YEAR-END 2011 | DOWNTOWN OFFICE RESEARCH REPORT | FOURTH QUARTER 2011 | DOWNTOWN CHICAGO | OFFICE
CHICAGO OFFICE MARKET OVERVIEW
Finishing on a High Note With reported year-end absorption at its highest rate since 2007, the Chicago CBD continued its path towards recovery, albeit at a very tentative and labored pace.
For much of 2011, the Chicago CBD witnessed inconsistencies in recovery with varying degrees of improvement dependent on factors such as asset class, the relative health of landlords, tenant industry and submarket desirability. The result has been a rather jagged path towards recovery. Yet clear signs exist of marked improvement over the prior year. As vacancy MARKET INDICATORS decreased 70 basis points to 15.1 percent during 2011, it Overall Chicago CBD seems the market has reclaimed its footing with improved Year-end Year-end demand resulting in 996,110 square feet of positive net 2010 2011 absorption during the year. Despite this absorption, the VACANCY RATE 15.8% 15.1% market still remains somewhat soft with demand levels weak relative to pre-recession years when annual net ABSORPTION (SF) -206,844 996,110 absorption typically exceeded 3,000,000 square feet.
RENTS $31.54 $31.45 TENANTS GET CREATIVE INVENTORY 140,794,206 140,794,206 During the year, tenants adapted to market conditions and reevaluated their space strategies. Space contractions continue to be a deterrent to the market’s recovery as some tenants are still responding to stagnant economic conditions by shedding excess space. However, the velocity of contractions appears to have subsided in the latter part of the year. Space efficiencies have also become a priority to tenants, further contributing to potential contractions in coming quarters.
Today’s cost-conscious tenants are actively seeking ways to simultaneously streamline costs while still accommodating the mobile nature of today’s workforce. Alternative workplace strategies such as hoteling have become increasingly popular. Hoteling allows employees to share workspaces as they alternate working from home, the office or some other remote location, thus reducing a company’s space needs. Such strategies not only serve as a cost cutting initiative, helping corporations improve their bottom line, but also provide today’s younger and more mobile workforce with the flexibility they desire. Tenants are also discovering that their storage needs are being greatly reduced as digital archiving and cloud technology becomes more prevalent. The downturn has inspired companies to look for resourceful and creative ways of reducing space and this sentiment is not likely to change in the near future. Although the desire to reduce company footprints could be a potential obstacle to a speedier recovery in the CBD, several bright spots in the market may help to compensate for any contractions.
COLLIERS INTERNATIONAL | P. 1 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
Strong demand drivers including ease of commuting, reduced pricing relative to pre-recession years, access to an expansive and talented labor pool and the ability for greater work-life balance have made the CBD the beneficiary of corporate migration from the suburbs during 2011. The most recent announcement of such migration occurred during the fourth quarter as Sara Lee committed to relocating its meat business from suburban Downers Grove to the CBD. Sara Lee’s relocation will result in almost 235,000 square feet of positive net absorption once the company relocates in 2013. This transaction exemplifies the type of thoughtful decision-making being employed by tenants today as they consider how their physical environment can be leveraged to create a competitive advantage whether that is through finding ways to recruit and retain the best employees or via cost savings as a result of lease restructures or relocations.
