Chicago Downtown Office Market Report

Chicago Downtown Office Market Report 2Q ‘08 Rents Hit Another Record High Leasing activity was strong in the 2nd quarter, but a struggling economy, new construction and increasing sublease supply point to a downturn. Record Rental Rates By The Numbers The current average asking rate, $30.15 PSF Gross, is another record high, and the 6th consecutive quarterly increase in rates. Rental rates Chicago CBD – Availability vs. Rental Rates will continue to rise over the next few quarters, and are not likely to Space Available Average Gross Asking Rent drop before several quarters of poor performance force landlords to 15% $31 modify their expectations. 14% $30

Strong 2nd Quarter 13% $29 Chicago’s downtown office market had strong activity during the second quarter. Completely reversing the 110,356 square feet of nega- 12% $28 tive net absorption seen in the first quarter, year-to-date positive net absorption rose to 1,454,390 square feet, and available space dropped 11% $27 another full percentage point, to only 11.1% of total inventory. 10% $26 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 About 400,000 square feet of this activity was due to office space being converted to other uses. Discounting these transactions, we see year- Chicago CBD - Existing Buildings 2Q 2008 to-date net absorption of just over 1 million square feet. At mid-year 2007, year-to-date net absorption was over 1.5 million square feet. Existing RBA - Overall (583 buildings) 153,524,743 Existing RBA - Class A (79 buildings) 67,850,366 Downturn in 2009 Existing RBA - Class B (205 buildings) 59,616,121 Available sublease space has taken a sharp rise, increasing over 300,000 Existing RBA - Class C (303 buildings) 26,058,256 square feet to 1,645,635 square feet. Chicago MSA’s unemployment Total Vacant Sq. Ft. 15,895,493 was reported at 6.5% for May, a sharp increase over the 4.7% figure Percent Vacant 10.4% for May of 2007. Illinois’ unemployment figures are now among the Total Available Sq. Ft. 16,984,084 highest in the nation. Percent Available 11.1% These trends, combined with the delivery of over 3.8 million square Gross Average Asking Rental Rate (Overall) $30.15 feet of new office space over the next year, indicate supply will greatly Year-To-Date Net Absorption 1,454,390 outpace demand in the near future, creating a downturn in the Chi- cago CBD office market.

Noteworthy Leases Tenant Address Sq. Ft. Type Marsh & McLennan Cos. (Mercer (US) Inc. and Guy Carpenter & Co.) 155 North Wacker Drive 134,000 Relocation PrivateBancorp Inc. 120 South LaSalle Street 105,449 New The Chicago School of Professional Psychology Merchandise Mart Plaza 82,000 Expansion Microsoft Corp. 200 East Randolph Street 78,000 Relocation - Expansion CRA International 1 South Wacker Drive 41,570 Relocation Legal Helpers 233 South Wacker Drive 40,301 New Harris & Harris, Ltd. Merchandise Mart Plaza 37,399 Relocation - Expansion Duff & Phelps Corporation 200 South Wacker Drive 22,239 New Kaplan Higher Education Corporation, Inc. 311 South Wacker Drive 17,272 New EF Education First Ltd. 200 North Michigan Avenue 15,000 New Charles Schwab & Co. Inc. 430 North Michigan Avenue 14,713 Relocation - Expansion Westcon Group 3020 Woodcreek Drive, Downers Grove 14,509 Relocation - Expansion Neohapsis 217 North Jefferson Street 10,150 Relocation

© 2008 Bradford Allen Realty Services. The information contained herein is from sources deemed reliable, however no warranty or representation is made as to the accuracy or completeness thereof. Peoria

