & Son Co.
Lease renewal
3333 W 47th Pl
47,600
Great Lakes Lumber & Pallet
New lease
2940 W 36th St
33,870
Quality Truck & Trailer
New lease
2101-2107 W Carroll Ave
20,000
Kim & Scott’s Gourmet Pretzels
Lease renewal
55
I-88 Corridor
POPULATION
578,404
+25.8%
771
MARKET SIZE (SF)
61,834,957
VACANCY
6,356,231 SF (10.3%)
4Q11 NET ABSORPTION
503,378
YTD NET ABSORPTION
823,031
NEW SUPPLY (SF)
0
0
St Charles
290
Carol Stream Elmhurst
West Chicago
355
Batavia
Oak Brook
56
83 294
56
North Aurora
88 Lisle Downers
31
59
25
Naperville 53 Grove
Sugar Grove
Aurora
Woodridge
34
55
Montgomery
Dupage
Airport
59
30
30
Bolingbrook
Submarket Trends
Vacancy
Rate
Net
Absorption
Asking
Rents
1,000,000
15%
600,000
13%
200,000
11%
The I-88 Corridor industrial submarket saw increased demand and
speculative development over the previous five years due to the lack
of land for development in feeder submarkets such as Central DuPage
-200,000
9%
-600,000
7%
2007
-1,000,000
2008
2009
2010
Vacancy Rate (%)
2011
5%
Net Absorption (SF)
and West Cook. Developers were drawn to the large available land
sites and easy access to major expressways that the I-88 submarket
has to offer. This rapid pace of development has stopped over the past
three years as obtaining project financing became difficult, vacancy
Inventory By City
has increased and demand has been limited.
17%
Aurora
7%
43%
Naperville
Market conditions have been improving in the I-88 Corridor for the
Montgomery
better part of the past two years. In that time, the vacancy rate has
Downers Grove
15%
Oswego, Westmont, North
Aurora, Hinsdale, Lisle, etc.
18%
declined nearly four percentage points as more than 2.4 million SF
of vacant space has been absorbed. At the end of the year, the I-88
Corridor vacancy rate stood at 10.3%, the lowest rate witnessed in
the submarket in three years. As the market responded to the recent
economic recession, companies downsizing and closing their doors led
2,500,000
to 2.34 million SF of new vacant space being added to the submarket
2,000,000
tally. All of that space has been absorbed during the two years since
1,500,000
things turned around, and the I-88 Corridor has recovered. Asking
lease rents remain low, however, yet to return to pre-recession levels.
1,000,000
500,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“All of the 2.34 million SF of vacant space added
to the I-88 Corridor market during the recession
has been recovered during the two years since.”
Pictured Above: 940 N Enterprise Street in Aurora, one of the two buildings purchased by
Panattoni Development Company as part of a portfolio for $14.325 million during the fourth quarter
New construction activity in the I-88 Corridor is limited to the
potential construction of a new warehouse facility for U.S.
0.8 MM
Foodservice in Aurora, where the company purchased an almost
2.6 MM
1.4 MM
50-acre parcel of land in 2010.
20,000 – 49,999 SF Available
50,000 – 99,999 SF Available
100,000 – 199,999 SF Available
1.6 MM
1.7 MM
Construction
Panattoni Development Company, headquartered in Sacramento,
purchased two 1990s-era buildings in Aurora in November. The
100
# of Buildings
portfolio purchase included the 163,420 SF warehouse building
80
in the White Oak Business Park that was 30% vacant at the time
60
of the sale and the 257,542 SF manufacturing building at 940
N Enterprise Street in the Meridian Business Campus that was
40
70% vacant when the deal closed.
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20 F A
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1, F A
S
valve and control system manufacturer Henry Pratt Company
leasing 108,273 SF at 225 S Highland Avenue in Aurora’s Shetland
Business Park. Green Sustainable Packaging, manufacturer of
water soluble liquid and gel packaging products, leased 78,494
SF at 1455 Sequoia Drive in Aurora, bringing the building to 84%
occupancy, and relocating their business from West Chicago.
Looking Forward
The recovery of the I-88 Corridor has been relatively quick and
consistent due to the submarket’s many desirable attributes for
potential tenants. One of the Chicago industrial market’s premier
submarkets, the demand and activity witnessed in the area
over the past two years will continue to spread to neighboring
submarkets, adding momentum to the market recovery.
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
Aurora
420,962
$14,325,000
$34.00
Panattoni Development Co
James Campbell Company LLC
600 & 700 N Commerce Ave
Aurora
259,416
$16,000,000
$62.00
General Electric Capital Corporation
2580 Diehl Rd
Aurora
65,477
$5,200,000
$79.00
Industrial Income Trust, Inc.
HSA Commercial Real Estate
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
2001-2051 Baseline Rd
Montgomery
295,620
Caterpillar Logistics
Lease renewal
225 S Highland Ave
Aurora
108,273
Henry Pratt Company
New lease
1455 Sequoia Dr
Aurora
78,494
Green Sustainable Packaging
New lease
1455 Sequoia Dr
Aurora
55,161
Varvit SPA
New lease
2012 Corporate Ln
Naperville
38,524
Schwarzkopf, Inc.
Lease renewal
2012 Corporate Ln
Naperville
34,717
Cable Plus, Inc.
Lease renewal
57
I-55 Corridor
POPULATION
243,496
+37.1%
655
MARKET SIZE (SF)
80,357,318
VACANCY
6,370,097 SF (7.9%)
4Q11 NET ABSORPTION
-310,793
YTD NET ABSORPTION
2,718,457
NEW SUPPLY (SF)
0
415,000
a
59
88
Downers
Grove
Naperville
Woodridge
Bolingbrook
59
30
Net
Absorption
294
Burr
Ridge
53
Submarket Trends
Vacancy
Rate
Hinsdale
Asking
Rents
Plainfield
55
Romeoville
355
171
4,000,000
15%
3,000,000
12%
2,000,000
9%
1,000,000
6%
0
3%
Of all of the Chicago area industrial submarkets, the I-55 Corridor has
seen the most activity and development interest over the past several
years. As a result, the majority of the available land parcels are either
2007
-1,000,000
2008
2009
Vacancy Rate (%)
2010
2011
0%
Net Absorption (SF)
Inventory By City
already developed or are controlled by developers, rendering the
I-55 Corridor an “infill market” with little additional land available for
significant new development.
The I-55 Corridor was one of the first submarkets to improve following
5%
5%
9%
37%
10%
Bolingbrook
the economic downturn. During the year-long period including the
Romeoville
second half of 2010 through the first half of 2011, more than 5 million SF
Woodridge
of vacant space was absorbed in both large and small transactions. This
Lemont
flurry of activity dropped the area’s vacancy rate 6.3%, an astonishing
Plainfield
Burr Ridge, Forest View,
Willowbrook
34%
adjustment for such a short period of time. Since then, things have
settled down a bit, as the third quarter of the year saw little absorption
and absorption turned negative in the fourth quarter, totaling negative
310,793 SF. However, several leases have been signed in the past two
10,000,000
quarters, indicating the recent improvement trend will soon resume.
8,000,000
The I-55 Corridor ended the year with a 7.9% vacancy rate, 3.4% lower
6,000,000
than the rate observed a year ago.