JOB GROWTH RECENT ANNOUNCEMENTS OF MAJOR CBD Another positive note for the CBD includes the EXPANSIONS BY EXISTING TENANTS mayor’s job growth initiative which has resulted Tenant Growth Plans Timing in securing several long-term expansion commitments by existing tenants. Over the Continental Holdings 1,300 Employees End of 2012 past year, at least twelve corporations have announced plans to expand their existing operations in Chicago, with a total commitment that exceeds 6,900 new jobs over the Devry, Inc. 1,000 Employees 2012 and beyond next several years. These commitments provide the potential for positive absorption in the future as jobs are gradually added. GE Capital 1,000 Employees In Process
Groupon 500 Employees+ In Process STILL A LANDLORD’S MARKET? The CBD office market continues to be segmented as abundant availabilities still exist Accenture 500 Employees Mid-2012 for small- to mid-sized tenants while space options for larger tenants are becoming Ernst & Young 500 Employees End of 2012 further constrained, particularly in the high-view, Class A sector of the market. The prevailing sentiment among tenants is that economic uncertainty in our markets Sara Lee 500 Employees Early 2013 should automatically lend itself to every landlord competing aggressively for tenancies regardless of a building’s market position. However, with the continued attraction of JP Morgan Chase 400 Employees End of 2012 tenants from the suburbs and other outside markets as well as the growth experienced Motorola Solutions 400 Employees End of 2012 in the technology and healthcare sectors, vacancy levels in the CBD have started to rebound more quickly than originally anticipated, leaving landlords of well-occupied Allscripts 300 Employees End of 2012 assets more confident and less willing to compete as aggressively for tenants as they EMC Corporation 200 Employees End of 2013 were one year ago. The broader market remains a tenant’s market with landlords of high-vacancy assets still willing to compete aggressively for tenants via inflated Merge Healthcare 200 Employees End of 2013 concession packages and reduced rental rates when their capital structures allow. However, the healthier, top-tier sector of the market is now trending towards Accretive Health 100 Employees In Process increasingly more bullish fundamentals as landlords of these assets have become more tenacious in their negotiations and are more selective about which deals they will aggressively pursue.
2012 FORECAST Office market fundamentals should continue to improve throughout 2012 and, barring any unforeseen catastrophes, a more sustained recovery will likely develop in 2013. Many tenants feel more confident in their long-term viability than they did just one year ago and the nervousness and that stalled decision-making during the last several years has given way to cautious optimism. However, full recovery will be largely predicated on economic growth. Serving as a deterrent to a completely rebounded outlook are global concerns surrounding the Eurozone debt crisis and recent rumors about a slowdown in emerging markets. This, combined with political indecision within our own government and the unknown impact that the upcoming U.S. presidential election will have on our national economy, has tenants expressing continued concerns about the sustainability of a recovery.
The pace of recovery in the first part of 2012 will likely be tepid due to the global uncertainties that continue to prevent the average business from moving forward with more aggressive hiring and in turn delays their ability to make leasing decisions unless they are expiration-driven. Large corporations that are feeling more confident about their long-term viability and have a higher comfort level for signing long-term lease commitments will continue to carry demand in the market while small- to mid-sized tenants slowly move towards reaching that same comfort level assuming economic recovery supports it. As such, improvements in the market will continue to be unevenly dispersed with certain landlords and submarkets experiencing more robust leasing activity while others will continue to struggle attracting tenants. As the market continues to gradually pull out of the slump, 2012 should be an opportunistic year for tenants and landlords alike. Tenants that are creditworthy and flexible in their space options will still be able to locate numerous opportunities to lock in reduced rental rates while landlords will use the coming year to focus on improving occupancies and stabilizing their assets in order to better position themselves for the future. It is anticipated that the movement towards recovery that the Chicago CBD experienced in 2011 will continue into 2012, although the overall growth experienced will remain modest until economic uncertainty no longer becomes the norm.
COLLIERS INTERNATIONAL | P. 2 Investment Sales Activity 2006 - 2011
