Office 1Q14.indd - NAI Global`s SocialNet

Transcription

Metropolitan Chicago
Market Review
Office Market Review
First Quarter 2014
To our valued customers, partners and future clients…
We have all heard the statistic that most fender benders occur within a
few miles of home. While the numbers are probably skewed because
people do a majority of their driving inside that radius, the numbers imply
that the familiarity of our neighborhood streets can lead to complacency
and inattentive driving. It’s easy to drift into autopilot and fill in the blanks,
don’t expect it to change. That’s not how our brains work. Because of the
conscious effort required, we rarely look at the world with fresh eyes. We
see what we expect to see.
Entering the second quarter of 2014, Chicagoland has seen a consistent
string of improvements in most office and industrial markets. Our numbers
have reflected the steady trend for enough quarters that if we’re inattentive,
it can seem like just another chapter in the same story. Each stair-step on
these bar charts and each slope on these line graphs represents significant
events for the companies, employees and communities involved. A report
that mentions a few thousand new jobs may be just a brief mention on our
morning news, but for the individual coming off unemployment to report to a
new position, it’s much more than a number.
2014 holds three more quarters of unwritten opportunities. As always,
it is the unique stories and circumstances behind the numbers – the
transactions and changes in the landscape - that will form the next segment
of our charts and graphs and (hopefully) continue recent positive trends.
Our research and brokerage professionals keep a keen eye on the details
and are always willing to assist with your real estate needs or inquiries.
Regards,
John R Picchiotti
COO, Brokerage
Table of
Contents
NAI Hiffman Metropolitan Chicago
Office Market Review
First Quarter 2014
04
07
08
Local Economy
Industrial Statistics
Suburban Office Summary
10
12
14
16
18
20
Downtown Office Summary
22
24
26
28
30
32
34
North Suburban
Northwest Suburban
O’Hare Area
East-West Corridor
I-55 Corridor
West Loop
Central Loop
East Loop
North Michigan Avenue
River North
Methodology/NAI Global
NAI Hiffman
Overall Trend
Local Economy
Unemployment
9.0%
POPULATION (2010 CENSUS)
9,461,105
POPULATION CHANGE (2000-2010)
+4.0%
MEDIAN HOUSEHOLD INCOME (2010)
$57,104
GROSS METRO PRODUCT (2013)
$585.9 BILLION
LABOR FORCE
4,113,660 
TOTAL NONFARM JOBS GAINED (2/13-2/14)
27,800 
CHICAGO METRO UNEMPLOYMENT RATE
9.0% 
ILLINOIS UNEMPLOYMENT RATE
8.4% 
U.S. UNEMPLOYMENT RATE
6.7% 
Case-Schiller Home
Price Index
123.7
Q4 2013
US GDP Change
2.6%
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.
Quarter in Review
Several phrases have been used to describe the economic recovery since the recession ended in 2009. At first it was
"anemic", then "slow and steady". Most recently, you may hear the recovery described as "gradual to moderate". While
these are only descriptors, the trend is clearly positive. Following a revised 4.1% GDP annual growth rate during the third
quarter of 2013, the final quarter of the year came in at a less impressive annual growth rate of 2.6%, but still slightly above
the mean rate of 2.4% since GDP growth turned positive following the recession. Economic sentiment improved steadily
8%
20%
65%
6%
10%
64%
4%
0%
63%
2%
Los Angeles
Suburban Population Change
City Population Change
Source: Linneman Associates
4 NAI Hiffman
62%
‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13
Metro Chicago Unemployment Rate
U.S. Labor Force Participation Rate
‘14
-10%
Boston
66%
Atlanta
30%
Miami
10%
Washington
67%
Philadelphia
40%
Houston
12%
Dallas
68%
Chicago
Unemployment and Work Force Participation
50%
New York City
City vs. Suburban Population Change (2000-2010)
0%
U.S. Unemployment Rate
Source: Bureau of Labor Statistics
Local Economy
U.S. Business Confidence
70
60
50
40
30
2006
2007
2008
2009
2010
2011
2012
2013
‘14
throughout all of 2013 and that trend has continued into early
2014. Similarly, consumer and manufacturer confidence indices
continue to trend positive. Employment figures, while not overly
impressive compared to past recovery periods, have remained
in positive territory and have even increased. An average of
194,000 non-farm jobs per month were added over the course
of 2013 compared to an average of 186,000 jobs per month
in 2012 and only 159,000 jobs per month in 2011. Based on
preliminary data through the first three months of 2014, the
average has decreased to around 178,000 jobs per month,
but this may be largely attributed to the abnormally cold and
snowy winter throughout the country. In fact, job gains are
commonplace across the board, including the manufacturing,
residential and nonresidential construction, wholesale trade,
business and professional services, hospitality, and healthcare
sectors. The U.S. unemployment rate has remained essentially
flat over the past four months at 6.7%, but the local ChicagoJoliet-Naperville Metropolitan Area unemployment rate is still
much higher, at 9%.
Source: Tradingeconomics.com, Institute for Supply Management
Average Weeks Unemployed
50
Looking Forward
30
20
‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13
10
Average weeks unemployed
Source: Bureau of Labor Statistics
Corporate Profits vs. Job Openings
6 MM
$2.0 Trillion
5 MM
$1.5 Trillion
4 MM
$1.0 Trillion
3 MM
$0.5 Trillion
2 MM
‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13
Corporate Profits After Tax ($)
‘14
One indicator of economic confidence closely tied to the
commercial real estate industry is residential and commercial
construction activity. Spending on single-family and multi-family
housing construction rose 1.9% in late-2013 to their highest
levels since 2008, while commercial construction spending
increased 2.7%. A notable increase in architectural billings
in 2013 was reported by the American Institute of Architects
(AIA), suggesting that further construction growth is soon to
come. Aside from concerns including uncertainty regarding the
federal budget, the debt ceiling, and the unknown implications
surrounding the Affordable Care Act, the country is poised for
economic growth throughout the remainder of 2014.
40
‘14
While much of the economic data compiled over the past few
months has been less than encouraging, this is likely in some
part due to the abnormal weather, including the coldest average
temperatures in more than 20 years. The realization that
employment has continued to increase, consumer spending
is growing at an annual rate of 3.1%, the ISM manufacturing
index is at an impressive 60.6 level, and business confidence
is at an 11-year high despite the lousy weather, signals that
the economy is headed in the right direction. While a major
expansion is unlikely because the economy needs time to
adjust to the tax increases that recently went into effect and
the federal spending cuts that began in March, the majority of
economists are predicting stronger, more sustainable growth
for the U.S. economy in 2014 than we witnessed in 2013.
$0
U.S. Non-Farm Job Openings (#)
Source: Bureau of Labor Statistics & Bureau of Economic Analysis
5
Chicago Office Markets
Office Market Overviews
North Suburban. . . . . . . . . . 10
Waukegan
Regional Airport
Northwest Suburban . . . . . . 12
O’Hare Area . . . . . . . . . . . . 14
Fox Lake
Gurnee
East-West Corridor . . . . . . . 16
Waukegan
I-55 Corridor . . . . . . . . . . . . 18
Grayslake
McHenry
West Loop. . . . . . . . . . . . . . 22
94
Central Loop . . . . . . . . . . . . 24
East Loop . . . . . . . . . . . . . . 26
Libertyville
North
Lake Forest
Suburban
Crystal Lake
North Michigan Avenue . . . . 28
Vernon Hills
River North . . . . . . . . . . . . . 30
Lake Zurich
Highland Park
Buffalo
Grove
Dundee
Deerfield
Northwest
Suburban
Northbrook
Chicago Executive
Airport
294
Arlington
Heights
90
94
Glenview
Evanston
Elgin
Schaumburg
Niles
Skokie
O’Hare
Area
South Elgin
Ohare
Int'l Airport
CBD (Central Business District)