4,000,000
2,000,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“Numerous deals both large and small in size
have pushed the I-55 Corridor vacancy rate
down more than 5.5% in the past year.”
Pictured Above: 1165 Crossroads Parkway in Romeoville, where warehousing firm
Distribution 2000 Inc. leased 236,882 SF during the fourth quarter
Wi
Spr
The fourth quarter saw the groundbreaking of a new 362,500 SF
0.5 MM
0.8 MM
build-to-suit facility in Woodridge for food service equipment and
supplies company Edward Don & Company. The building will be
1.7 MM
the first in the new 80-acre Union Pointe industrial and office
50,000 – 99,999 SF Available
7.0 MM
business park at the intersection of I-355 and I-55.
20,000 – 49,999 SF Available
100,000 – 199,999 SF Available
2.0 MM
Construction
Several distribution and warehousing buildings, each over
50
# of Buildings
100,000 SF in size, were traded in the I-55 Corridor during the
40
fourth quarter. The majority of these buildings were involved in
30
multi-property portfolio sales between investment companies.
LaSalle Investment Management, Inc. purchased a 5-property
20
portfolio that included three properties in Romeoville totaling
10
427,652 SF and one 269,662 SF property in Bolingbrook. IT
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SF
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50 A
SF
99
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20 A
SF
99
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1, F A
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distribution, supply chain management and contract assembly
services company SYNNEX Corporation purchased the 450,900
SF building they had leased at 1160-1180 W Remington
Boulevard in Romeoville for about $15.5 million in November.
The largest new lease of the fourth quarter involved warehousing
firm Distribution 2000 Inc. leasing 236,882 SF at 1165 Crossroads
Parkway in Romeoville, moving their operations early next year
from two facilities totaling about 175,000 SF in Bolingbrook.
Looking Forward
The I-55 Corridor recently witnessed significant absorption
in excess of one million SF for multiple quarters, and is now
experiencing a historically low vacancy rate that may promote
new speculative development.
4th Qtr 2011
Property Address
City
Price PSF Buyer
Various
796,049
$51,500,000 $65.00
LaSalle Investment Management, Inc. Panattoni Development Company
1053 Schmidt Rd
Romeoville
499,200
$18,500,004* $37.00*
KTR Capital Partners LP
Allianz Real Estate America
1160-1180 W Remington Blvd
Romeoville
450,900
$15,525,000 $34.00
SYNNEX Corporation
Panattoni Development Company
605 Crossroads Pky
Romeoville
354,400
$13,300,000 $38.00
254 Internationale Dr
Bolingbrook
261,444
$11,000,000 $42.00
KTR Capital Partners LP
Allianz Real Estate America
370 W Crossroads Pky
Bolingbrook
258,560
$9,200,000
$36.00
Seller
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
2601 Internationale Pky
Woodridge
356,621
Best Buy
Lease renewal
1165 Crossroads Pky
Romeoville
236,882
Distribution 2000, Inc.
New lease
3-7 Timber Ct
Bolingbrook
178,670
CHEP
New lease
340 W Crossroads Pky
Bolingbrook
160,779
North Coast Logistics
Lease renewal
*Allocated price based on full value of portfolio transaction
59
South Cook
+0.5%
1,126
MARKET SIZE (SF)
85,528,194
55
VACANCY
9,748,401 SF (11.4%)
4Q11 NET ABSORPTION
62,074
YTD NET ABSORPTION
211,854
NEW SUPPLY (SF)
0
267,000
Chicago Midway
Airport
Bedford Park
Woodridge
Bridgeview
12 20
294
7
45
le
Alsip
Palos
Heights
43
355
90
57
Blue
Island
83
50
Mokena
Vacancy
Rate
Asking
Rents
Net
Absorption
Gary/Chi
South
Holland
Tinley Park
Submarket Trends
1
Hammond
80 94
80
394
Matteson
1
Park Forest
30
Sauk
Village
Monee
is
716,130
Schererville
na
POPULATION
South Cook Overview
2,000,000
15%
1,000,000
13%
0
11%
The South Cook submarket is one of the Chicago metropolitan area’s
-1,000,000
9%
2007
-2,000,000
2008
2009
Vacancy Rate (%)
2010
largest in terms of geographic size and total square footage. The area
benefits from a solid mix of manufacturing and distribution facilities
due to an abundance of skilled, educated labor, and excellent access
to several major expressways, train lines and public transportation.
2011
7%
Net Absorption (SF)
The submarket consists of primarily older product with scattered
modern infill developments of around 2 million SF in Bedford Park
Inventory By City
and additional projects in Alsip and Sauk Village. Ownership is mixed,
including institutional, owner/user and both national and local private
26%
35%
Bedford Park
owners. While its location close to Chicago is key, Cook County taxes
Alsip
can be a financial burden.
Chicago Heights
Bridgeview
5%
14%
8%
South Holland
Other Southern Cook
Communities
11%
The South Loop submarket responded quickly to the economic
downturn, witnessing a 4.6% spike in the vacancy rate during 2008 and
2009. Since this rate peaked at 13.6% in early 2009, the submarket has
experienced alternating periods of negative and positive absorption,
2,500,000
with a general trend towards improvement. The year ended with a
2,000,000
vacancy rate of 11.4%, 2.2% below the peak. Net absorption for year
1,500,000
totaled 211,854 SF, with 62,074 SF absorbed during the fourth quarter.
1,000,000
500,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“The year ended with a vacancy rate of
11.4%, which is 2.2% below the peak
rate recorded in 2009.”
Pictured Above: 7400-7420 Richards Road in Bridgeview, a 161,740
SF building leased by World Imports during the fourth quarter
Construction continues on Winpak’s new 267,000 SF build-tosuit facility at the LogistiCenter at Sauk Village and is anticipated
1.0 MM
to be completed by February 2012. Otherwise, new development
1.9 MM
4.3 MM
20,000 – 49,999 SF Available
is likely to remain minimal until sustained absorption is realized
50,000 – 99,999 SF Available
2.0 MM
and rental rates increase.
100,000 – 199,999 SF Available
South Cook Overview
Construction
3.6 MM
Three Bedford Park buildings were purchased by Denver-
120
based Industrial Income Trust Inc. during the fourth quarter. The
# of Buildings
100
buildings were part of a 12-building, $195.5 million portfolio
80
purchase by the industrial real estate investment trust which
60
also included properties in Moreno Valley, California and outside
40
Dallas, Texas.
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10 A
SF
99
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50 A
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99
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20 F A
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19 ble
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1, F A
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furniture wholesale distributor World Imports leasing the 161,740
SF building at 7400-7420 Richards Road near the 95th Street
interchange at I-294 in Bridgeview. This is the Philadelphiabased company’s first facility in Illinois.
Looking Forward
While the South Cook vacancy rate has come down a bit from
its peak in 2009, lease rates remain low and building values are
stagnant for class “B” buildings in the submarket. An uptick
in manufacturing activity is a positive sign for the South Cook
submarket, hopefully leading to absorption and rent stabilization
over the next two years.
South Cook Sale Transactions
4th Qtr 2011
Property Address
City
5445 W 73rd St
Bedford Park
470,160
5151 W 73rd St
Bedford Park
5139 W 73rd St
Price PSF
Buyer
Seller
$20,003,026* $43.00*
Ridge Property Trust
272,385
$11,588,659* $43.00*
Bedford Park
270,789
$11,520,757* $43.00*
1230 W 171st St
Hazel Crest
40,410
$1,550,000
$38.00
Seefried Properties, Inc.