70
60 60 53 50
40
30 Number of Sales 20 15 16
10 9 3 0 2006 2007 2008 2009 2010 2011
Class A Class B Class C
Source: Costar; Colliers International Research
RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
New Constructionv Deliveries VACANCY AND ABSORPTION 2000 - 2010 The CBD vacancy rate continued its descent NETNet ABSORPTIONAbsorption & Vacancy & VACANCY CENTRAL BUSINESS DISTRICT during the fourth quarter, ending the year at 15.1 4,000,000 Overall CBD 3,652,913 percent, compared to 15.8 percent at the end of 4,003,0,500000,000 3,562,728 3,695,540 18.0% 2010. During this most recent down cycle, 15.8% 15.8% 16.0% 3,03,00,000000,000 15.1% vacancy peaked at 16.2 percent in the first 14.5% 14.0% quarter of 2010. However, modest decreases 2,002,0,500000,000 12.1% 12.0% Vacancy 1,892,460111.9%,897,981 during the past seven consecutive quarters have 2,000,000 1,745,968 996,110 1,000,000 10.0% allowed for some headway towards recovery, as 1,504,364 408,121 1,500,000 1,331,436 Square Footage 0 8.0%
the current vacancy rate is the lowest reported Square Footage 933,710 1,000,000 782,400 (206,844) since the end of 2009. 665,000 6.0% (1,000,000) 479,000 500,000 4.0% Further, the sublease vacancy rate has fallen to (2,000,000) 0 000 0 (1,992,685) 2.0% pre-recessionary levels and currently resides at 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122013 (3,000,000) 0.0% 1.2 percent, which is below the 10-year average Source:2006 Costar; Colliers2007 International2008 Research 2009 2010 2011 sublease vacancy rate of 1.7 percent. Sublease Source: Costar; Colliers International Research Absorption Vacancy vacancy rates can often be a good measure of a market’s health as tenants typically place excess Submarket Vacancy Rates space on the sublease market in hopes of SUBMARKET2009 - 2011 VACANCY RATES 2009 - 2011 recouping some expenses during down cycles. In 2009, sublease vacancy peaked at 2.2 percent 20.0% 17.9% 17.1% 17.0% 17.1% 17.0% and has posted steady descents ever since. 16.4% Asking Gross Rental14.8% Rates 15.1% 15.2% 14.3% 14.7% 14.6% Overall15.0% CBD 14.1% Net absorption was positive 296,344 square feet 13.3% $45.00
during the fourth quarter, representing seven ) $40.00 10.3%
(% 10.0% consecutive quarters of gains. Net absorption for the year totaled 996,110 square feet, the $35.00 largest annual gain since 2007. At the end of $30.00
Vacancy 5.0% 2010, net absorption was negative 206,844 $25.00 square feet. While all three asset classes finished $20.00 2011 with positive gains, Class B space posted $15.000.0% Central Loop East Loop North Michigan Ave. River NorthWest Loop the largest positive improvement with positive $10.00 589,694 square feet of net absorption. Class A $5.00 Source: Costar; Colliers International Research 2009 2010 2011 space totaled positive 264,061 square feet of net $0.00 2006 2007 2008 2009 2010 2011 absorption for 2011. Source: Costar; Colliers International Research Class A Class B Class C Average LEASE ACTIVITY The year finished on a strong note as four of the top five leasing transactions in the CBD were consummated during the fourth quarter. The largest was Aon Corporation’s renewal at its namesake building at 200 E. Randolph Street. In its commitment to add 1,000 jobs in the city by 2014, GE Capital renewed and expanded its space by 79,000 square feet to occupy a total of 371,000 square feet at 500 W. Monroe Street. Also during the quarter, PricewaterhouseCoopers renewed its 279,000-square-foot lease at 1 N. Wacker Drive and in a surprising decision the American Medical Association inked a 275,000-square-foot lease at the former IBM Plaza at 330 N. Wabash Avenue to relocate from its namesake tower at 515 N. State Street. As part of the transaction, the association secured naming rights of the building which will be renamed AMA Tower upon occupancy in 2013. The flurry of large lease transactions completed at the end of the fourth quarter suggests that companies are feeling a little more optimistic about their long-term viability and have decided to take advantage of tenant-favorable lease economics by signing long-term lease commitments.
With respect to large transactions, leasing volume improved substantially in 2011. The year ended with 18 lease transactions containing 100,000 square feet or greater totaling 3.6 million square feet of space. This is a vast improvement over the 7 transactions totaling 1.3 million square feet reported in 2010. As economic fears are starting to subside, tenant confidence should continue improving, resulting in a relatively healthy leasing landscape in 2012, particularly for larger tenants. Despite an expectation for improved leasing activity, the real question surrounds how much further tenants will continue to contract upon renegotiating leases or relocating to alternate spaces given an overall push to reduce company footprints.