Peoria Fulton Carol Chicago

Green Green Halsted Halsted

Halsted Madison W Randolph Lake Gladys Monroe Adams Jackson V Hubbard

Harrison an Buren ashington Kinzie T aylor 90 94 Union W ayman

Des Plaines Des Plaines operations, including Elmhurst, Wood Dale, Franklin Park and Schaumburg. western suburban sites. HSBC is considering the western suburbs where it now has of identifying a site where they will build a second building to combine many of the in the ve buildings expire over two to the next three years and HSBC is in the process currently scattered in the western suburbs, into a new operations center. The leases in Mettawa, plans to consolidate many of its remaining 2,700 Chicago-area workers, building suburban facilities intove headquarters one 560,000-square-foot north America Holdings Inc., which recentlyHSBC North consolidated 3,100 workers from Loop West

Quincy Jefferson Chicago W Lexington Jefferson Polk

290 Milwaukee

Clinton tower.1,340,000-square-foot A.G., for the Bank Deutsche fund managed by RREEF, a unit of $540 million to investment a German of 1 North Wacker Drive, paying Interests L.P., closed on its acquisition managed by Houston-based Hines Hines U.S. Core fund, O ce which is Kingsbury

Clinton NORTHWESTERN Transportation Ohio TERMINAL CHICAGO METRA Ogilvie Center North

River Canal Kingsbury Canal

South

i c

Loop a

e r

Wacker ST. ORLEANS N. LEVEL U/L Orleans

River Chicago Franklin

Chestnut

Franklin many layos may occur due to the consolidation. late this year. No information is available yet on how with an identical operation at 540 West Madison Street at location, the Orleans where 625 employees work, plans to BofA combine a payment processing operation Street Orleans at that 350 North expires 31, 2009. July will not renewreportedly a lease for 205,000 Sq. Ft. Charlotte, of America Corp. NC-based Bank (BofA) Chicago Superior

Institute Randolph V

Locust

Walton an Buren Ontario Madison W

Harrison Huron Monroe Illinois Kinzie Grand Adams Quincy acker Ohio Erie Lake

Hubbard Wells Wells Wells just three, Grove. in Downers including a facility consolidates eight nationwide processing mortgage o ces into employees nationwide, the Chicago area could gain jobs as it jobs that will be impacted. While WaMu will lay o 3,000 Hills – with no information available regarding the number of Schaumburg, and one each in Oak Brook, Skokie and Vernon o ces in the Chicago areamortgage – two in the city, two in WaMu (Washington Mutual Inc.) will close seven free-standing Central

Financial CARROLL AVE. L LEVEL Loop Sherman (Metra) Station Street LaSalle La Salle

Locust LaSalle Chestnut

La Salle

Clark W W Clark Washington ashington Jackson

Clark ashington Square Square

Federal Dearborn Dearborn Harrison Plymouth Congress Pritzker Park Polk

State

State E. KINZIE ST. Michigan

E. North Water St. Avenue Wabash North

Wabash Loop Harrison 9th 1 E. HUBBARD ST U/L LEVEL

8th L/L East 1th

Garland Rush Delaware

Chestnut T W Old ower ater Michigan Michigan S.W Randolph Jackson Balbo

10 S. of Chicago Art Institute U/L LEVEL Michigan ater Station Metra Street Randolph

E. North Water St. L/L PIONEER COURT 400 S. Station Metra Buren V an Cityfront Plaza Dr. U/L

Institute the School of St. Clair Grant Park Art Millennium Stetson Park

U/L Cityfront Plaza Dr. Cityfront Plaza Mies van der Rohe

Columbus L/L St. Clair St. E. North Water St. St. Water North E. Shell Music Petrillo

Pearson Fountain Buckingham Chicago Columbus Superior Ontario Huron Illinois Grand Ohio Erie Lake Shore Drive Fairbanks Ogden Plaza Dewitt Lake Michigan U/L LEVEL N. Park Dr. Photos courtesy of CoStar

Peoria

Peoria Fulton Carol Chicago CBD Office Market Statistics – 2Q08 CBD Office Chicago Chicago Class A Gross Average Asking Rent (PSF) Class B Gross Average Asking Rent (PSF) Class C Gross Average Asking Rent (PSF)