Private trust
6754 W 74th St
Bedford Park
23,037
$837,000
$36.00
Sheridan Plumbing & Sewer Inc
Crescent Realty Corp
South Cook Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
7400-7420 Richards Rd
Bridgeview
161,740
World Imports
New lease
8687 S 77th Ave
Bridgeview
137,078
Allegheny Ludlum
New lease
10130 Virginia Ave
Chicago Ridge
36,000
Respro Inc
New lease
511 W Armory Dr
South Holland
30,000
Paulsen Pipe
New lease
*Allocated price based on full value of portfolio transaction
61
POPULATION
447,272
+45.5%
614
MARKET SIZE (SF)
62,388,294
VACANCY
8,415,319 SF (13.3%)
4Q11 NET ABSORPTION
38,246
YTD NET ABSORPTION
2,067,702
NEW SUPPLY (SF)
555,292
265,000
North Aurora
88
59
Downers
Grove
Aurora
55
Bolingbrook
294
Plainfield
34
126
355
55
71
30
Shorewood Joliet
23
52
53
6
Tinley Park
Mokena
30
New Lenox
52
Minooka
Channahon Elwood
47
45
6
le
Submarket Trends
Vacancy
Rate
Net
Absorption
80
Ottawa
6
Seneca
57
113
53
170
Asking
Rents
55
102
113
Kankakee
I-80/Joliet Corridor Overview
2,000,000
25%
1,500,000
21%
1,000,000
17%
500,000
13%
The I-80/Joliet Corridor submarket has historically catered to multi-state
“big box” distribution. Its access to I-80 and I-55 position the corridor
well for distribution operations. In addition, the nation’s largest inland
0
9%
2007
-500,000
2008
2009
2010
Vacancy Rate (%)
2011
5%
Net Absorption (SF)
port is located in Joliet and Elwood. This intermodal development, also
known as CenterPoint Intermodal Center, has remained a bright spot
not only in the corridor, but for the entire Chicago market. CenterPoint
Intermodal Center now offers intermodal service as well as direct rail
Inventory By City
service with both the BNSF and Union Pacific Railroads.
Joliet
25%
44%
5%
Elwood
The vacancy rate continued to decline through 2011, reaching 13.3%
Minooka
by the end of the year, the lowest rate witnessed in the submarket in
Ottawa
10%
Mokena, New Lenox,
Shorewood, Frankfort, etc.
16%
several years. More than 2 million SF of vacant space was absorbed
over the course of the year, resulting in a vacancy rate 2.5% below
the 15.8% rate recorded a year ago, and 7.4% below the 20.7% peak
reached at the beginning of 2009.
Construction
8,000,000
Two new buildings were completed in the submarket during the fourth
6,000,000
quarter, totaling 555,292 SF. A build-to-suit project for speciality
4,000,000
chemical manufacturer Stepan Company measuring 217,692 SF was
2,000,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“More than 2 million SF of vacant space was
absorbed over the course of 2011, resulting in
a vacancy rate 2.5% lower than a year ago.”
Pictured Above: 21511 Division Street in the Crest Hill Business Park, a 262,500
SF building purchased by High Street Equity Advisors in late October
A
bus and engine manufacturer Navistar International, who last year
0.4 MM
leased the 522,520 SF building at 2700 W Haven Road finished
0.6 MM
0.6 MM
a 337,600 SF expansion to the building during the fourth quarter,
20,000 – 49,999 SF Available
1.7 MM
growing their manufacturing facility to 860,100 SF. Announced
50,000 – 99,999 SF Available
during the fourth quarter, CenterPoint Properties recently broke
100,000 – 199,999 SF Available
7.3 MM
ground on a new build-to-suit for recycling company Resource
Management Company (RMC). The new 265,000 SF building is
the latest success story for the CenterPoint Intermodal Center-
100
I-80/Joliet Corridor Overview
completed in the CenterPoint Intermodal Center-Joliet. Truck,
# of Buildings
Joliet, which continues to expand.
80
60
The largest sale transaction of the fourth quarter involved
40
Boston-based High Street Equity Advisors purchasing the class
20
“A” industrial warehouse at 21511 Division Street in the Crest Hill
0
e
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00 ila
0, a
v
20 A
9
SF
99
9,
19
– e
0 bl
00 ila
0, va
10 A
SF
99
,9
99
– ble
00 ila
,0 va
50 A
SF
99
,9
49
– ble
00 ila
,0 a
v
20 F A
S
99
,9
19 ble
–
0 ila
00 va
1, F A
S
Business Park. The 262,500 SF building is leased long-term to
Goglanian Bakeries, and sold for $11.6 million.
Global supply chain management and logistics solutions
company Ozburn-Hessey Logistics (OHL) leased 476,988 SF at
2780 McDonough Street in Joliet. The space had been leased by
another logistics provider, Ryder Integrated Logistics Inc. OHL
is taking over the lease and was able to negotiate an extension.
Looking Forward
The past two years have witnessed significant absorption of
vacant space in the I-80/Joliet Corridor, and a quickly dropping
vacancy rate. The location of the submarket and its intermodal
developments will continue to drive interest, demand and
eventually additional construction in the area.
I-80/Joliet Corridor Sale Transactions
4th Qtr 2011
Property Address
City
Size (SF)
Sale Price
Price PSF
Buyer
Seller
21511 Division St
Crest Hill
262,500
$11,600,000
$44.00
High Street Equity Advisors
Greco & Sons
8550 W 185th St
Tinley Park
100,000
$3,150,000
$32.00
David Anders
TCB Development
I-80/Joliet Corridor Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
2780 McDonough St
Joliet
476,988
OHL
New lease
CenterPoint Intermodal Center
Elwood
264,600
Resource Management Companies
New build-to-suit lease
2700 McDonough Rd
Joliet
50,000
Rehrig Penn Logistics
New lease
7700 W Graphic Dr
Tinley Park
22,200
Velocity Sports Performance
New lease
120 E Laraway Rd
Frankfort
16,000
Southwest Fireplaces
New lease
18621-18633 S 81st Ave
Tinley Park
15,063
Genesis Casket
New lease
63
Northwest Indiana
POPULATION
486,945
+1.3%
431
MARKET SIZE (SF)
35,746,307
VACANCY
2,706,363 SF (7.6%)
4Q11 NET ABSORPTION
485,348
YTD NET ABSORPTION
610,850
NEW SUPPLY (SF)
0
0
g
20
90
Gary/Chicago Airport
12
Porter 94
Gary
Hammond
80 94
80 90
Portage
6
65
Submarket Trends
Vacancy
Rate
Net
Absorption
Indiana
Illinois
30 Merrillville
Valparaiso
Crown
Point
Asking
Rents
Lowell
Northwest Indiana Overview
1,000,000
15%
600,000
13%
200,000
11%
The Northwest Indiana submarket is a bifurcated market, with areas
north of I-80 including the towns of Hammond, East Chicago, and Gary
containing some of the heaviest manufacturing facilities in the world,
-200,000
9%
-600,000
7%
2007
-1,000,000
2008
2009
2010
Vacancy Rate (%)
2011
5%
Net Absorption (SF)
home to companies like BP Amoco, US Steel, and Arcelor Mittal.