171
88
Ohio
43 St 12
90
Grove
83
94
Burr
Ridge
I-55Darien
Corridor
Bolingbrook
290
294
355
90
41
North
12
Michigan
20
Avenue
Oak
Lawn
Chicago
Midway
50
Airport
Wacker
57
94
Dr
East Loop
Randolph St
Carpenter St
Aurora
Naperville
River
North
20
55
Kinzie St
Halsted St
North Aurora
East-West
294
Corridor
Downers
Westmont
41
94
Chicago Ave
290
Lombard
90
West
Loop
Central
Loop
Harvey
Congress Pky
57
Michigan Ave
Carol Stream
Chicago
Midway
Airport
Michigan Ave
355
90 Chicago
94
Oak St
State St
Franklin Park
Wacker Dr
Addison 290
Wells St
Dupage
St CharlesAirport
90
6
294
80
94
Romeoville
55
6 NAI Hiffman
Gary/Chicago A
Office Market Statistics
First Quarter 2014
Market/
Submarket
# Bldgs.
Total RBA
(SF)
Total
Vacancy
Total
Available
1Q14 Net
Absorption (SF)
1Q14 Under
Constr. (SF)
North Suburban
Class “A”
Class “B”
Class “C”
524
133
256
135
30,321,585
17,318,270
10,085,362
2,917,953
15.85% 
15.67% 
16.78% 
13.71% 
1.53% 
2.58% 
0.18% 
0.00% 
17.38% 
18.25% 
16.96% 
13.72% 
24.26% 
28.08% 
19.82% 
16.97% 
20,384
-11,018
16,461
14,941
0
0
0
0
Northwest Suburban
Class “A”
Class “B”
Class “C”
585
103
335
147
33,762,617
16,650,944
14,096,648
3,015,025
20.92% 
17.34% 
24.95% 
21.89% 
0.93% 
0.80% 
1.21% 
0.41% 
21.86% 
18.13% 
26.15% 
22.30% 
28.36% 
27.67% 
30.32% 
22.97% 
135,754
61,578
79,242
-5,066
0
0
0
0
O’Hare Area
Class “A”
Class “B”
Class “C”
171
37
87
47
15,250,637
8,131,341
6,106,692
1,012,604
19.31% 
15.07% 
24.79% 
20.28% 
0.23% 
0.32% 
0.14% 
0.00% 
19.54% 
15.39% 
24.94% 
20.28% 
23.85% 
20.79% 
28.45% 
20.68% 
14,799
-90,464
113,141
-7,878
165,000
165,000
0
0
East-West Corridor
Class “A”
Class “B”
Class “C”
666
143
346
177
42,960,999
21,120,182
16,844,042
4,996,775
17.98% 
15.42% 
22.04% 
15.13% 
2.25% 
2.51% 
2.60% 
0.02% 
20.24% 
17.93% 
24.64% 
15.14% 
26.09% 
27.52% 
26.68% 
18.07% 
72,000
72,000
0
0
86
11
57
18
4,019,255
698,578
2,685,974
634,703
12.09% 
3.30% 
14.56% 
11.27% 
1.09% 
0.00% 
1.63% 
0.00% 
13.17% 
3.30% 
16.19% 
11.27% 
15.48% 
5.52% 
18.78% 
12.49% 
80,326
68,177
16,462
-4,313
21,344
10,632
8,919
1,793
2,032
427
1,081
524
126,315,093
63,919,315
49,818,718
12,577,060
18.23% 
15.81% 
21.73% 
16.64% 
1.45% 
1.78% 
1.36% 
0.11% 
19.67% 
17.59% 
23.09% 
16.75% 
25.65% 
26.61% 
26.11% 
18.92% 
272,607
38,905
234,225
-523
0
237,000
237,000
0
0
West Loop
Class “A”
Class “B”
Class “C”
111
33
36
42
45,399,037
30,193,318
11,234,046
3,971,673
9.83% 
10.63% 
9.46% 
4.76% 
0.72% 
0.61% 
1.27% 
0.05% 
10.56% 
11.25% 
10.73% 
4.81% 
18.53% 
18.89% 
21.63% 
7.00% 
201,836
153,858
41,618
6,360
1,550,067
1,550,067
0
0
Central Loop
Class “A”
Class “B”
Class “C”
82
24
33
25
38,849,342
19,661,779
15,790,580
3,396,983
10.85% 
10.86% 
11.68% 
6.95% 
0.98% 
0.61% 
1.64% 
0.01% 
11.83% 
11.47% 
13.32% 
6.96% 
16.42% 
14.47% 
20.60% 
8.31% 
-211,107
-58,034
-62,673
-90,400
0
0
0
0
East Loop
Class “A”
Class “B”
Class “C”
70
10
20
40
23,768,306
10,864,735
7,588,848
5,314,723
15.27% 
15.74% 
15.74% 
13.64% 
0.78% 
1.19% 
0.55% 
0.26% 
16.05% 
16.92% 
16.30% 
13.90% 
22.99% 
23.78% 
26.45% 
16.44% 
-46,406
32,323
-49,503
-29,226
0
0
0
0
North Michigan Ave.
Class “A”
Class “B”
Class “C”
62
11
34
17
13,141,925
6,202,259
6,131,682
807,984
15.65% 
17.83% 
14.06% 
10.96% 
0.99% 
1.46% 
0.65% 
0.00% 
16.64% 
19.29% 
14.71% 
10.96% 
23.41% 
25.34% 
23.02% 
11.53% 
31,463
-38,087
53,592
15,958
0
0
0
0
River North
Class “A”
Class “B”
Class “C”
126
6
41
79
13,530,272
4,088,938
5,798,248
3,643,086
8.60% 
7.71% 
10.45% 
6.64% 
2.03% 
0.00% 
4.65% 
0.14% 
10.63% 
7.71% 
15.11% 
6.78% 
12.38% 
7.67% 
17.72% 
9.18% 
-90,870
693
-99,055
7,492
0
0
0
0
Downtown Totals
Class “A”
Class “B”
Class “C”
451
84
164
203
134,688,882
71,011,029
46,543,404
17,134,449
11.53% 
11.94% 
11.97% 
8.64% 
0.96% 
0.74% 
1.62% 
0.12% 
12.49% 
12.68% 
13.59% 
8.76% 
18.57% 
18.33% 
21.76% 
10.86% 
-115,084
90,753
-116,021
-89,816
1,550,067
1,550,067
0
0
2,483
511
1,245
727
261,003,975
134,930,334
96,362,122
29,711,509
14.77% 
13.77% 
17.02% 
12.03% 
1.02% 
1.23% 
1.49% 
0.11% 
15.97% 
15.00% 
18.50% 
12.14% 
22.00% 
22.26% 
24.01% 
14.27% 
157,523
129,658
118,204
-90,339
1,787,067
1,787,067
0
0
I-55 Corridor
Class “A”
Class “B”
Class “C”
Suburban Totals
Class “A”
Class “B”
Class “C”
Metro Chicago Totals
Class “A”
Class “B”
Class “C”
Direct
Vacancy
Sublease
Vacancy
0
0
0
7
Overall Trend
Suburban Office Market
Vacancy Rate
# OFFICE BUILDINGS
2,032
MARKET SIZE (SF)
126,315,093
TOTAL VACANCY
24,852,174 SF (19.67%)
DIRECT VACANCY
23,026,036 SF (18.23%)
SUBLEASE VACANCY
1,826,138 SF (1.45%)
AVAILABLE SPACE
32,399,739 SF (25.65%)
1Q14 NET ABSORPTION (SF)
272,607
TOTAL 2014 NET ABSORPTION (SF)
272,607
UNDER CONSTRUCTION (SF)
237,000
1Q14 NEW SUPPLY (SF)
180,000
19.67%
Net Absorption
272,607 SF
Asking Rents
$19.58
Pictured above: One Tellabs Center in Naperville, acquired by Select Income REIT and leased back to Tellabs, Inc during the first quarter
Comprised of several scattered pockets of office developments, 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. The 15 largest suburban office complexes are at least 1.1 million SF, which is about the average size
of an office tower in the Central Business District.
Quarter in Review
Net absorption in the suburban office market outpaced the downtown office market during the first quarter of the year, as it
has done for six of the past eight quarters. Between January and March, 272,607 SF of vacant space was absorbed through
continued leasing activity and user sales, pushing the vacancy rate down 21 basis points from last quarter to 19.67%, the
lowest vacancy rate recorded in the suburban office market in more than five years. This rate is 61 basis points below the
20.28% vacancy rate recorded a year ago, and has dropped 4.3% since the market turned around in late-2010 due to nearly
5 million SF of space being absorbed. All five suburban office markets witnessed positive absorption during the first quarter, a
signal that the office market recovery has become increasingly broad. The most activity took place in the Northwest Suburban
market, where 135,754 SF was absorbed, followed by the East-West Corridor, where 80,326 SF of vacant space was
absorbed. The largest transaction of the quarter in the suburbs involved Tellabs, Inc selling their 819,513 SF headquarters
facility at 1415 W Diehl Rd in Naperville to Select Income REIT and leasing it back long-term.
Suburban Vacancy | Absorption
Suburban Direct & Overall Vacancy
24%
900,000
21.86%
20.92%
22%
300,000
17.38%
-300,000
20%
-900,000
18%
19.54%
19.31%
20.24%
19.67%
18.23%
17.98%
15.85%
13.17%
12.09%
-1500,000
2009
2010
2011
2012
Vacancy Rate (%)
2013
‘14
16%
Net Absorption (SF)
North
Suburban
8 NAI Hiffman
Northwest
Suburban
O’Hare
Area
East-West
Corridor
Direct Vacancy
I-55
Corridor
Overall
Suburban
Sublease Vacancy
Suburban Office Market
New Development
Largest Blocks of Available Space
Office development in the suburban market remains
minimal compared to the downtown market and
is limited to build-to-suit projects. Construction
continues on the American Academy of Orthopaedic
Surgeons’ 165,000 SF build-to-suit headquarters
and the 72,000 SF iMed Medical Office Campus
in Naperville. Until hiring substantially increases
and more of the nearly 25 million SF of vacant
space throughout the suburbs is absorbed, new
construction projects will be few and far between.
Building Name
Building Address
AT&T
2000 W AT&T Dr, Hoffman Estates
1,207,245
Motorola Mobility Campus
600 N US Highway 45, Libertyville
1,121,186
Woodland Falls II
26525 N Riverwoods Blvd, Mettawa
492,948
AON Office Building
1000 Milwaukee Ave, Glenview
405,039
Block Size (SF)
AT&T Business Park
2001 Lakewood Blvd, Hoffman Estates
287,000
Oakmont Centre
700 Oakmont Ln, Westmont
256,767
Cantera
4201 Winfield Rd, Warrenville
249,996
2400 Cabot
2400 Cabot Dr, Lisle
205,633
Fischer Corporate Center
1707 N Randall Rd, Elgin
196,088
Two Park Center
5550 Prairie Stone Pky, Hoffman Estates
193,601
Suburban Office – Buildings On the Market
1st Quarter 2014
Market
Building Address
Size (SF)
Target Price
Price PSF Seller
Status
North Suburban
1,121,186
S.T.O.
S.T.O.
Motorola Mobility Inc
On market
Northwest Suburban
Kemper Lakes Business Center, Long Grove
1,091,214
$135,000,000
$124
Equus Capital Partners, Ltd
Under contract
O’Hare Area
Columbia Centre
620,210
$95,000,000
$153
Angelo, Gordon/Pearlmark/White Oak
On market
Northwest Suburban
21440 Lake Cook Rd, Deer Park
351,425
$40,000,000
$114
Continental
Under contract
North Suburban
2100 E Lake Cook Rd, Buffalo Grove
258,995
$45,000,000
$174
Hamilton Partners/JSQ Commercial
Under contract
East-West Corridor
711 Jorie Blvd, oak Brook
200,162
$24,000,000
$120
Dominick’s
Under contract
Suburban Office – Significant Sale Transactions
1st Quarter 2014
Market
Building Address
Size (SF)
Sale Price
Price PSF Buyer
Seller
East-West Corridor
1415 W Diehl Rd, Naperville
819,513
$187,500,000
$229
Select Income REIT
Tellabs, Inc
Northwest Suburban 999-1111 Plaza Dr, Schaumburg
389,153
$11,431,0001
$291
RMS Properties
CWCapital Asset Management LLC
O’Hare Area
302,088
$30,258,500
$100
Lone Star Funds
CWCapital Asset Mgmt
Northwest Suburban 2850 W Golf Rd, Rolling Meadows
299,331
$13,425,000
$45
Arthur J Gallagher & Co
Intercontinental Real Estate Corporation
Northwest Suburban 2550 W Golf Rd, Rolling Meadows
270,200
$11,575,000
$43
John Buck Company
East-West Corridor
203,842
$28,400,000
$139
Adventus Realty Services Inc M&J Wilkow/CarVal Investors
Northwest Suburban 1051 Perimeter Dr, Schaumburg
196,144
$9,405,000
$48
Sabal Financial Group LP
North Suburban
126,788
$14,873,000
CWCapital
8550 W Bryn Mawr Ave, Chicago
28100 Torch Pky, Warrenville
500 Davis St, Evanston
2
3
4
2
3
$117
4
Suburban Office – Significant Lease Transactions
Market
Property Address
1st Quarter 2014
Leased (SF)
Tenant
Lease Type
East-West Corridor
819,513
Tellabs, Inc
Sale-leaseback
Northwest Suburban
10 N Martingale Rd, Schaumburg
63,483
IBM
Lease renewal
East-West Corridor
3500 Lacey Rd, Downers Grove
55,874
Sanford L.P. (Newell Rubbermaid)
New lease
Northwest Suburban
2900 Golf Rd, Rolling Meadows
47,980
Weber-Stephens Products Co
New lease
East-West Corridor
3025 Highland Pky, Downers Grove
28,808
Ford Motor Co
Lease renewal
North Suburban
150 N Field Dr, Lake Forest
28,000
PharMEDium Services
Lease renewal
O’Hare Area
27,484
Advocate Health Care
Lease expansion
North Suburban
540 Lake Cook Rd, Deerfield
22,206
The Ayco Company, L.P.