COLLIERS INTERNATIONAL | P. 3 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
CHICAGO CBD SIGNIFICANT LEASING TRANSACTIONS OF FOURTH QUARTER 2011
Tenant Address Class Submarket Size (SF) Deal Type Aon Corporation 200 E. Randolph Street A East Loop 400,000 Renewal GE Capital 500 W. Monroe Street A West Loop 371,000 Renewal/Expansion American Medical Assocition 330 N. Wabash Avenue A River North 275,000 New Lease SmithBucklin Corp 330 N. Wabash Avenue A River North 111,000 New Lease DeVry 300 S. Riverside Plaza B West Loop 77,000 New Lease Quantitative Risk Management 181 W. Madison Street A Central Loop 68,000 Renewal Publicis Worldwide 111 E. Wacker Drive B East Loop 66,000 Renewal/Expansion Epstein International 600 W. Fulton Avenue C West Loop 60,000 Renewal Investment Sales Activity National Futures Association 300 S. Riverside2006 Plaza - 2011 B West Loop 60,000 Renewal/Expansion United Healthcare 200 E. Randolph Street A East Loop 55,000 New Lease Segal & Co. 101 N. Wacker Drive 70 B West Loop 52,000 West Loop 60 Morgan Stanley/Smith Barney 70 W. Madison Street 60 A Central Loop 45,000 Renewal 53 West Monroe Partners 222 W. Adams Street A West Loop 43,000 New Lease 50 Savo Group 155 N. Wacker Drive A+ West Loop 42,000 New Lease/Expansion SMS Assist 875 N. Michigan Avenue 40 A North Michigan Ave. 41,000 Sublease LinkedIn 525 W. Monroe Street A West Loop 41,000 Renewal/Expansion 30 Attorney's Liability Assurance Society 311 S. Wacker Drive A West Loop 40,000 Renewal Number of Sales 20 Townsend Analytics 100 S. Wacker Drive B West Loop 40,000 15 Renewal 16
Jacobs Engineering 525 W. Monroe Street 10 A West Loop 37,000 Renewal 9 3 Loop Capital 111 W. Jackson Blvd. B Central Loop 30,000 New Lease 0 Ryerson Steel 227 W. Monroe Street A 2006West Loop 2007 29,0002008 Sublease2009 2010 2011 International Fellowship of Christians & Jews 30 N. LaSalle Street B Central Loop Class25,000 A Class B Renewal/ExpansionClass C
Roundarch 300 E. Randolph Street Source:A Costar;East ColliersLoop International Research22,000 New Lease
CONSTRUCTION New Constructionv Deliveries New construction has not delivered to the Chicago CBD 2000 - 2010 since 2010 when the vertical expansion of the Blue Cross NEW CONSTRUCTION DELIVERIES 2000 - 2011 Blue Shield Building at 300 E. Randolph Street added 4,000,000 933,000 square feet to inventory. The last new building 3,652,913 additions to inventory occurred in 2009 with the deliveries 3,500,000 of 353 N. Clark Street, 300 N. LaSalle Street and 155 N. 3,000,000
Wacker Drive, which added a combined 3.7 million square 2,500,000 feet to inventory. During 2009 and 2010, discussions 1,892,4601,897,981 2,000,000 1,745,968 regarding the potential for new office development were 1,504,364 1,500,000 1,331,436 completely halted. Frozen credit markets combined with Square Footage 933,710 demand characteristics that did not support new inventory 1,000,000 782,400 665,000 completely tabled any proposed developments. As 2011 479,000 500,000 came to a close, discussions not only ensued again but 0 000 0 several developers are proactively marketing new 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122013 development plans to large tenants with expirations in the Source: Costar; Colliers International Research next three to five years, hoping to lure anchor tenants that could jumpstart the launch of a new office tower. Submarket Vacancy Rates While vacancy still remains elevated and broader market fundamentals2009 would - 201 normally1 not seem to support the addition of new inventory, the quality, large block sector of the market continues to become further constrained, providing few options for large tenants in the market. As a result, if pre-leasing requirements can be met so financing can be attained, there appears 20to.0 %be sufficient demand for new product that can offer large block availability. 2012 17.9% 17.1% 17.0% 17.1% 17.0% will likely be an active year as developers continue to court large tenants, complete site acquisitions,16.4% and delve into the construction planning phase. 15.1% 15.2% Dependent upon the size of the first tower to be launched, the actual delivery of 14.8a %new14.7 %building is a minimum of 24 months away. 14.6% 15.0% 14.3% 14.1% 13.3%
) 10.3%
(% 10.0%
Vacancy 5.0% COLLIERS INTERNATIONAL | P. 4
0.0% Central Loop East Loop North Michigan Ave. River NorthWest Loop
Source: Costar; Colliers International Research 2009 2010 2011 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