There are many functionally obsolete crane & manufacturing buildings
housing firms in this area that service the steel and chemical industries.
South of I-80, towns such as Munster, Hobart, Merrillville and Portage
Inventory By City
cater to more modern business parks. Indiana has historically held
significant economic advantages over Illinois, such as lower property
Hammond
19%
25%
taxes, utility costs, labor rates, and soft costs (workman’s compensation
East Chicago
and unemployment insurance). Most companies new to Northwest
4%
Gary
11%
Portage
Indiana migrate from South Cook/Will Counties, but existing Northwest
Merrillville
Indiana firms rarely move across the state line to Illinois.
22%
19%
Other Northwest
Indiana Suburbs
The Northwest Indiana vacancy rate peaked at 12.1% at the end of
2009 and has declined 4.4% during the two years since, ending the
Under Construction & Recent Deliveries
1,500,000
year with a 7.7% rate. Net absorption has been overall positive during
1,200,000
this time, totaling more than 1.5 million SF of vacant space absorbed,
900,000
however 2011 did witness two periods of negative net absorption
during the second and fourth quarters of the year.
600,000
300,000
2011
2010
2008
2009
2007
2006
2005
2004
2003
2002
2001
2000
0
“Net absorption has totaled more than 1.5
million SF during the past two years, pushing
the vacancy rate down to 7.7%.”
Pictured Above: The Clark, located at 6675 Daniel Burnham Drive in Portage, where Great
Lakes Office Furniture, Inc. and Frick Services, Inc. leased space during the fourth quarter
The previous decade was an active construction period in the
Northwest Indiana submarket, as more than 3 million SF was
0.3 MM
0.9 MM
added to the total industrial inventory, an increase of about
0.4 MM
20,000 – 49,999 SF Available
9%. Economic and vacancy concerns have resulted in limited
50,000 – 99,999 SF Available
construction since 2009.
0.7 MM
100,000 – 199,999 SF Available
1.4 MM
New, used and refurbished furniture supplier Great Lakes Office
35
Furniture, Inc. leased 39,200 SF in the building known as The
# of Buildings
30
Clark at 6675 Daniel Burnham Drive in Portage’s Ameriplex at the
25
Port business park, moving their operation to the building from
20
Northwest Indiana Overview
Construction
15
Valparaiso.
10
5
Agriculture and grain warehousing company Frick Services,
0
e
0+ bl
00 ila
0, a
v
20 A
9
SF
99
9,
19
– e
0 bl
00 ila
0, va
10 A
SF
99
,9
99
– ble
00 ila
,0 va
50 A
SF
99
,9
49
– ble
00 ila
,0 va
20 A
SF
99
,9
19 ble
–
0 ila
00 va
1, F A
S
Inc. also leased space at 6675 Daniel Burnham Drive, leasing
10,000 SF during the fourth quarter. The Wawaka, Indianabased company is also located in a nearby building and needed
additional space to store their product short-term.
Looking Forward
The Northwest Indiana vacancy rate has been on the decline since
the beginning of 2010, and has reached historically low levels
over the past few quarters. Looking for cost saving solutions,
companies from the South Cook and Will County areas in Illinois
continue to be attracted by the economic advantages and leasing
incentives being offered by Northwest Indiana landlords.
Northwest Indiana Sale Transactions
Property Address
City
4th Qtr 2011
Price PSF
Buyer
Seller
None to report
Northwest Indiana Lease Transactions
4th Qtr 2011
Property Address
City
Leased (SF)
Tenant
Comments
6675 Daniel Burnham Dr
Portage
39,200
Great Lakes Office Furniture, Inc
New lease
1191 Erie Ct
Crown Point
12,000
Nason’s Appliance Co
New lease
6675 Daniel Burnham Dr
Portage
10,000
Frick Services, Inc.
New lease
200-212 Ivanhoe Ct
Griffith
5,500
Catalyst Handlings Resources LLC
New lease
65
Logistics Review
& 2012 Forecast
Positioning for Profitability in 2012 - Transportation Drives Real Estate
On average, transportation costs are typically eight to ten times
the cost of the annual real estate spend and in most scenarios,
transportation is the true “driver” behind real estate decisions.
Logistics Cost Breakdown
Source: Establish, Inc./Herbert W. Davis
and Company 2006 Database
50.3%
21.8%
9.5%
1.2%
O
ie
l
pp
er
th
2.2%
Su
A
Se
n
rv
tio
tio
tra
s
is
y
ta
er
or
or
um
t
2.7%
in
dm
os
or
nt
sp
t
4.3%
n
Re
C
b
La
Tr
ve
In
an
7.8%
n
ic
e
With this being the case, the issues raised and the obstacles that
transportation-centric companies are attempting to overcome are
without question shaping the foundation for the future of industrial
real estate.
So, what is the future? Consistently, the CEO’s and Chief Supply
Chain Officers are commenting on how to integrate further with
the railroads. The industrial developments that include a rail or
transportation savings component will be in demand, able to
charge a premium and maintain occupancy.
Rail Positioning
Further evidence towards the increase of rail usage is that the
railroads have been preparing for more capacity. The BNSF
Railroad capital expenditures in 2011 alone was $3.8 billion. Their
capex budget in 2010 was $2.7 billion. The Class I carriers have all
been expanding and/or developing their logistics hubs during this
economic downturn. The railroad industry invested approximately
$12 billion in America’s infrastructure in 2011. One particular area
of focus for the railroads has been intermodal. Intermodal shipping
is a method of transporting cargo using multiple modes of shipping
from origin to destination, without any handling of the freight itself
while changing modes. Transportation modes used in intermodal
shipping can include trucks, railroad, ocean carriers, steamships,
and airplanes. The most common combination is truck and rail.
Trains can haul more cargo making rail far more efficient than
trucks to move large loads. Using freight trains to haul goods also
has the potential to significantly reduce environmental pollution by
decreasing the amount of greenhouse gas emissions. However,
trains cannot be used in “door-to-door” delivery and have more
limited scheduling flexibility than trucks. Intermodal shipping,
therefore, combines the best attributes of both rail and truck
shipping.
While intermodal shipping has rebounded tremendously, we
are optimistic that intermodal growth will continue. Our growth
expectation is based on intermodal’s lower emissions and lower
prices, which are amplified when fuel prices increase, given rails’
fuel efficiency versus trucking. Historically, trucking firms suffer
from greater than 100% annual driver turnover. When freight fully
returns, trucking capacity will be difficult for shippers to locate and
rail will be the only viable alternative. For most of the products
being shipped, barge transport is not feasible due to perishable
content or time sensitive delivery. Airfreight, as an alternative, is
too costly for most and drives up the cost of the goods beyond
competitive points. Other than trucking, intermodal presents the
only real option from a transportation perspective.
Trucking Challenges
There are other factors leading to rail. The Journal of Commerce
has reported that a trucking capacity shortfall of 180,000 is
predicted for 2012. Two new trucking regulations will further
deteriorate trucking capacity: CSA 2010 and Hours of Service.
Fuel surcharges have grown and are now hovering around 30%
with most corporations anticipating this to continue to climb – a
corporation’s exposure to fuel charges is reduced when shipping
via rail.