New lease
I-55 Corridor
631 E Boughton Rd, Bolingbrook
21,662
Wi-Tronix, LLC
Lease expansion/renewal
REO sale 2Part of a 14-property national office and retail portfolio sale
Entries highlighted in red denote NAI Hiffman transactions
3
Part of a national 49-property office/retail portfolio sold for a published price of $224 million 4Part of a national 49-property office/retail portfolio sold for $224 million
1
9
173
North Suburban
# OFFICE BUILDINGS
524
MARKET SIZE (SF)
30,321,585
TOTAL VACANCY
5,270,425 SF (17.38%)
DIRECT VACANCY
4,806,265 SF (15.85%)
SUBLEASE VACANCY
464,160 SF (1.53%)
AVAILABLE SPACE
7,356,729 SF (24.26%)
20,384
41
45
Waukegan
Regional Airport
Gurnee
83
Waukegan
20,384
0
0
120
Grayslake
21
94
176
Libertyville
Vernon Hills
45
ke Zurich
Highland Park
Deerfield
21
68
Northbrook
Chicago Executive
Airport
Net Absorption
17.38%
41
22
Buffalo
Grove
Asking Rents
94
294
Arlington
Heights
Vacancy Rate
Lake Forest
60
Glenview
43
haumburg
Evanston
Niles
20,384 SF
Skokie
Ohare
Int'l Airport
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 claim to Chicago’s popular “North
Shore” communities where many of 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 Allstate and Hewitt & Associates, but historically the
market has been better served by its pharmaceutical-related staples including Walgreens, Baxter and Abbott Laboratories.
Vacancy | Absorption
Inventory by City
400,000
25%
200,000
22%
0
19%
-200,000
16%
-400,000
13%
-600,000
10%
Deerfield (14%)
Other Suburbs (27%)
Northbrook (12%)
Vernon Hills (5%)
2009
2010
2011
2012
Vacancy Rate (%)
2013
‘14
Net Absorption (SF)
Skokie (10%)
Glenview (5%)
Buffalo Grove (5%)
Bannockburn (5%)
Lincolnshire (9%)
Evanston (8%)
Conditions have remained stable in the
North Suburban market, vacancy is at a
similar rate as a year ago
10 NAI Hiffman
North Suburban
Quarter in Review
Conditions in the North Suburban office market have remained relatively stable over the past year. The vacancy rate is similar
to the rate recorded a year ago and decreased by 8 basis points during the first quarter to 17.38%. Positive demand returned
to the area over the past three months, as 20,384 SF of vacant space was absorbed through elevated leasing and user sale
activity during the period.
The largest sale of the first quarter involved California-based international diversified financial services firm Sabal Financial
Group LP purchasing a 49-property, national office and retail portfolio that included 500 Davis Center, a 126,788 SF class “A”
office building located at 500 Davis St in Evanston. CWCapital sold the portfolio to Sabal for a published price of $224 million.
Saratoga Springs, New York-based financial counseling and education services provider, The Ayco Company, L.P., signed the
largest lease of the quarter, taking 22,206 SF at 540 Lake Cook Rd within Deerfield’s Corporate 500 Centre.
Looking Forward
The improvement trend witnessed in the North Suburban market has slowed over the past year, following an active 2012.
News of Abbott Laboratories spinoff AbbVie Inc subleasing the entire 558,859 SF office property at 26525 N Riverwood Blvd
in Mettawa from Capital One Financial Corp during the second quarter will be a big step for the North Suburban market, and
would represent the largest new office transaction in the Chicago area since 2012, when Motorola Mobility leased 604,000 SF
in the Merchandise Mart. There remain plenty of options for tenants large or small, and a large tenant moving into the market
would have an appreciable effect on the vacancy rate.
Contiguous Block Analysis
Building Name
Building Address
Block Size (SF)
Motorola Mobility Campus
Woodland Falls II
492,948 (SL)
AON Office Building
1000 Milwaukee Ave, Glenview
405,039 (SL)
Bannockburn Centre at College Park
1200 Lakeside Dr, Bannockburn
170,165 (SL)
Woodland Falls Corporate Center
Landmark of Lake Forest II
150 S Saunders Rd, Lake Forest
One Overlook Point
1 Overlook Pt, Lincolnshire
20,000+ SF
Contig. Blocks
1,121,186
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
156,156
0
126,595 (SL)
10
Class “A” Blocks
111,327
20
30
Class “B” Blocks
40
50
60
Class “C” Blocks
(SL) All or partially a sublease listing
Significant North Suburban Sale Transactions
1st Quarter 2014
Building Name
Building Address
Size (SF) Sale Price Price PSF Buyer
Seller
500 Davis Center
500 Davis St, Evanston
126,788
$14,873,0001 $1171
One Conway Park
105,000
$13,100,000 $125
Equity Group Inv/Fulcrum Asset Advisors Duke Realty/Chambers Street
Pine Meadow Corp Ctr
950 Technology Way, Libertyville 90,258
Grand Tri-State Corp Ctr 1075 Tri-State Pky, Gurnee
3300 Dundee Rd, Northbrook
$8,000,000
$89
Alliance Commercial Partners LLC
State Farm Mutual
43,066
$3,541,674
$82
Consumers Cooperative Credit Union
CenterPoint Properties
25,667
$3,250,000
$127
International Sanitary Supply Association American College of Chest Physicians
Significant North Suburban Lease Transactions
Building Name
Property Address
1st Quarter 2014
Leased (SF)
Tenant
Lease Type
Two Conway Park
28,000
PharMEDium Services
Lease renewal
Corporate 500 Centre
22,206
The Ayco Company, L.P.
New lease
Edens Corporate Center
10,145
O’Halloran Kosoff Geitner & Cook, LLC
Lease renewal
5420 Old Orchard Rd, Skokie
10,000
Paragon Marketing Group, LLC
New lease
211 Waukegan Rd, Northfield
8,868
North Shore University Health System
New lease
Edens Corporate Center
8,739
BCD Travel
New lease
Corporate 500 Centre
8,352
Horizon Pharma, Inc
Lease expansion
1
Part of a national 49-property office/retail portfolio sold for a published price of $224 million
11
173
45
Wau
Region
Northwest Suburban
Fox Lake
12
McHenry
# OFFICE BUILDINGS
585
MARKET SIZE (SF)
33,762,617
TOTAL VACANCY
7,378,936 SF (21.86%)
94
14
DIRECT VACANCY
7,063,761 SF (20.92%)
SUBLEASE VACANCY
315,175 SF (0.93%)
AVAILABLE SPACE
9,574,284 SF (28.36%)
135,754
135,754
0
Libertyville
176
176
Crystal Lake
L
14
14
Lake Zurich
Buffalo
Grove
12
68
31
22
25
Chicago Executive
Airport
Palatine
Dundee
62
0
59
53
Hoffman
Estates
14
29
Arlington
Heights
90
Elgin
20
72
South Elgin
Vacancy Rate
Net Absorption
21.86%
135,754 SF
Schaumburg
Elk Grove
Village
Hanover
Park
19
Asking Rents
Bloomingdale
Dupage
St Charles Airport
Ohare R
Int'l Airport
Wood
Dale
20
290
Addison
Frank
355
The Northwest Suburban market is highly influenced by activity in the Schaumburg Area submarket, which includes the
municipalities of Schaumburg, Hoffman Estates, Rolling Meadows, Arlington Heights and Palatine (65% of total market
inventory). Recently, big companies such as Catamaran Corporation and Capital One have leased significant space in the
submarket. The vacancy rate in the Northwest Suburban market increased dramatically in 2009 and 2010 to more than 27%,
but has since dropped nearly 5% due to more than 1.6 million SF of net absorption over the past three years.
Inventory by City
400,000
30%
200,000
28%
0
26%
-200,000
24%
-400,000
22%
Other Suburbs (22%)
Schaumburg (29%)
Long Grove (4%)
Elgin (7%)
Arlington Heights (10%)
Hoffman Estates (8%)
-600,000
2009
2010
2011
2012
Vacancy Rate (%)
2013
‘14
20%
Rolling Meadows (10%)
Itasca (10%)
Net Absorption (SF)
The Northwest Suburban market has
absorbed nearly 1.5 million SF during the
past two years
12 NAI Hiffman
Northwest Suburban
Quarter in Review
The Northwest Suburban market has witnessed positive net absorption during eight of the past nine quarters. This
encouraging trend continued during the first quarter, as 135,754 SF of vacant space was absorbed. The area’s vacancy rate
followed suit, experiencing its largest decline in over a year dropping 36 basis points during the first quarter to 21.86%. This
rate has dropped most quickly over the past two years, and is now more than 5% below the 27.01% peak rate reached during
the third quarter of 2010 and 58 basis points below a year ago.
The largest sale transaction of the quarter involved RMS Properties acquiring the three class “B” Schaumburg office buildings
known as National Plaza at Woodfield. The buildings, totaling 389,153 SF, are located at 999, 1000, and 1111 Plaza Dr
and were sold for $11,431,000 in a REO sale after being foreclosed on in 2013. Weber-Stephens Products Co, the parent
company of Weber Grills, signed the largest new lease of the first quarter, taking the entire 47,980 SF class “B” office building
at 2900 Golf Rd in Rolling Meadows previously occupied by cleaning and janitorial company Jani-King International Inc. With
the move onto busy Golf Road, Weber will be increasing their visibility and further expanding their presence in the area.