Green Green Halsted Halsted

Halsted Madison W Randolph Lake Gladys Monroe Adams Jackson Year-to-Date Net Absorption V Hubbard

Harrison an Buren ashington Kinzie T aylor Total Inventory (Sq. Ft.) 90 94 Total Sq. Ft. Available Union W Percent Available ayman

Quincy Jefferson Chicago W Lexington Jefferson Polk 290 Overall CBD 153,524,743

16,984,084 1,454,390 Milwaukee $34.29 $27.21 $22.24 11.1%

Clinton NORTHWESTERN Transportation Ohio TERMINAL CHICAGO METRA Ogilvie Center North

River Canal Kingsbury Canal

South

River North c Loop a g 15,560,318 o

1,302,410

(15,524) R i

$30.67 v $26.01 $20.66

8.4% e r

Wacker ST. ORLEANS N. LEVEL U/L Orleans

North Michigan North River Chicago 16,434,232

1,369,618 Franklin Avenue 412,280

Chestnut many layos may occur due to the consolidation. late this year. No information is available yet on how with an identical operation at 540 West Madison Street at location, the Orleans where 625 employees work, plans to BofA combine a payment processing operation Street Orleans at that 350 North expires 31, 2009. July will not renewreportedly a lease for 205,000 Sq. Ft. Charlotte, of America Corp. NC-based Bank (BofA) $34.95 $26.71 $23.66 Franklin Chicago Superior

Institute Randolph V 8.3%

Locust

Walton an Buren Ontario Madison W

Harrison Huron Monroe Illinois Kinzie Grand Adams Quincy acker Ohio Erie Lake

Financial CARROLL AVE. L LEVEL Loop Sherman (Metra) Station Street LaSalle La Salle West Loop 51,699,003

Locust

Chestnut 6,097,559 (247,814) LaSalle $34.40 $29.64 $22.22 11.8% La Salle

Clark W W Clark Washington ashington Jackson

Clark ashington Square Square

Federal Central Loop Dearborn

40,290,239 Dearborn 4,465,801 813,840 $34.75 $27.39 $23.46 11.1% Harrison Plymouth Congress Pritzker Park Polk

State

State E. KINZIE ST. Michigan

E. North Water St. Avenue Wabash North 26,217,347 East Loop 3,459,007 Wabash Loop 336,316 Harrison 9th 1 E. HUBBARD ST U/L LEVEL

8th L/L $33.09 $25.69 $21.83 East 13.2% 1th

Garland Rush Delaware

Chestnut T W Old ower ater Michigan Michigan S.W Randolph Jackson Balbo

10 S. of Chicago Art Institute U/L LEVEL Michigan ater Station Metra Street Randolph

E. North Water St. L/L PIONEER COURT 400 S. Station Metra Buren V an South Loop South 3,323,604 155,292 289,689 Cityfront Plaza Dr. U/L $17.00 $23.99 8.7% Institute the School of St. Clair Grant Park Art Millennium Stetson Park

U/L Cityfront Plaza Dr. Cityfront Plaza Mies van der Rohe

Columbus L/L St. Clair St. E. North Water St. St. Water North E. Shell Music Petrillo

Pearson Fountain Buckingham Chicago Columbus Superior Ontario Huron Illinois Grand Ohio Erie Lake Shore Drive Fairbanks Ogden Plaza Dewitt Lake Michigan U/L LEVEL N. Park Dr. 200 South Michigan Avenue 18th Floor Chicago, IL 60604

Inside: Chicago Downtown Office Market Report – 2Q’08

Bradford Allen Market Meter - Chicago Downtown Office Space

Year-To-Date Net Absorption (SF) Availability (%) Average Gross Asking Rental Rate ($) The change, positive or negative, in physically occupied The total amount of space being marketed for lease, re- The weighted average gross asking price per square foot space during the year to date. gardless of current occupancy, including sublease space. of all available space, weighted by number of square feet available.

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