Network Change
These factors will drive and force change in the supply chain
network. The majority of the distribution networks were designed
with the assumption of “cheaper oil” as well as a more traditional
Pictured Above: An aerial image of the
CenterPoint Joliet Intermodal Terminal
In addition, a key to future retail growth is the fastest growing
sales channel: eCommerce. Some are projecting mobile
commerce to be the highest overall sales channel within five
years. Developing eCommerce distribution centers is becoming
one of the biggest challenges for network design. Web logistics
is very different from traditional logistics due to small order sizes,
broad product ranges and short response time. Due to these
differences, companies typically need three years to develop a
professional eCommerce operation.
Other areas of growth are manufacturing, food distribution and
exporting. We will be seeing increased “re-shoring” where
the all-in cost to produce and transport locally becomes more
advantageous. Conversely, there has been significant growth in
the export market leading to real estate development particularly
with grain related operations and recycled paper.
Freight Coming Back
The two charts below illustrate that TEU volume is climbing back
up. TEU literally means twenty-foot equivalent unit, a measure
used for capacity in container transportation. For example, a
10,000 TEU container vessel has the capacity to carry 10,000
twenty foot containers. These charts are a good indicator of
economic activity and the illustrated growth is a positive reflection
on the economy.
Total Container Port Traffic in TEUs - U.S. Total
50 MM
Total TEU Traffic
40 MM
30 MM
20 MM
10 MM
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
Source: American Association of Port Authorities
*Est. 2011 container TEU volumes
Source: American Association of Port Authorities
10 MM
8 MM
6 MM
4 MM
2 MM
2011*
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Most Active Sectors
Today we are seeing 3PL’s as the most active sector in the Tenant
marketplace. 3PL’s offer flexibility to a traditionally brick and
mortar slower moving process. Companies can enter and exit
markets more quickly in response to customer demand which is
leading to shorter term lease commitments. The most common
3PL end-clients are in the retail sector.
Total Container Port Traffic in TEUs - U.S. Total
Logistics Review
level of trucking capacity. With the amount of corporate spending
on transportation, companies will be forced to evolve their
network strategy to survive. Influencing and accelerating this is
the fact that network change is not a fast process. This is not five
years out; this is now.
0
Los Angeles
Long Beach
Savannah
Oakland
Seattle
Tacoma
New York /
New Jersey
Hampton Roads
Houston
Charleston
In addition, as a very good indicator for real estate growth, the
Cass Freight Index showed September 2011 shipments close to
a four-year high. The broad-based Cass Freight Index (compiled
by freight billing processor Cass Information Systems, and
represents 1,200 divisions of firms across the SIC classification
spectrum) reveals shipments and shipping spend are both on
an upward trajectory. Cass Information Systems calculates a
monthly freight index for North America shipping activity based
on the freight transactions for large shippers in a wide variety of
industries. The index is widely used by industry analysts and
economists as an accurate barometer of North American shipping
and economic trends.
In September, the Cass Freight Index was close to a four-year
high, with more shipments in any single month since November
2007, the month before the recession started and right before
the freight index plunged to the lowest level in its 20-year history.
Now that U.S. intermodal rail shipments through September 2011
are back to pre-recession levels, and the Cass Freight Index in
September is also back to pre-recession levels for broaderbased shipping activity, these strong and ongoing shipping
improvements would seem to defy the case for an economic
downturn or double-dip recession. In addition, the railroads are
projected continued freight recovery in 2013.
How to Capitalize
From a pure real estate perspective, a development may not
have direct rail connectivity, however it’s critical to understand
what transportation advantages a building or location offers. In
particular, we have found it effective to have an understanding
of the lift volume and specific function of the various intermodal
operations.
Equally important is the ability to correlate the transportation
advantages directly to the real estate costs. Rate itself can only
be pushed so far, whereas if a project can impact the corporate
transportation spend, the actual net rent will be much less of a
factor in the decision process.
67
Retail Review
& 2012 Forecast
The Chicago Retail market experienced a slight decline in
market conditions in the fourth quarter of 2011, while the
vacancy rate increased, ending the year at 8.5%.
Average quoted asking rental rates in the Chicago retail market
area are down over previous quarter levels and also down from
the levels recorded a year ago. Quoted rents ended the fourth
quarter 2011 at $16.11 PSF. This represents a 0.5% decrease
in rental rates from the previous quarter and a 2.35% decrease
from the same time a year ago.
The shopping center market in Chicago currently consists of
3,794 projects with 160,662,132 SF of retail space in 5,427
buildings. It is comprised of community, neighborhood and
strip centers. Over the past four quarters the shopping center
vacancy rate has increased slightly from 12.1% to 12.3%.
The power center average vacancy rate was 7% in the fourth
quarter of 2011 with no new construction projects delivered to
the market. The trend of little construction will continue through
2012, other than a free standing Super Walmart, Walgreens,
CVS or a single tenant fast food building. Moreover, relocation
and creation of the Super Walmarts has a meaningful impact
on the additional market square footage. Currently, Walmart
has four vacant 115,000 SF structures on the market and
Lowe’s has recently closed the doors to four of their stores
at 115,000 SF per store that adds additional SF of vacancy to
the retail market. Subsequently, between Walmart and Lowe’s,
920,000 SF of big box “prime” vacant space has been added
to the market.
Another factor having direct impact on the retail market is the
big box retailers who are working to shrink their footprints.
Best Buy is focused on reducing their average space per store
nationwide, while Walmart has reduced the size through the
creation of their Walmart Express stores. Numerous other
retailers are following suit.
A recent trend within the Chicago Metro area has been a
growing desire among consumers for fresher, organic and
ethnic foods that has helped grocers remain in demand for
either new retail construction or absorbing the vacant big box
stores such as former Cub Foods, Walmart and Lowe’s. At the
same time, wholesale clubs and lower priced grocery stores
are appealing to shoppers seeking to save money. One rapidly
expanding brand in Chicago is Mariano’s Fresh Market, who
has opened several stores in the area in the past year. Sites
that would work for food stores are no longer limited to the top
one or two traditional grocers in the Chicago market. There are
numerous “niche” food retailers in this retail category such as;
Pete’s Produce, Cermak Produce, Tony’s Finer Food, Produce
World, Trader Joe’s, Aldi and Sav A Lot.
Ross Dress For Less, a 25,000 SF soft goods retailer with
over 1,000 stores in 27 states, opened 12 stores in the
Chicago market in 2011 and are actively pursuing additional
locations. HH Gregg, a 25,000 SF rapidly expanding consumer
electronics and appliance retailer with over 190 stores, opened
16 locations within the Chicago Metro area in 2011 and they
too continue to pursue additional locations within the market.
Savers, a 35,000 SF retailer also focused on the Chicago Metro
trade area, opened two stores in 2011 with plans for additional
expansion in 2012.
The retail sector will see modest improvement in occupancy
and rents until the market stabilizes. Retail remains one of
the property types where opportunities are very specific and
defined.
Investment Market Review
& 2012 Forecast
Investment Review
The Macro Perspective
Looking Back: In less than a four year period, the
commercial real estate market went from a peak in 2007,
into a credit crunch in 2008, through a financial crisis in
2009 to the beginnings of a recovery in 2010. The “pricedto-perfection” underwriting reflecting interest only periods,
pro forma income, and higher loan-to-value ratios, along with
complex structured investments, drove returns lower and
asset values higher providing the ingredients for a pricing
bubble. The CRE market was capital driven as opposed to
market fundamentals driven.
first quarter of 2010. Global and U.S. economic turmoil,
pullback in the midyear level of CMBS originations, uneven
demand across property types and a focus on core assets
to weather the financial market volatility, creating a supplydemand imbalance, contributed to this dramatic pullback.