Looking Forward
Seven buildings over 100,00 SF traded during the first quarter, indicating that interest in the Northwest Suburban market
continues to attract investors and owner/users. Although the area is still witnessing the highest vacancy rate of any of the
Chicago area office markets, it has also seen the most improvement over the past two years, absorbing nearly 1.5 million SF nearly 534,000 SF more than any of the other suburban office markets during that period. This demand for space is expected
to continue throughout 2014. Tenants looking for contiguous spaces 50,000 SF or larger currently have 24 options, and 12
spaces 100,000 SF or larger remain available, suggesting that the market can still accommodate larger tenants.
Building Name
Building Address
AT&T
2000 W AT&T Dr, Hoffman Estates
AT&T Business Park
2001 Lakewood Blvd, Hoffman Estates
287,000
Fischer Corporate Center
1707 N Randall Rd, Elgin
196,088
Two Park Center
5550 Prairie Stone Pky, Hoffman Estates
193,601
One Woodfield Lake
1000 E Woodfield Rd, Schaumburg
182,600
Woodfield Corporate Center 200 N Martingale Rd, Schaumburg
175,980
Continental Towers
Block Size (SF)
20,000+ SF
Contig. Blocks
1,207,245
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
10
20
159,824
30
40
Significant Northwest Suburban Sale Transactions
Building Name
Building Address
National Plaza at Woodfield 999-1111 Plaza Dr, Schaumburg
50
60
70
80
1st Quarter 2014
Size (SF) Sale Price
Price PSF Buyer
Seller
389,153
$11,431,0001 $291
RMS Properties
Meadows Corporate Ctr
2850 W Golf Rd, Rolling Meadows 299,331
$13,425,000 $45
Arthur J Gallagher & Co
Meadows Corporate Ctr
2550 W Golf Rd, Rolling Meadows 270,200
$11,575,000 $43
John Buck Company
Woodfield Exec Plaza
1051 Perimeter Dr, Schaumburg
196,144
$9,405,000
$48
American Center
955 American Ln, Schaumburg
109,373
$3,828,000
$35
2
2
Franklin Ptnrs/Bixby Bridge Experian/American Realty Capital
Significant Northwest Suburban Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF) Tenant
Lease Type
Woodfield Preserve I
63,483
IBM
Lease renewal
Meadows Corporate Center
47,980
Weber-Stephens Products Co
New lease
Two Pierce Place
2 Pierce Pl, Itasca
20,453
Mitsubishi Engine North America
New lease
Woodfield Corporate Centre
16,272
Rittal Corporation
Lease renewal
Woodfield Preserve I
13,684
Merrill Lynch, Fenner & Smith
New lease
1
REO sale
2
Part of a national 49-property office/retail portfolio sold for a published price of $224 million
13
Northbrook
Chicago Executive
Airport
O’Hare Area
94
294
Arlington
Heights
# OFFICE BUILDINGS
171
MARKET SIZE (SF)
15,250,637
TOTAL VACANCY
2,979,224 SF (19.54%)
DIRECT VACANCY
2,944,489 SF (19.31%)
90
SUBLEASE VACANCY
34,735 SF (0.23%)
AVAILABLE SPACE
3,636,961 SF (23.85%)
14,799
14,799
165,000
50,000
14
Des Plaines
12
Elk Grove
Village
45
72
Ohare
Int'l Airport
Park Ridge
Rosemont
171
19
19
290
Franklin Park
Addison
5
Vacancy Rate
Net Absorption
Asking Rents
290
Lombard
19.54%
14,799 SF
At approximately 15.3 million SF, the O’Hare submarket is one of the smallest suburban markets. Due to its central location,
proximity to O’Hare International Airport and access to public transportation, the O’Hare submarket has led the suburban
office recovery. Many companies have identified the O’Hare submarket as the ideal location for a new office or a consolidation
of multiple locations. Geographically, O’Hare sits in the center of the major suburban submarkets providing the “middle
ground” for employees coming from surrounding locations, not to mention immediate access to the airport for multi-market
companies. Additionally, O’Hare is the only submarket providing access to the CTA’s elevated train lines from the city, allowing
convenient public transportation for city-dwelling staff members.
Inventory by City
200,000
28%
120,000
26%
40,000
24%
-40,000
22%
-120,000
20%
-200,000
18%
Schiller Park, Franklin
Park, Norridge,
Harwood Heights (4%)
Bensenville (4%)
Park Ridge (9%)
Rosemont (34%)
Des Plaines (21%)
2009
2010
2011
2012
Vacancy Rate (%)
2013
‘14
Net Absorption (SF)
Chicago
(O’Hare Area) (28%)
Over the past four years, the O’Hare
Area vacancy rate has dropped by more
than 6%, or 150 basis points per quarter
14 NAI Hiffman
O’Hare Area
Quarter in Review
New leases were able to outweigh the void left after LifeFitness vacated its 77,860 SF space at 5100 River Rd in Schiller Park
as the O’Hare Area witnessed 14,799 SF of positive net absorption during the first quarter. The area’s vacancy rate decreased
by nine basis points to 19.54% from the end of 2013 and has remained under 20% for the past two quarters.
Construction continues on the American Academy of Orthopaedic Surgeons’ 165,000 SF build-to-suit headquarters at the
corner of River and Higgins Roads, less than two blocks from its current location.
Dallas-based Lone Star Funds purchased a 14-property national office and retail portfolio that included the 302,088 SF class
“A” International Tower located at 8550 W Bryn Mawr Ave in Chicago. Lone Star Funds purchased the building for nearly $30.3
million, or about $100 PSF. Also in International Tower, Advocate Health Care expanded their lease by 27,484 SF. Cole Taylor
Bank, as part of a pending transaction with MB Financial, increased its footprint, expanding its lease by 17,130 SF at Pointe
O’Hare I located at 9550 W Higgins Rd in Rosemont. The company will now lease 137,853 SF within the 270,512 SF building.
Looking Forward
The O’Hare Area vacancy rate has dropped by more than 6% in four years; an average decrease of a 150 basis points per
year. This has been especially evident among the market’s premier class “A” assets, where few quality spaces remain available.
As tenants continue to fill the remaining class “A” space this will result in additional demand for the area’s class “B” buildings.
Last quarter, MB Financial agreed to acquire Cole Taylor Bank, while US Foods, which leases about 500,000 SF in Rosemont,
is being purchased by Sysco. Although not yet complete, these acquisitions will likely have a negative impact on the O’Hare
Area market going forward, as redundancies will reduce the need for office space.
Building Name
Building Address
Cumberland Centre
5450 N Cumberland Ave, Chicago
143,525
O’Hare Lake Office Park
2350-2360 E Devon Ave, Des Plaines
142,596
5500 Peal St, Rosemont
133,237
US Cellular Plaza
119,228
O’Hare Plaza I
8725 W Higgins Rd, Chicago
78,060
5100 River Rd, Schiller Park
74,988
1350 E Touhy Ave, Des Plaines
71,367
1350 Touhy
Block Size (SF)
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
5
10
15
20
25
30
Significant O’Hare Area Sale Transactions
1st Quarter 2014
Building Name
Building Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
International Tower
302,088
$30,258,5001
$1001
Lone Star Funds
CWCapital Asset Mgmt
621 Busse Rd, Bensenville2
38,9562
$1,200,000
$31
Gullo International Development Corporation
Cloverleaf Group, Inc
Significant O’Hare Area Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF) Tenant
Lease Type
International Tower
27,484
Advocate Health Care
Lease expansion
O’Hare Plaza I
25,000
Comcast
New lease/relocation
Pointe O’Hare I
9550 W Higgins Rd, Rosemont
17,130
Cole Taylor Bank
Lease expansion
Riverway West
9399 W Higgins Rd, Rosemont
14,776
Sumitomo
Lease renewal
Commerce Center at O’Hare
999 E Touhy Ave, Des Plaines
12,096
Precision Research Inc
Lease renewal
Columbia Centre I
5600 N River Rd, Rosemont
10,405
Knight, Hoppe, Kurnick & Knight
Lease renewal
O’Hare Plaza I
9,869
Bansley and Kiener, LLP
Lease renewal
1
Part of a 14-property national office and retail portfolio sale
2
Flex building
15
No
Chicago Executive
Airport
East-West Corridor
# OFFICE BUILDINGS
666
MARKET SIZE (SF)
42,960,999
TOTAL VACANCY
8,694,137 SF (20.24%)
DIRECT VACANCY
7,725,732 SF (17.98%)
SUBLEASE VACANCY
968,405 SF (2.25%)
AVAILABLE SPACE
11,209,401 SF (26.09%)
80,326
80,326
72,000
0
294
Arlington
Heights
90
Elgin
Schaumburg
Elk Grove
Village
64
St Charles
Ohare
Int'l Airport
290
Dupage
Airport
Franklin
64
Elmhurst
355
31
83
Lombard
38
25
38
Oakbrook
Terrace Oak Brook
59
North Aurora
294
88
59
34
Downers
Grove
Westmont
Naperville
Aurora
34
355
55
Bolingbrook
Romeoville
Vacancy Rate
Net Absorption
20.24%
80,326 SF
Asking Rents
Largest of the suburban office markets, the East-West Corridor is 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 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 and absorption.
The characteristically more stable eastern section is defined by more diverse multi-tenant buildings, smaller blocks of space,
and older product.
Inventory by City
400,000
25%
200,000
24%
0
23%
-200,000
22%
-400,000
21%
-600,000
2009
2010
2011
2012
Vacancy Rate (%)
2013
‘14
20%
Net Absorption (SF)
Oak Brook (16%)
Other Suburbs (19%)
Westchester (4%)
Naperville (15%)
Aurora (4%)
Lombard (8%)
Downers Grove (13%)
Oakbrook Terrace (10%)
Lisle (11%)
Over 1.7 million SF of vacant space has
been absorbed since the market turned
around at the end of 2010
16 NAI Hiffman
Rose
East-West Corridor
Quarter in Review
The East-West Corridor experienced positive demand for the fourth consecutive quarter, absorbing 80,326 SF of vacant space
during the first quarter of the year. In turn, the vacancy rate continued to decline, dropping 38 basis points from the end of
2013 down to 20.24% by the end of March. Since vacancy peaked at 23.77% during the third quarter of 2010, this rate has
dropped by more than 3.5% during the three-and-a-half years since.
Construction continues on the 72,000 SF iMed Medical Office Campus located at the corner of 75th St and Route 59 in
Naperville and is scheduled to be completed later this year.