Quarterly Sales Volume Percent Change
200%
100%
50%
0%
-50%
Source: Real Capital Analytics
The following chart is an all-properties, national index
designed to track same-property prices beginning January
2001. It shows a 49% decline in pricing from the February
2008 peak of 1.90 to the 0.98 trough!
Moodys/REAL Commercial Property Price Index (CPPI)
2.0%
1.5%
Quarterly Sales Volume by Property Type
$120 Billion
1.0%
Retail
Office
$100 Billion
Industrial
Multifamily
2011
2010
2009
2008
2007
2006
2005
2004
2003
$60 Billion
2002
2001
$80 Billion
0.5%
Source: MIT Center for Real Estate, Real Capital Analytics
$40 Billion
$20 Billion
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
$0
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-100%
To put the timing and magnitude of the changes in sales
volume in this cycle into perspective, we show in the first
chart national quarterly dollar sales volumes by property type
(multi-family, retail, office and industrial) beginning in 2001.
The peak, the crunch and the crisis are clearly shown in the
chart below. The aggregate quarterly dollar sales volumes
declined 93% from the cycle peak in the first quarter of 2007
to the trough in the first quarter of 2009! Few investors had
anticipated the breadth and depth of the collapse. As shown
in the chart, 2010 and 2011 volumes, approaching those last
seen in 2004 and 2005, have been inconsistent in the rate of
recovery.
Sales Volume Percent Change (Year Over Year)
150%
The next chart shows the quarterly year-over-year change
in sales volume for all properties beginning in 2002. Clearly
growth in transaction volume slowed sharply in the second
half of 2011 following the impressive gains beginning in the
Pictured Above: 250 S Wacker Drive, purchased by Credit Suisse Asset
Management for $90 million during the fourth quarter
The next chart shows the quarterly number of properties sold
nationally beginning in 2001, an indication of the liquidity
within the market. The first quarter 2009 volume indicates that
the market had changed dramatically. However, in comparing
the quarterly change in dollar sales volume to the quarterly
change in the number of properties sold, the peak-to-trough
dollar declines were 94% and 35%, respectively, indicating
that the dollar size of the transactions had fallen dramatically
69
with liquidity across the market varying greatly. Since then the
market has improved, however, we are still at levels last seen
almost seven years ago.
Average Capitalization Rates by Property Type
10%
8%
National Number of Properties Sold by Property Type
6,000
Retail
5,000
Office
4,000
Multifamily
6%
Retail
Office
Industrial
Multifamily
Industrial
2011
2010
2009
2008
2007
2006
2005
2004
2003
2,000
2002
2001
3,000
4%
1,000
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
The next chart shows the quarterly year-over-year change in
the number of properties sold for all properties. Clearly the
market began to recover from the trough of 2009, again, the
second half 2011 volume shows a dramatic decline in volume.
6%
4%
2%
-2%
Number of Properties Sold Percent Change
(Year Over Year)
150%
Gross Domestic Product Percent Change
0%
Quarterly Properties Sold Percent Change
200%
Looking Forward: Macroeconomic Issues
• Sluggish outlook for the U.S. Economy: Although GDP has
turned positive, it still remains below historically normal growth
rates, and grew very little through much of 2011.
-4%
-6%
-8%
100%
2011
2010
2009
2008
50%
2007
-10%
0%
Source: U.S. Department of Commerce Bureau of Economic Analysis
-50%
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-100%
The following chart shows average cap rates by property type
beginning in 2001. The correlation between increasing sales
volume and decreasing cap rates is clearly shown in the run
up to the 2007 peak. What is not clear, however, is the impact
of core transactions since mid-2009 which have skewed these
data points. In a typical “liquid market” across all property
Classes and sales volume, cap rates would not show the
improvement shown.
• Weak job growth: it’s been two and a half years since the
recession ended; job growth has been modest at best. Much of
the “political focus” on jobs is the unemployment rate. This rate
can be misleading as it fails to take into account the labor force
participation rate, a diminishing denominator that destorts the
unemployment rate. Unemployment is slowly improving, but
the economy still needs to add another 5.8 million jobs just
to recover the jobs lost since the peak employment in 2007.
Moreover, to keep pace with the population growth, an estimated
1 million jobs a year must be created, or 83,333 per month.
Unemployment and Work Force Participation
12%
68%
Metro Chicago Unemployment Rate
U.S. Unemployment Rate
67%
10%
U.S. Labor Force Participation Rate
2011
2010
2009
2008
2007
2%
2006
63%
2005
4%
2004
64%
2003
6%
2002
65%
2001
8%
2000
66%
• European sovereign debt crisis: the fall-out from the
Eurozone sovereign debt crisis on the world financial
markets continues to add uncertainty to the restructuring
efforts by the EU and creates increasing downside risk to
the world economy.
• Fiscal pressure on state and local governments: declining
public sector employment continues to undermine private
sector employment gains. The greater of the public
sector deficits appears to be a lack of leadership as few
politicians have stepped up with proposals to get the cost
of government, primarily retirement and health care costs,
under control. The artificially inflated government payrolls
due to the deficit-financed federal “stimulus”, is over. This
drag on growth will remain for the foreseeable future.
• Weak housing market: housing conditions remain poor with
declining home prices and historically low housing starts.
High foreclosure levels, negative home equity, and declining
home prices continue the weak consumer spending levels.
Commercial Real Estate Implications
• Sales volume: relative to other asset classes, CRE returns
remain attractive and should drive sales volumes above those
of 2011. The economic outlook and credit conditions will
play an integral role in the sales volume ultimately achieved.
The CRE market is tri-furcated: the best, the distressed and
the rest. Core assets, the best, represent a relatively small
portion of CRE. There is no near term incentive to dispose
of these recently acquired safe harbor assets. There will
continue to be a supply shortage. Lenders are disposing of
distressed assets at an increasing pace. Numerous banks,
however, are limited by their capital levels to absorb losses.
An improving CRE market will drive distressed sales volume.
The majority of properties are in “the rest” category. Absent
Pictured Above: 1400 Opus Place in Downers Grove, part of the 3-property Executive
Towers West office park purchased by The Blackstone Group in December
debt related issues forcing a sale or recapitalization, owners
are holding out for better pricing. Strong job growth will open
up this category.
• U.S. political gridlock: the S&P downgrade of the U.S.
sovereign debt rating is symptomatic of the gridlock within
The Beltway. This ongoing gridlock has taken a toll on
consumer confidence as there is little faith that both parties
in Congress are capable of putting aside their political
differences to address the anemic economic growth. Long
term investment decisions have been put on hold as the
rules of the game are unclear.
• Property markets: risk adverse investors, looking for
secure cash flows, have driven demand for core assets in
first tier markets. The demand for core assets far exceeds
the supply as recent core investors are likely to be long term
holders. In the search for consistent yield, investors will be
forced to consider secondary and possibly tertiary markets.
Economic volatility may temper a movement into these
markets. Early in the recovery, it’s still about risk and return.
Investors should at a minimum consider secondary markets
with favorable growth prospects.
• Debt markets: financing conditions should improve. Life
insurance companies have been the consistent source of debt
for large loans secured by core assets. Critical to regaining
liquidity in the CRE debt markets, however, is the recovery
of the CMBS market. Spread volatility following the Euro
crisis and the U S debt ceiling debate greatly diminished the
appetite of originators to undertake execution risk. Recent
CMBS originations appear to have been better underwritten
with wider spreads and been well received. Smaller regional
banks continue to wrestle with non-performing loans and
the resulting liquidity/reserve issues. Most national and an
increasing number of regional banks have resumed CRE
originations. Expect to see more debt funds as a new
source of capital: first mortgages and mezzanine debt. More
than $1.5 trillion in commercial mortgage debt matures in
the next five years. Much of this debt is underwater which
may prolong the CRE recovery.
• Equity markets: The supply of equity greatly exceeds
the availability of targeted properties. The REIT recovery
preceded the recovery of the CRE market in part due to
access to the debt and equity capital markets which allowed
them to de-lever their balance sheets and market strategic
acquisitions. REITs enjoyed attractive returns in 2009 and
2010.
71
The Metro Chicago Perspective
In analyzing investment activity in Metropolitan Chicago, we
have used annual data as opposed to the quarterly data in
the national overview due to fewer transaction data points.
In the chart below, we put the timing and magnitude of the
changes in sales volume in this cycle into perspective by
property type since 200. The peak, the crunch, and the crisis
are clearly shown with aggregate sales volume declining 89%
from peak to trough versus the national decline of 93% - a
strong correlation to the national market.
The chart below shows average cap rates by property type
beginning in 2001. As expected, there is a strong correlation
between increasing sales volume and decreasing cap rates.
Again, the numbers are skewed by core transactions especially
given the lack of non-core assets with stabilized rent rolls that
have sold.
Average Capitalization Rates by Property Type - Metro Chicago
10%
8%
Annual Sales Volume by Property Type - Metro Chicago
$20 Billion
Retail
6%
Office
Industrial
$15 Billion
Industrial
Multifamily
Multifamily
2010
2009
2008
2007
2006
2005
2004
4%
Source: NAI Hiffman
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
$0
2003
$5 Billion
2002
2001
$10 Billion
Retail
Office
Source: NAI Hiffman
The chart below details the annual number of properties
sold beginning 2001, a sign of liquidity in the market. Sales
transaction volume for 2006 and 2007 was 962 and 919,
respectively, a 4.5% decrease, versus a 6.5% increase in sales
volume over this time period indicating an increase in average
sales prices. The Metro Chicago peak-to-trough decline from
2007 to 2009 was 77%, 919 to 213 properties sold.
Optimism has returned to the investment arena as the
availability of debt and equity improves, interest rates remain
favorable and property markets stabilize. Core assets, however,
which represent an estimate 15% of the commercial real estate
market, can drive the market recovery only so far. For the
recovery to continue, the bid/ask spread for the balance of the
market must narrow, spurred in part by an improving economy.
Number of Properties Sold Annually - Metro Chicago
1,000
Retail
Office
800
Industrial
Multifamily
600
400
200
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
Source: NAI Hiffman
Pictured Above: The Shoppes at Gregg’s Landing, a retail shopping center located at
1720 N Milwaukee Avenue in Vernon Hills, purchased for about $252.00 PSF in late 2011
& 2012 Forecast
Industrial Investment Review
a stabilized basis for the offerings in highest demand.
Looking Back: Following two years of lackluster volume,
industrial investment activity for 2011 more than doubled the
amount of sales witnessed throughout the previous year as a
strong appetite for Class A industrial assets among investors
pushed up prices not experienced since the peak of the market
in 2007. Buyers entered the year seeking well-located, quality
industrial properties with no or very limited vacancy risk. With
property market fundamentals slowly improving and no new
speculative construction to compete with the current stock,
investors pushed down yields for the best assets.
Looking Forward: The year ahead will no doubt produce plenty
of news headlines that will cause brief periods of volatility in
our capital markets, although we expect that borrowing rates
will remain at current levels throughout 2012. Sovereign debt
problems in Europe are not going away, the US Congress will
continue to debate how to best address our own fiscal problems
and we will elect our next president. With all these factors
combined, we expect the 2012 economy to look very similar to
2011 – slow, but positive growth.
Overall volume for the year totaled approximately $1.3 billion,
which is about average for the Chicago market looking back
over the past ten years. What was unique about the past year
was the high percentage of portfolio sales. While portfolio
sales historically account for one-third of overall transaction
volume, the past year saw approximately 70% of total industrial
investment sales volume concentrated within institutional-quality
portfolios sold to investors. Two main factors contribute to the
increase in portfolio activity. First, the capital markets were in
disarray for most 2009 and 2010, limiting the amount of debt
buyers could obtain at attractive terms and causing a backlog
of properties slated for disposition. Second, the property
market fundamentals needed to stabilize before investors could
be confident that rental rates would find a floor and growth
expectations could once again be plugged into their models.
Improvement in the debt markets and stabilizing rental rates
allowed for more fluid pricing and drew sellers off the sidelines
that had been idle for the all of 2009 and much of 2010.
With demand among investors focused on the best quality
assets, capitalization rates for those assets quickly compressed
to levels not witnessed since 2007, getting down around 6% on
Largest Industrial Investment Sales
2011
Buyer
Seller
Total SF
Heitman
Northern Builders
2,320,948
Stockbridge
Interstate Partners
2,150,000
IIT
H.S.A./Bridge Capital Partners
1,434,649
IDI
1,196,470
Pictured Above: 443 Fort Hill Drive in Naperville, a 368,407 SF building that was
part of Heitman’s portfolio purchase totaling 2,320,948 SF in May of 2011
Industrial Indvestment Review
Industrial Investment Review
The property fundamentals will continue to improve as the
lack of any measureable speculative development allows for a
continuation in the vacancy rate decline and a gradual increase
in overall rental rates. We expect more class “B” quality assets
to be marketed for sale as large owners seek to streamline their
portfolios and attempt to capitalize on the increasing demand
for industrial assets in the Chicago market. The vacancy rate
in the O’Hare submarket has declined roughly 150 basis points
over the past year and rents have stabilized and even increased
for better quality assets. We believe investment activity within
the O’Hare submarket will increase due to the improving
fundamentals and the limited amount of construction on the
horizon.
Very few class “B” quality assets traded hands in 2011, so it is
difficult to identify pricing trends coming into 2012. However, the
few properties that did transact appeared to show a significant
spread between the yields being paid for class “A” product
versus class “B”. We expect this spread to narrow in 2012 as
investors pursue higher-yielding assets to offset some of the
lofty prices paid last year. Improving property fundamentals
should also provide some confidence for investors looking to
take on a little more risk.
Throughout 2011 debt became increasingly available for core
properties and investors capitalized on this availability, driving
up prices and compressing yields. The big question moving
forward will be how much debt will be available for the class
“B” assets expected to come to market in the first quarter. Our
expectations are that sellers will have to offer a mix of class “A”
and “B” quality assets in order for investors to obtain acceptable
debt terms and in turn pay acceptable prices to sellers.