The largest transaction of the first quarter involved Select Income REIT purchasing the 819,513 SF class “A” Tellabs, Inc
headquarters facility known as One Tellabs Center for $187.5 million, or about $229 PSF. Select Income REIT leased the entire
facility back to Tellabs, who has been in the five-story building since constructing it at a cost of $72.8 million in 2001. The
largest new lease of the first quarter involved Sanford L.P., the maker of Sharpie and Paper Mate pens, signing a full-floor lease
for 55,874 SF in the former Sara Lee headquarters in Esplanade II located on 3500 Lacey Rd in Downers Grove.
Looking Forward
Since the end of 2010, the East-West Corridor has absorbed over 1.7 million SF of vacant space. Options for large contiguous
blocks of space continue to be tight for tenants, especially in the market’s premier class “A” buildings. Only seven contiguous
spaces 100,000 SF or larger are currently available, and only four of those spaces are within class “A” buildings. As OfficeMax
winds down its lease of 354,000 SF at 263 Shuman Blvd in Naperville to move to Florida as part of its merger with Office
Depot Inc, the large vacancy left behind will negatively impact the market if a tenant isn’t found before the lease expires.
Building Name
Building Address
Oakmont Centre
700 Oakmont Ln, Westmont
256,767
Cantera
4201 Winfield Rd, Warrenville
249,996
2400 Cabot
2400 Cabot Dr, Lisle
205,633
Corridors Two
2655 Warrenville Rd, Downers Grove
149,896
Westwood of Lisle II
Block Size (SF)
2441 Warrenville Rd, Lisle
148,423
750 N Commons Dr, Aurora
112,655
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
20
40
60
80
100
Significant East-West Corridor Sale Transactions
1st Quarter 2014
Building Name
Building Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
One Tellabs Center
819,513
$187,500,000
$229
Select Income REIT
Tellabs, Inc
Cantera Meadows West
28100 Torch Pky, Warrenville
203,842
$28,400,000
$139
Adventus Realty Services Inc
M&J Wilkow/CarVal Investors
1717 Park St, Naperville
114,016
$5,722,500
$50
Deen Investments, LLC
Tetrad Holdings Corporation
Significant East-West Corridor Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF) Tenant
Lease Type
One Tellabs Center
819,513
Tellabs, Inc
Sale-leaseback
Esplanade II
3500 Lacey Rd, Downers Grove
55,874
Sanford L.P. (Newell Rubbermaid)
New lease
Highland Landmark II
3025 Highland Pky, Downers Grove
28,808
Ford Motor Co
Lease renewal
Highland Pointe I
333 E Butterfield Rd, Lombard
21,603
Consumer Portfolio Services
New lease
2500-2550 Warrenville Rd, Downers Grove
21,000
Addus Health Care
New lease
701 E 22nd St, Lombard
16,086
Raddon Financial Group
Lease renewal
One Oakmont Plaza
999 Oakmont Plaza Dr, Westmont
14,059
Centene Management Company
New lease
Corporate Plaza of Elmhurst
501 W Lake St, Elmhurst
13,368
ITW Acme
Lease renewal
17
Oak Brook
I-55 Corridor
294
88
Downers
Grove
# OFFICE BUILDINGS
86
MARKET SIZE (SF)
4,019,255
TOTAL VACANCY
529,452 SF (13.17%)
DIRECT VACANCY
485,789 SF (12.09%)
SUBLEASE VACANCY
43,663 SF (1.09%)
AVAILABLE SPACE
622,364 SF (15.48%)
21,344
21,344
0
0
Westmont
Naperville
Burr Ridge
83
355
53
55
Darien
Bolingbrook
Romeoville
Vacancy Rate
Net Absorption
13.17%
21,344 SF
Asking Rents
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 the area hospitals in La Grange, Hinsdale, and the Adventist Bolingbrook Hospital.
Inventory by City
20%
150,000
Countryside (4%)
100,000
18%
50,000
16%
0
14%
-50,000
12%
Darien (11%)
Romeoville,
Downers Grove (1%)
Bolingbrook (26%)
Willowbrook (14%)
-100,000
2009
2010
2011
2012
Vacancy Rate (%)
2013
10%
‘14
Net Absorption (SF)
Woodridge (20%)
Burr Ridge (24%)
The vacancy rate dropped by 53 basis
points to 13.17%, nearly 3% below where
it stood a year ago at 16.1%
18 NAI Hiffman
I-55 Corridor
Quarter in Review
With the lowest vacancy rate among all five of the suburban office markets, the I-55 Corridor witnessed improving conditions
during the first quarter, absorbing 21,344 SF of vacant space through new leasing activity. The vacancy rate dropped by 53
basis points during the quarter to 13.17%, nearly 3% below where it stood a year ago at 16.1%. This rate had been on a
general rise during the years following the recession, contrary to the improvement trend witnessed in the other suburban office
markets, but experienced a significant drop in 2013 due to significant leasing activity, and has returned to levels last witnessed
nearly four years ago.
Apha Products, Inc sold its two class “B” office buildings at The Offices of Waterfall Glen in Woodridge during the first quarter.
The Boler Company purchased the 77,000 SF building located at 840 S Frontage Rd for just over $9 million, and Palladium
Energy purchased the 50,242 SF building at 940 S Frontage Rd for $5.75 million. The largest lease transaction of the quarter
involved Wi-Tronix, LLC renewing its lease and expanding to occupy 21,662 SF in Promenade Bolingbrook, located at 631 E
Boughton Rd in Bolingbrook.
Looking Forward
New leases and sizable new vacancies can have a significant impact on the I-55 Corridor due to its small size. The area
remains an affordable alternative to parts of the East-West Corridor and will continue to attract tenants based on value and
its transportational and locational advantages. However, with only one available contiguous space over 100,000 SF and three
options over 50,000 SF, leasing activity will likely involve smaller tenants.
Building Name
Building Address
Block Size (SF)
Tallgrass Corporate Center
1000 Remington Blvd, Bolingbrook
122,686
79,832
Waterfall Glen - Phase III
840 S Frontage Rd, Woodridge
77,000
MidPoint II
7135 Janes Ave, Woodridge
46,624
Creekside Corporate Center
38,115
Waterfall Glen
36,234
550-564 W Boughton Rd, Bolingbrook
22,000
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
1
2
3
4
Significant I-55 Corridor Sale Transactions
5
6
1st Quarter 2014
Building Name
Building Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
Waterfall Glen Offices
77,000
$9,182,000
$120
The Boler Company
Alpha Products, Inc
Waterfall Glen Offices
50,242
$5,750,000
$115
Palladium Energy
Alpha Products, Inc
Significant I-55 Corridor Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF) Tenant
Lease Type
Promenade Bolingbrook
631 E Boughton Rd, Bolingbrook
21,662
Wi-Tronix, LLC
Lease expansion/renewal
Bluff Point Center
1404 Joliet Rd, Romeoville
4,400
Intertek USA
New lease
Estancia Corporate Center
150 Harvester Dr, Burr Ridge
2,914
AXSUN Corporation
New lease
Remington Corporate Center
2,147
Polaris Physical Therapy
New lease
19
Overall Trend
Downtown Office Market
Vacancy Rate
# OFFICE BUILDINGS
451
MARKET SIZE (SF)
134,688,882
TOTAL VACANCY
16,827,048 SF (12.49%)
DIRECT VACANCY
15,528,624 SF (11.53%)
SUBLEASE VACANCY
1,298,424 SF (0.96%)
AVAILABLE SPACE
25,009,356 SF (18.57%)
-115,084
-115,084
1,550,067
0
12.49%
Net Absorption
-115,084 SF
Asking Rents
$28.56
Pictured above: Riverside Plaza, where Zurich American leased 107,852 SF during the third quarter
The Chicago Loop, Wacker Drive, North Michigan Avenue and the South Michigan Avenue Streetwall are all iconic landmarks
that give Chicago worldwide recognition. Historic buildings and modern high-rises define Chicago’s famous skyline, home
to several of the tallest buildings in the country. These landmarks, combined with O’Hare International Airport and public
transportation including the “El”, commuter train lines and dozens of bus lines, all make Chicago’s 24-hour downtown
a world-class business center and tourist destination. Wacker Drive in the West Loop is the most active corridor in the
downtown office market, but when it comes to rents companies pay for office space, it isn’t as expensive as one would think,
ranking 20th most expensive for office tenants, behind cities like San Francisco, New York, Austin and Portland, Oregon.
Quarter in Review
Absorption turned negative in the downtown office market for the first period in more than three-and-a-half years, as new
vacancies outweighed the effect of continued leasing activity and existing office buildings were converted to other uses. Over
the course of the first quarter, the downtown vacancy rate remained essentially flat at 12.49%. The West Loop was the only
downtown submarket to see solid activity during the first quarter, as 201,836 SF of vacant space was absorbed, pushing the
vacancy rate down 44 basis points to 10.56%. Absorption was slightly positive in the North Michigan Avenue submarket, but
turned negative in the remaining three downtown submarkets. The Central Loop submarket introduced the most new vacant
space to the market, where net absorption totaled negative 211,107 SF for the first quarter.
Downtown Vacancy | Absorption
Downtown Direct & Overall Vacancy
1 MM
18%
16.05%
16%
15.27%
0
14%
16.64%
15.65%
12.49%
11.83%
10.56%
10.63%
10.85%
11.53%
9.83%
-1 MM
8.60%
12%
-2 MM
2009
2010
2011
2012
Vacancy Rate (%)
20 NAI Hiffman
2013
10%
‘14
Net Absorption (SF)
West
Loop
Central
Loop
East
Loop
North
Michigan
Avenue
Direct Vacancy
River
North
Overall
Downtown
Sublease Vacancy
Downtown Office Market
Investment interest remained active, with seven
buildings in excess of 200,000 SF in size trading
during the quarter, the largest involving a joint-venture
between Cindat Capital Management and Zeller
Realty Group acquiring the nearly 1.3 million SF office
tower at 311 S Wacker Dr.
New Development
Construction continues on two office buildings in
the downtown office market. A 689,067 SF building
known as 1K Fulton is underway at 1000 W Fulton St,
where Google has signed leases to occupy more than
275,000 SF. Construction also continues on River
Point, a new 861,000 SF office tower at Lake St and
Canal St along the Chicago River.