73
Office Submarket Map
Airport
173
45
Fox Lake
Waukegan
Regional Airport
8
83
Gurnee
Waukegan
McHenry
Grayslake
12
120
1 West Loop
Central Business District
173
41
120
21
2 Central Loop
3 East Loop
4 North Michigan Ave.
5 River North
43
11
176
Libertyville
176
60
Crystal Lake
Lake Forest
Vernon Hills
60
45
Lake Zurich
41
83
7
22
22
Buffalo
Grove
Highland Park
12
Deerfield
21
25
31
Northbrook
Palatine
Dundee
Chicago Executive
Airport
53
72
90
Arlington
Heights
10
Elgin
59
20
South Elgin
Hanover
Park
Bloomingdale
Dupage
Airport
9
Skokie
Park Ridge
11 Central Northwest
12 Far Northwest
14 Eastern E-W Corridor
15 Western E-W Corridor
90
90
94
Elmhurst
355
38
10 Schaumburg Area
41
Franklin Park
Addison
Carol Stream
8 Far North
16 I-55 Corridor
290
64
83
Lombard
290
14
15
38
294
59
55
55
88
53
Downers
Grove
Westmont
Naperville
Aurora
Chicago
CBD (Central Business
District)90
Burr
Ridge
34
Chicago
Midway
Airport
Darien
30
171
Chicago Ave.
16
25
31
41
94
Oak St.
90
Bolingbrook
294
5
Ohio
43 St.12
4
State St.
North Aurora
6
Niles
Wood Dale
25
7 Central North
13 O’Hare Area
Evanston
Int'l Airport
31
St Charles
13
Elk Grove
Village
53
64
Glenview
Des Plaines
Schaumburg
9 North DuPage
East-West
20
Hoffman
Estates
94
294
6 Near North
Northwest Suburban
12
North Suburban
94
20
355
© 2009 NAI Hiffman
3
1
94
r.
Randolph St.
Michigan Ave.
355
Halsted St.
55
Wacker
D
57
50
83
94
Wells St.
Romeoville
20
Oak
Lawn
Wacker Dr.
90
41
12
2
Harvey
6
290
294
80
Industrial Submarket Map
14
12
20
Beloit
Westosha
Airport
Wisconsin
Illinois
1 Chicago North
Pleasant Prairie
2 Chicago South
3 North Cook
173
173
75
Zion
41
45
173
47
51
Fox Lake
76
4 West Cook
Waukegan
Regional Airport
90
5 Southwest Cook
83
6 South Cook
14
Waukegan
McHenry
23
Grayslake
12
120
7 I-57/Will Corridor
120
21
43
13
Rockford
8 Lake County
94
8
9 Northwest Cook
23
Belvidere
Cherry
Valley
20
19
Mundelein
176
176
176
10 O’Hare
60
Crystal Lake
Lake Forest
Vernon Hills
60
11 Central DuPage
45
Lake Zurich
41
83
12 I-55 Corridor
22
22
43
Buffalo
Grove
90
12
Highland Park
13 McHenry County
21
25
31
Hampshire
72
39
Northbrook
Dundee
9
14
23
90
18
20
South Elgin
15 Fox Valley
3
Morton
Grove
Des Plaines
Schaumburg
59
14 I-90 Northwest
94
294
Arlington
Heights
72
Elgin
64
Chicago Executive
Airport
53
Glencoe
Niles
Streamwood
Elk Grove
Village
16 I-88 Corridor
Evanston
vvans
nnston
Skokie
Park Ridge
Ohare
31
25
Bloomingdale
DeKalb
elle
64
10
Wood Dale
290 Bensenville
64
Geneva
West Chicago
38
Carol Stream
11
Elmhurst
83
294
Sugar Grove
Naperville
16
Aurora
30
Hinsdale
59
88
53
30
Downers
Grove
Woodridge
Burr
Ridge
Montgomery
30
Westchester
31
5
55
55
Bedford
Park
Willow
Springs
12
30
34
51
Plainfield 55
2
294
83
57
Palos
Heights
Romeoville
39
90
94
Blue Island
6
171
East Chicago
Gary/Chicago Airp
355
355
Hammond
Hazel Crest
Tinley Park
71
41
Chicago Midway
Airport
Oak Lawn
Bolingbrook
47
Chicago
Cicero
La Grange
59
25
21 Northwest Indiana
290
38
North Aurora
20 Southeast Wisconsin
4
Melrose
Park
Batavia
19
1
Franklin Park
Dupage
St CharlesAirport
15
38
18 DeKalb County
19 I-39 Corridor
53
47
17 I-80/Joliet Corridor
30
52
Joliet
30
Munster
1
80
Mokena
Matteson
21
New Lenox
52
30
Park Forest
17
80 94
394
53
Minooka
La Salle
Ottawa
50
7
1
45
6
© 2009 NAI Hiffman
Monee
Elwood
Indiana
6
Illinois
80
52
Seneca
57
53
75
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Methodology
The information included in this review is the result of a compilation
and analysis of data from various sources on class A, class B
and class C industrial properties located in the metropolitan
Chicago area defined by the submarket map on the previous
page. NAI Hiffman obtained the information from property
representatives, CoStar Group, RealCapital Analytics, industry
periodicals and magazines, our in-house property database, and
other sources. NAI Hiffman greatly appreciates the participation
of each of these individuals, companies and resources,
without whose help this review would not have been possible.
All of the information detailed throughout this review is saved
and organized in our own in-house database and is regularly
updated. Utilizing this database, we can analyze, calculate and
report demographic information, inventory, vacancy, availability,
net absorption, and transactional information.
Definitions
Net Absorption The net change in occupied space
in a given market between the current measurement
period and the last measurement period. Net
absorption can be either positive or negative and must
include decreases as well as increases in inventory
NAI Global / Methodology & Definitions
Methodology &
Definitions
levels. For the purpose of this review, sublease space
is included in the calculation of net absorption.
New Supply The total inventory delivered to the
market since the last measurement period. Delivered
is defined as total square footage and/or number
of buildings that has completed construction and
received a certificate of occupancy during a stated
period.
Under Construction Buildings where either: a) actual
ground breaking has occurred (site excavation or
foundation work) and construction is ongoing (not
abandoned or discontinued) but for which a certificate
of occupancy has not yet been issued; or b) properties
The NAI Hiffman Market Reviews track several measures of market
undergoing conversion to office from another use or
conditions. This information is collected for individual properties
c) properties undergoing a major renovation where
then consolidated, organized and analyzed for submarket and
75 percent or more of the building is not available for
market totals. These terms, used throughout the reviews, are
lease and building generally requires a certificate of
defined below according to NAIOP Terms & Definitions.
occupancy to be made available for lease.
Total Inventory (Market Size) The total square footage of gross
Available Space The total amount of space that is
rentable area in a specific market. It includes the gross rentable
currently being marketed as available for lease in a
area in buildings that have received a certificate of occupancy.
given time period. It includes space that is available,
Total inventory increases when a new building is delivered and
regardless of whether the space is vacant, occupied,
decreases when an existing building is destroyed, demolished or
available for sublease, or available at a future date.
its use changes.
Available space excludes shadow space.
Vacancy Rate A measurement expressed as a percentage of
Shadow Space That portion of leased space which
the total amount of vacant space divided by the total amount of
is vacant but not available space. Shadow space is
inventory. Vacant space is inventory that is not currently occupied.
difficult to measure. (Synonym: phantom space)
77
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EVP/Managing Director
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Marketing
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