Submarket
Building Name
West Loop
River Point
Building Address
Block Size (SF)
444 W Lake St
616,200
West Loop
311 W Monroe St
354,017
North Michigan Avenue The AMA Building
515 N State St
350,906
East Loop
200 E Randolph St
339,761
West Loop
500 W Monroe St
311,049
West Loop
227 W Monroe St
272,101
AON Center
East Loop
One Prudential Plaza
130 E Randolph St
256,720
West Loop
Bank of America Plaza
540 W Madison St
241,200
West Loop
AT&T Building
225 W Randolph St
238,788
River North
600 West Chicago
600 W Chicago Ave
231,294
Downtown Office – Buildings On the Market
1st Quarter 2014
Submarket
Building Name
Building Address Size (SF)
Target Price
Price PSF Seller
Central Loop
Three First National Plaza
70 W Madison St
1,420,021
$400,000,000
$282
Gaw Capital Partners/Korean Teacher’s On market
300 N LaSalle St
1,302,901
$880,000,000
$675
KBS Realty Advisors
On market
300 S Riverside Plz
1,040,705
$330,000,000
$317
Means-Knaus Partners, LP
On market
Central Loop
30 N LaSalle St
988,171
$240,000,000
$243
Tishman Speyer
Under contract
West Loop
230 W Monroe St
623,524
$130,000,000
$208
Lincoln Property Company/PIMCO
On market
West Loop
101 W Wacker Dr
614,161
$200,000,000
$326
Hines
On market
River North
West Loop
Riverside Plaza
Status
Downtown Office – Significant Sale Transactions
1st Quarter 2014
Submarket
Building Address
Size (SF)
Sale Price
Price PSF Buyer
Seller
West Loop
311 S Wacker Dr
1,281,000
$302,400,000
$236
Cindat Capital/Zeller Realty Group
Shorenstein Realty Services/Fremont Group
Central Loop
180 N LaSalle St
770,191
$126,000,000
$164
Beacon Capital Partners
Berkley Properties LLC
Central Loop
203 N LaSalle St
581,100
$111,500,000
$192
Sumitomo Corporation of America
HCI Capital/M&J Wilkow Ltd
North Michigan Avenue 541 N Fairbanks Ct
541,637
$79,500,000
$147
Northwestern Memorial Hospital
Golub & Company/Chicago Park District
East Loop
200 S Michigan Ave
357,777
$69,000,000
$193
Shidler Group
Central Loop
32 W Randolph St
226,666
$12,000,000
1
$53
MB Real Estate
Leemore Group
Central Loop
39 S LaSalle St
209,597
$22,000,000
2
$105
Kimpton Hotel & Restaurant Group LLC
ROC Fund II/Hamilton Partners
1
2
Downtown Office – Significant Lease Transactions
1st Quarter 2014
Submarket
Building Name
Property Address
Leased (SF) Tenant
Lease Type
River North
River North Point
350 N Orleans St
44,590
Rocket Fuel, Inc
New lease
North Michigan Avenue AMA Plaza
330 N Wabash Ave
32,560
ContextMedia, Inc
New lease
River North
The Merchandise Mart
222 Merchandise Mart Plz 25,000
1871
Lease expansion
River North
River North Point
350 N Orleans St
22,633
Stryker Corp
New lease
444 N Michigan Ave
21,545
Initiative Media
New lease
River North
Potbelly Sandwich Works Corporation
Lease renewal
River North
Regus
New lease
20 W Kinzie St
River North
13,350
Sittercity Inc
New lease
North Michigan Avenue American Dental Association Building 211 E Chicago Ave
13,263
American Academy of Pediatric Dentistry Inc
New lease
River North
20 W Kinzie St
10,974
Modest, Inc
New lease
North Michigan Avenue Reader Building
11 E illinois St
5,000
TubeMogul
New lease
1
Redevelopment project, buyer plans to convert building into apartments 2Redevelopment project, buyer plans to convert building into boutique hotel
21
Chicago
Chicago
Midway
Airport
West Loop
171
90
41
94
Oak St
Chicago Ave
90
111
MARKET SIZE (SF)
45,399,037
TOTAL VACANCY
4,792,153 SF (10.56%)
Ohio
43 St 12
DIRECT VACANCY
4,463,168 SF (9.83%)
SUBLEASE VACANCY
328,985 SF (0.72%)
AVAILABLE SPACE
8,412,304 SF (18.53%)
201,836
201,836
1,550,067
0
41
State St
# OFFICE BUILDINGS
12
20
90
Kinzie St
94
20
Oak
Lawn
83
Wacker
57
50
94
Dr
Michigan Ave
Wells St
Wacker Dr
Halsted St
Carpenter St
Randolph St
Harvey
6
290
Vacancy Rate
Net Absorption
10.56%
201,836 SF
Congress Pky
294
80
Asking Rents
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 the submarket and has been the
corridor of the most significant office developments. After several years of no construction cranes in the submarket, new
development activity has begun again, with two buildings under construction at 444 W Lake St and 1000 W Fulton St totaling
1,550,067 SF and a 400,000 SF building at 200 W Randolph St close to being approved. Several additional office buildings
have been proposed in the West Loop submarket, including a nearly 1.5 million SF office tower at 400 W Randolph St.
Vacancy by Class Type
400,000
20%
200,000
18%
0
16%
-200,000
14%
-400,000
12%
-600,000
2009
2010
2011
2012
Vacancy Rate (%)
2013
10%
‘14
Net Absorption (SF)
11.25%
10.73%
4.81%
Class “A”
Vacancy Rate
Class “B”
Vacancy Rate
Direct Vacancy
Class “C”
Vacancy Rate
Sublease Vacancy
The West Loop vacancy rate dropped to
10.56%, now the lowest among the five
downtown office submarkets
22 NAI Hiffman
West Loop
Quarter in Review
Demand for space remained strong in the West Loop during the first quarter and the submarket has now experienced positive
net absorption for the past sixteen consecutive quarters. Net absorption for the period totaled 201,836 SF due to elevated
leasing activity, pushing the vacancy rate down 44 basis points to 10.56%. The West Loop was the only downtown submarket
to witness appreciable demand during the first quarter, with the Central Loop, East Loop, and River North experiencing
negative net absorption, and only 31,463 SF absorbed in the North Michigan Avenue submarket between January and March.
The largest sale transaction completed during the first quarter involved the acquisition of the 1.28-million SF class “A” office
tower at 311 S Wacker Dr by a joint-venture between China-based Cindat Capital Management and Chicago-based Zeller
Realty Group. The building traded for $302.4 million, or about $236 PSF, and was 85% occupied at the time of the sale. R-T
Specialty, an independent wholesale brokerage firm that provides specialty insurance services, signed the largest lease of the
first quarter, leasing 54,000 SF on a long-term basis at 500 W Monroe St.
Looking Forward
The West Loop vacancy rate is now the lowest among the five downtown office submarkets at 10.56%. This rate is more
than 7.5% below the peak rate of 18.13% recorded in early-2010. During that four year period, nearly 3.5 million SF of vacant
space has been absorbed. However, there is still room for improvement, as 11 options for contiguous blocks of space 100,000
SF or larger and 24 options for 50,000 SF or larger are still available, suggesting that the submarket is capable of additional
significant absorption. The largest available space measures 616,200 SF in the 1,067,400 SF building known as River Point
currently under construction at the corner of Canal St and Lake St along the Chicago River.
Building Name
Building Address
River Point
444 W Lake St
Block Size (SF)
616,200
311 W Monroe St
354,017
500 W Monroe St
311,049
227 W Monroe St
272,101
Bank of America Plaza
540 W Madison St
241,200
AT&T Building
225 W Randolph St
238,788
Willis Tower
233 S Wacker Dr
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
10
189,730
20
30
Significant West Loop Sale Transactions
Building Name
40
50
1st Quarter 2014
Building Address
Size (SF)
Sale Price
Price PSF Buyer
Seller
311 S Wacker Dr
1,281,000
$302,400,000
$236
Shorenstein Realty Services/Fremont Group
Cindat Capital/Zeller Realty Group
Significant West Loop Lease Transactions
Building Name
Property Address
1st Quarter 2014
Leased (SF) Tenant
Lease Type
500 W Monroe St
54,000
R-T Speciality Group
New lease
CME Center
30 S Wacker Dr
39,079
Munich Reinsurance America, Inc
Lease renewal
Hyatt Center
71 S Wacker Dr
33,371
Akerman LLP
Sublease
Hyatt Center
71 S Wacker Dr
33,249
Paul Hastings LLP
New lease
Willis Tower
233 S Wacker Dr
27,683
Scor S.E.
Lease renewal
500 W Monroe St
27,000
R-T Specialty
New lease/relocation in buidling
333 W Wacker Dr
26,167
FMGK LLC
New lease
150 N Riverside Dr
25,593
Victory Park Capital Advisors LLC
New lease
10 South Riverside Plaza
10 S Riverside Plz
25,554
National Equity Fund, Inc
New lease
111 North Canal
111 N Canal St
16,000
Twitter, Inc
New lease
West Wacker 333
23
Chicago
Chicago
Midway
Airport
Central Loop
171
90
41
94
Oak St
Chicago Ave
82
MARKET SIZE (SF)
38,849,342
TOTAL VACANCY
4,595,798 SF (11.83%)
State St
90
# OFFICE BUILDINGS
Ohio
43 St 12
DIRECT VACANCY
4,215,938 SF (10.85%)
SUBLEASE VACANCY
379,860 SF (0.98%)
AVAILABLE SPACE
6,380,265 (16.42%)
-211,107
-211,107
0
0
12
20
90
Kinzie St
94
20
Oak
Lawn
Wacker
57
50
83
41
94
Dr
Michigan Ave
Wells St
Wacker Dr
Halsted St
Carpenter St
Randolph St
Harvey
6
290
Vacancy Rate
Net Absorption
11.83%
-211,107 SF
Congress Pky
294
80
Asking Rents
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 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.
1,000,000
18%
700,000
16%
400,000
14%
100,000
12%
-200,000
10%
13.32%
11.47%
6.96%
-500,000
2009
2010
2011
2012
Vacancy Rate (%)
2013
8%
‘14
Net Absorption (SF)
Class “A”
Vacancy Rate
Class “B”
Vacancy Rate
Direct Vacancy
Class “C”
Vacancy Rate
Sublease Vacancy
Net absorption turned negative during the
first quarter, but vacancy is still well below
the rate recorded a year ago
24 NAI Hiffman
Central Loop
Quarter in Review
Net absorption turned negative during the first quarter as continued leasing activity was offset by new vacancies being
introduced to the market. Between January and March, net absorption totaled negative 211,107 SF, pushing the vacancy rate
up 19 basis points to 11.83%. Despite this increase, the vacancy rate is 84 basis points below the rate recorded a year ago
and more than 3% below the 15% peak recorded in late-2010.
Boston-based Beacon Capital Partners acquired the 770,191 SF class “A” building at 180 N LaSalle St for $126 million from
Berkley Properties LLC in January, the largest sale transaction in the West Loop during the first quarter. Following the closing
of 47 under-enrollled elementary schools last summer, The Chicago Board of Education signed the largest new lease of the
quarter, moving and downsizing its headquarters from 125 S Clark St to 182,000 SF at 1 N Dearborn St, the site of the current
Sears flagship store. CPS will occupy the first three floors of the building, a significant change from their current half-empty
19-story headquarters location. The new location is CPS’ third home in 17 years.
Looking Forward
Although the vacancy rate in the Central Loop has returned to levels last seen in 2008, there is still room for additional
recovery. There are currently 33 options for contiguous blocks of space 20,000 SF or larger and 17 spaces 50,000 SF or larger
available, with more than half of that space in the submarket’s desirable class “A” building. Increased demand is expected to
return to the Central Loop during the coming quarters as activity from the active West Loop market considers the area, putting
additional downward pressure on the submarket’s vacancy rate.
Building Name
Building Address
222 North LaSalle
222 N LaSalle St
200,686
Chase Tower
10 S Dearborn St
193,319
11 S LaSalle St
146,313
Bank of America Building
Citadel Center
Block Size (SF)
231 S LaSalle St
132,336
77 W Wacker Dr
130,968
131 S Dearborn St
128,622
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
5
10
15
20
Significant Central Loop Sale Transactions
Building Name
25
30
1st Quarter 2014
Building Address
Size (SF)
Sale Price
Price PSF Buyer
Seller
180 N LaSalle St
770,191
$126,000,000
$164
Beacon Capital Partners
Berkley Properties LLC
203 N LaSalle St
581,100
$111,500,000
$192
Sumitomo Corporation of America
HCI Capital/M&J Wilkow Ltd
32 W Randolph St
226,666
$12,000,000
$53
MB Real Estate
Leemore Group
39 S LaSalle St
209,597
$22,000,0002
$1052
Kimpton Hotel & Restaurant Group LLC
ROC Fund II/Hamilton Partners
1
1
Significant Central Loop Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF) Tenant
Lease Type
One North Dearborn
1 N Dearborn St
182,000
The Chicago Board of Education
New lease
200 North LaSalle
200 N LaSalle St
47,466
Career Builder
Lease expansion/consolidation
77 W Wacker Dr
45,827
ADM (Archer Daniels Midland Co)
New lease
440 S LaSalle St
25,947
Fay Financial
New lease
10 S LaSalle St
22,874
Blatt Hasenmiller
New lease
20,345
SpringCM
New lease
180 N LaSalle St
1
35
Redevelopment project, buyer plans to convert building into apartments Redevelopment project, buyer plans to convert building into boutique hotel
2
25
Chicago
Chicago
Midway
Airport
East Loop
171
90
41
94
Oak St
Chicago Ave
70
MARKET SIZE (SF)
23,768,306
TOTAL VACANCY
3,813,997 SF (16.05%)
State St
90
# OFFICE BUILDINGS
Ohio
43 St 12
DIRECT VACANCY
3,629,498 SF (15.27%)
SUBLEASE VACANCY
184,499 SF (0.78%)
AVAILABLE SPACE
5,464,861 SF (22.99%)
-46,406
-46,406
0
0
12
20
90
Kinzie St
94
20
Oak
Lawn
Wacker
57
50
83
41
94
Dr
Michigan Ave
Wells St
Wacker Dr
Halsted St
Carpenter St
Randolph St
Harvey
6
290
Vacancy Rate
Net Absorption
16.05%
-46,406 SF
Congress Pky
294
80
Asking Rents
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 growing retail component. Over the past
several years, the submarket has benefited from a plethora of condo conversion projects that have rejuvenated the area and
its aging buildings. However, since the economic downturn, the market for condo conversions has been greatly diminished.
The area does not benefit from the easy access to highways or commuter lines that neighboring submarkets enjoy, but it is
still within walking distance of the “El” trains, Millennium Park and close to Lake Shore Drive.
600,000
20%
400,000
18%
200,000
16%
0
14%
-200,000
12%
-400,000
2009
2010
2011
2012
Vacancy Rate (%)
2013
10%
‘14
Net Absorption (SF)
16.92%
16.30%
13.90%
Class “A”
Vacancy Rate
Class “B”
Vacancy Rate
Direct Vacancy
Class “C”
Vacancy Rate
Sublease Vacancy
The East Loop has introduced an
additional 272,638 SF of vacant space
over the past three quarters
26 NAI Hiffman
East Loop
Quarter in Review
The East Loop recorded negative net absorption for the third consecutive quarter, totaling negative 46,406 SF for the first
quarter of the year. New vacancies outpaced leasing activity during the period, pushing the vacancy rate up 20 basis points
to 16.05% by the end of March. This rate is similar to what was recorded a year ago, but is still down 3.68% from the peak
19.73% rate recorded during the final quarter of 2009.
Honolulu-based investment firm Shidler Group completed the only significant sale during the first quarter in the East Loop,
acquiring its third vintage office tower in downtown Chicago. The company purchased the 357,777 SF, 22-story office building
from Equus Capital Partners, Ltd for $69 million, or about $193 PSF. The law firm of Taft Stettinius & Hollister LLC renewed
their 63,120 SF lease during the first quarter in One Illinois Center located at 111 E Wacker Dr.
Looking Forward
Over the past three quarters, the East Loop has introduced an additional 272,638 SF of vacant space to the market. Only
five contiguous blocks of available space 100,000 SF or larger are currently available, and 11 options for 50,000 SF or larger,
suggesting that tenants looking for large spaces will likely have to consider options in neighboring submarkets. The largest
contiguous block of available space totals 339,761 SF in the AON Center at 200 E Randolph St and is comprised largely
of space vacated by law firm Kirkland & Ellis LLP in 2009 when they relocated to 300 N LaSalle St. The recovery has been
uneven in the East Loop due to periods of significant vacancies being introduced alternating with periods of absorption.
Building Name
Building Address
Block Size (SF)
AON Center
200 E Randolph St
339,761
One Prudential Plaza
130 E Randolph St
256,720
303 E Wacker Dr
218,822
Two Illinois Center
233 N Michigan Ave
133,639
One Congress Center
401 S State St
110,898
CNA Center
333 S Wabash Ave
92,473
The Sullivan Center
1-33 S State St
70,107
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
5
10
15
20
Significant East Loop Sale Transactions
1st Quarter 2014
Building Name
Building Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
Borg-Warner Building
200 S Michigan Ave
357,777
$69,000,000
$193
Shidler Group
Significant East Loop Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF)
Tenant
Lease Type
One Illinois Center
111 E Wacker Dr
63,120
Taft Stettinius & Hollister LLP
Lease renewal
Two Illinois Center
233 N Michigan Ave
34,508
Burrell Communications Group, LLC
Lease renewal
Michigan Plaza
205 N Michigan Ave
19,000
News America Marketing Properties LLP
New lease
324-332 S Michigan Ave
17,876
Undisclosed
New lease
247 S State St
16,050
DePaul University
Lease renewal
55 E Monroe St
15,319
Getty Images, Inc
New lease
The Hub Office Building
Monroe Building
25
65 E Wacker Pl
6,942
Reading in Motion
New lease
104 S Michigan Ave
6,785
Hiscox Insurance
New lease
27
Chicago
Chicago
Midway
Airport
62
MARKET SIZE (SF)
13,141,925
TOTAL VACANCY
2,187,105 SF (16.64%)
Chicago Ave
Ohio
43 St 12
DIRECT VACANCY
2,056,838 SF (15.65%)
SUBLEASE VACANCY
130,267 SF (0.99%)
AVAILABLE SPACE
3,076,826 SF (23.41%)
31,463
31,463
0
0
Michigan Ave
# OFFICE BUILDINGS
171
20
90
41
94
Oak St
State St
90
Kinzie St
94
41
12
20
Oak
Lawn
Wacker
57
50
83
90
94
Dr
Michigan Ave
Wells St
Wacker Dr
Halsted St
Carpenter St
Randolph St
Harvey
6
290
Vacancy Rate
Net Absorption
16.64%
31,463 SF
Congress Pky
294
80
Asking Rents
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 retail corridor interspersed with
posh residential towers, North Michigan 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 new home of
the Lurie Children’s Hospital of Chicago. The presence of these large healthcare institutions should benefit the submarket for
years to come.
400,000
20%
200,000
17%
0
14%
-200,000
11%
-400,000
8%
-600,000
19.29%
14.71%
10.96%
2009
2010
2011
2012
Vacancy Rate (%)
2013
‘14
5%
Net Absorption (SF)
Class “A”
Vacancy Rate
Class “B”
Vacancy Rate
Direct Vacancy
Class “C”
Vacancy Rate
Sublease Vacancy
The North Michigan submarket
experienced its largest decline in vacancy
in two years during the fourth quarter
28 NAI Hiffman
Quarter in Review
Net absorption during the first quarter of the year nearly matched the total absorbed during the final quarter of 2013. Although
not an astounding figure, 31,463 SF of vacant space was absorbed between January and March, pushing the vacancy rate
down 24 basis points to 16.64%. This rate is 43 basis points below the 17.07% rate recorded a year ago and 1.67% below
the peak rate recorded in mid-2011.
Northwestern Memorial Hospital acquired the 541,637 SF office building from Golub & Company and the Chicago Park District
for $79.5 million at the end of March. Northwestern Memorial Hospital was already a tenant in the building, occupying 220,000
SF. The Chicago Park District occupies five floors in the building and will remain in its office space for up to four years without
paying rent as part of the transaction. ContextMedia, Inc, a chicago-based company who owns and operates a suite of digital
healthcare networks, completed the largest lease of the quarter, taking 32,560 SF in the AMA Plaza located at 330 N Wabash
Ave. Initiative Media, a global media strategy and investment agency, signed a new lease for 21,545 SF within the 516,797 SF
class “B” office building located at 444 N Michigan Ave.
Looking Forward
The North Michigan Avenue vacancy rate is the highest among the five downtown submarkets, and faces significant
challenges ahead. There remain five options for 100,000 SF or larger contiguous blocks of space in a small submarket that is
known for limited leasing volume. Until some of these large blocks of space begin to lease, significant improvement is unlikely
to occur. The submarket will continue to recover more slowly than the other downtown submarkets due to its location and the
limited presence of traditional office users. The area’s medical facilities will be crucial in the future of the submarket.
Building Name
Building Address
Block Size (SF)
The AMA Building
515 N State St
350,906
101 E Erie St
227,569
River East Arts Center
401-465 E Illinois St
210,000
Wrigley Building-North Tower
410 N Michigan Ave
125,584
401 North Michigan Center
401 N Michigan Ave
104,990
36 E Grand Ave
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
91,316
740 N Rush St
76,501
5
10
Significant North Michigan Avenue Sale Transactions
Building Name
15
20
1st Quarter 2014
Building Address
Size (SF)
Sale Price
Price PSF Buyer
Seller
541 N Fairbanks Ct
541,637
$79,500,000
$147
Golub & Company/Chicago Park District
Northwestern Memorial Hospital
Significant North Michigan Avenue Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF)
Tenant
Lease Type
AMA Plaza
330 N Wabash Ave
32,560
ContextMedia, Inc
New lease
21,545
Initiative Media
New lease
American Dental Association Building 211 E Chicago Ave
444 N Michigan Ave
13,263
American Academy of Pediatric Dentistry Inc
New lease
Reader Building
11 E Illinois St
5,000
TubeMogul
New lease
401 Noth Michigan Center
401 N Michigan Ave
3,995
Caldera Investments
New lease
29
Chicago
Chicago
Midway
Airport
River North
171
90
41
94
Oak St
Chicago Ave
90
126
MARKET SIZE (SF)
13,530,272
TOTAL VACANCY
1,437,995 SF (10.63%)
Ohio
43 St 12
DIRECT VACANCY
1,163,182 SF (8.6%)
SUBLEASE VACANCY
274,813 SF (2.03%)
AVAILABLE SPACE
1,675,100 SF (12.38%)
-90,870
-90,870
0
0
41
State St
# OFFICE BUILDINGS
12
20
90
Kinzie St
94
83
20
Oak
Lawn
Wacker
57
50
94
Dr
Michigan Ave
Wells St
Wacker Dr
Halsted St
Carpenter St
Randolph St
Harvey
6
290
Vacancy Rate
Net Absorption
10.63%
-90,870 SF
Congress Pky
294
80
Asking Rents
Comprised of predominantly class “C” timber-loft style office buildings, the River North submarket is also home to several
modern glass and steel class “A” office towers. The recent construction in the neighborhood of high-end residential
developments, retail and up-scale restaurants has also been of note, but only one available development site remains at Wolf
Point where the Chicago river splits, so major new office developments will be rare. The submarket is the least accessible
to transportation of all the downtown office submarkets, but offers sensational views along the Chicago River. Several highprofile, quickly-growing companies have decided to call River North home, including tech giant Google, Inc and deal-of-theday website company Groupon.
1,200,000
20%
800,000
17%
400,000
14%
0
11%
7.71%
6.78%
8%
-400,000
-800,000
15.11%
2009
2010
2011
2012
Vacancy Rate (%)
2013
5%
‘14
Net Absorption (SF)
Class “A”
Vacancy Rate
Class “B”
Vacancy Rate
Class “C”
Vacancy Rate
The vacancy rate increased by 67 basis
points to 10.63% during the first quarter,
but remains well below the 18.13% peak
30 NAI Hiffman
River North
Quarter in Review
Following two quarters of positive net absorption, demand turned negative during the first quarter as new leases were
outweighed by the effect of new vacancies being introduced. Net absorption during the first quarter totaled negative 90,870
SF, pushing the vacancy rate up 67 basis points from the previous quarter to 10.63%, a rate 57 basis points above the rate
recorded a year ago, but still well below the 18.13% peak reached during the second quarter of 2010.
The only significant sale transaction that took place during the first quarter in the River North submarket involved marketing firm
AgencyEA LLC purchasing the 30,800 SF building located at 920 N Franklin St from South Street Capital for $4.6 million, or
about $149 PSF. AgencyEA LLC already occupied half of the building but needed the extra space for future growth as its staff
has doubled in a little over a year.
California-based advertising technology firm Rocket Fuel, Inc signed the largest new lease of the first quarter in River North,
relocating from its current 8,700 SF at 444 N Wabash Ave to 44,590 SF on the top floor of River North Point located at 350 N
Orleans St, where Kalamazoo, Michigan-based medical device marker Stryker Corp also leased 22,633 SF this quarter.
Looking Forward
Seven contiguous spaces 50,000 SF or larger, and only two spaces 100,000 SF or larger remain available in the River North
submarket, however the anticipated departure of Google from 20 W Kinzie St for its new offices at 1000 W Fulton Market in
2015 will leave a rare large block of vacant space behind. This new vacancy could negatively impact the submarket’s vacancy
rate, or it may be quickly leased.
Building Name
Building Address
Block Size (SF)
600 West Chicago
600 W Chicago Ave
231,294
River North Point
350 N Orleans St
145,114
Dearborn Plaza
20 W Kinzie St
95,945
678 N Kingsbury St
83,000
222 Merchandise Mart Plz
81,225
363 W Erie St
63,876
20,000+ SF
Contig. Blocks
50,000+ SF
Contig. Blocks
100,000+ SF
Contig. Blocks
0
2
4
6
8
Significant River North Sale Transactions
10
1st Quarter 2014
Building Name
Building Address
Size (SF)
Sale Price
Price PSF
Buyer
Seller
Franklin Square
920 N Franklin St
30,800
$4,600,000
$149
AgencyEA LLC
South Street Capital
Significant River North Lease Transactions
1st Quarter 2014
Building Name
Property Address
Leased (SF) Tenant
Lease Type
River North Point
350 N Orleans St
44,590
Rocket Fuel, Inc
New lease
25,000
1871
Lease expansion
River North Point
350 N Orleans St
22,633
Stryker Corp
New lease
20,000
Potbelly Sandiwch Works Corporation
Lease renewal
18,191
Regus
New lease
20 W Kinzie St
13,350
Sittercity Inc
New lease
20 W Kinzie St
10,974
Modest, Inc
New lease
31
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32 NAI Hiffman
North America
Europe &
The Middle East
Canada
Mexico
United States
Latin America &
The Caribbean
Argentina
Bulgaria
Czech Republic
Denmark
Finland
France
Georgia
Locations by Country
North America
Canada
Mexico
United States
Latin America &
The Caribbean
Argentina
Bahamas
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Methodology
& Definitions
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 report would not have been possible.
All of the information detailed throughout this report 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.
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
levels. For the purpose of this report, 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
Definitions
abandoned or discontinued) but for which a certificate
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 reports, 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)
of occupancy has not yet been issued; or b) properties
33
Executive Leadership
Dennis Hiffman
Chairman
630 691 0616
[email protected]
David Petersen, RPA
CEO
630 691 0691
[email protected]
John Picchiotti
COO - Brokerage
630 691 0608
[email protected]
Bob Assoian
Managing Director
630 317 0761
[email protected]
Office Services
Michael Flynn, CCIM, SIOR
Executive Vice President
630 691 0600
[email protected]
Adam Johnson
Vice President
630 317 0729
[email protected]
Daniel O’Neill
630 691 0610
[email protected]
Michael Van Zandt
630 368 0848
[email protected]
James Adler
630 691 0605
[email protected]
Patrick Kiefer
630 693 0670
[email protected]
Jack Reardon
Senior Vice President
630 693 0647
[email protected]
Jason Wurtz
Vice President
630 693 0692
[email protected]
Brian Edgerton
Vice President
630 693 0671
[email protected]
Kyle Kreminski
Associate
630 317 0716
[email protected]
Jason Streepy
630 317 0743
[email protected]
Linda Garske
630 317 0742
[email protected]
Matt Novak
Associate
630 693 0659
[email protected]
Aubrey Van Reken
Vice President
630 693 0679
[email protected]
Shawn Frick
Financial Analyst
630 317 0702
[email protected]
Patrick Sullivan
HFF, L.P.
Managing Director
312 980 3610
[email protected]
Mark Katz
HFF, L.P.
Director
312 528 3650
[email protected]
Jim Tsevis
Vice President
630 693 0673
[email protected]
Dan Hiffman
Senior Sales Associate
630 693 0655
[email protected]
Jennifer Hopkins
Senior Retail Associate
630 693 0667
[email protected]
Investment Services
Arthur Burrows
630 693 0675
[email protected]
Retail Services
Mike Meksto
630 317 0717
[email protected]
34
NAI Hiffman
Industrial Services
John Cash, SIOR
630 691 0609
[email protected]
Steve Connolly, SIOR
630 693 0642
[email protected]
Bruce Granger
630 693 0648
[email protected]
Michael Robbins
Vice President
630 693 0680
[email protected]
Casey Baird
Associate
630 693 0697
[email protected]
Benjamin Cremer
630 691 0614
[email protected]
David Haigh
Vice President
630 693 0649
[email protected]
Adam Roth, CCIM, SIOR
630 691 0607
[email protected]
Kyle Barrett
Associate
847 693 0689
[email protected]
Kelly Disser
Vice President
630 317 0721
[email protected]
Daniel Leahy, SIOR
630 691 0604
[email protected]
Stephen Sullivan
Vice President
847 610 0123
[email protected]
Howard Bergdoll
Associate
630 317 0724
[email protected]
Packy Doyle
Associate
630 691 0601
[email protected]
Adam Marshall, CCIM
Vice President
630 691 0603
[email protected]
Brett Tomfohrde
Associate
630 693 0669
[email protected]
Duke Botthof
847 520 0204
[email protected]
Eric Fischer
Vice President
630 693 0677
[email protected]
Mark Moran
630 693 0656
[email protected]
Eric Tresslar
630 693 0650
[email protected]
Joe Bronson, SIOR
Vice President
630 317 0725
[email protected]
Jeff Fischer
630 317 0726
[email protected]
Lawrence Much, SIOR
630 691 0606
[email protected]
John Whitehead
Vice President
630 693 0643
[email protected]
Brian Colson
630 691 0619
[email protected]
Chris Gary
Vice President
630 693 0694
[email protected]
Adam Naparsteck
Vice President
630 693 0676
[email protected]
Whitney Kannaka
Director of Marketing
630 317 0713
[email protected]
Matt Hronick
Senior Designer
630 693 0693
[email protected]
Lauren Fishbune
Marketing Specialist
630 317 0737
[email protected]
Catherine DeBoer
Elsa Gaztambide
Karen Kirian
Melody Lawrence
Cindy Nickell
Alison O’Connell
Denise Racana
Tammi Sowinski
Erin Thill
Lynn Zbierski
Marketing
Research
For further information regarding the content of this market
review, or for specialty reports, please contact your local
broker or:
Craig Hurvitz
Director of Research
630 693 0645
[email protected]
Brian Chandler
Research Associate
630 317 0738
[email protected]
35
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Office 1Q14.indd - NAI Global`s SocialNet

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