LARGE BLOCKS OF AVAILABILITY AND TENANT DEMAND 10 Large blocks of space in the CBD are defined as those containing 100,000 square feet or greater on blocks of a contiguous and direct basis. During the fourth quarter, the net change in large block availability CBD resulted in the addition of three blocks of space to the market. However, the total change in available Class A space square footage within the blocks was only 250,000 square feet as several other large blocks were consisting of decreasd in size during the quarter. Furthermore, there are only four blocks of space that could 1,943,438 accommodate a tenant 200,000 square feet or greater, which means the options available for the square feet largest tenants in the market remain very constrained. There are currently 23 large blocks totaling 3.8 million square feet of space available within all building classes of the CBD. Although this may sound like a plethora of options, when examined more 4 closely, larger tenants are finding that the spaces available for their occupancies are dwindling when blocks of factors such as asset class, submarket desirability, and view characteristics are considered. The West Loop Chicago CBD has seen a flight towards quality properties over the past several years, particularly within the legal and financial services industries. The need for large blocks of contiguous top-tier, space Class A well-located space with quality views often cannot be found in older buildings. Of the 23 blocks of consisting of available space, only 10 of them reside within Class A buildings. When dissected further, the lack of 915,079 high-view, quality, well-located space becomes even more apparent. Only four of those blocks reside square feet within the highly desired West Loop submarket and of those, only two are located within the building high-rise. While small to mid-sized tenants still have an abundance of space options in the market, larger tenants seeking the highest quality space in the market are left with very limited options, unless 2 they are willing to consider low-rise space or second generation assets. Such constrained conditions blocks of for large tenants have prompted increased discussions and active marketing of new office West Loop developments in the CBD. High Rise LARGE BLOCK DIRECT AVAILABILITIES (100,000+ SQUARE FEET) Class A space Building Class Size (SF) Floor Submarket consisting of 500 W. Monroe Street A 369,207 30-44 West Loop 668,721 200 E. Randolph Street A 340,959 66-77 East Loop square feet 233 S. Wacker Drive A 299,514 48-54 West Loop 222 N. LaSalle Street B 278,040 14-18 Central Loop 303 E. Wacker Drive B 241,206 13-20 East Loop 130 E. Randolph Street A 185,042 30-37 East Loop 55 E. Monroe Street B 175,263 38-41 East Loop 300 S. Riverside Plaza B 161,708 20-22 West Loop 11 S. LaSalle Street C 150,166 1-14 Central Loop 333 S. Wabash Avenue B 147,500 26-30 East Loop 303 E. Wacker Drive B 143,960 22-26 East Loop 111 W. Illinois Street A 141,503 5-10 River North 227 W. Monroe Street A 139,883 5-8 West Loop 10 S. Dearborn A 139,165 26-30 Central Loop 435-445 N. Michigan Avenue B 129,947 2-3 North Michigan Avenue 410 N. Michigan Avenue B 125,817 10-16 North Michigan Avenue 205/225 N. Michigan Avenue B 120,446 14-15 East Loop 33 S. State Street B 117,207 5-6 East Loop 161 N. Clark Street A 116,964 2-5 Central Loop 401 S. State Street C 110,898 4-6 East Loop 500 W. Monroe Street A 106,475 21-24 West Loop 401 N. Michigan Avenue A 104,726 21-25 North Michigan Avenue
COLLIERS INTERNATIONAL | P. 5 Net Absorption & Vacancy Overall CBD
4,000,000 3,562,728 3,695,540 18.0%
15.8% 15.8% 16.0% 3,000,000 15.1% 14.5% 14.0% 2,000,000 Vacancy 12.1% 11.9% 12.0% 996,110 1,000,000 10.0% 408,121
0 8.0% Square Footage (206,844) 6.0% (1,000,000) 4.0% (2,000,000) (1,992,685) 2.0%
(3,000,000) 0.0% 2006 2007 2008 2009 2010 2011
Source: Costar; Colliers International Research Absorption Vacancy
RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
RENTS AND CONCESSIONS
The average direct gross asking rental rate AsASKINGking Gross GROSS Rental FACE Rates RATE CENTRAL BUSINESS DISTRICT increased slightly during the fourth quarter to Overall CBD $31.45 per square foot, up from $31.24 per $45.00 square foot in the prior quarter. Compared to $40.00 the end of 2010, the average rate has minimally $35.00 descended from $31.54 per square foot. The relative lack of change in the average rental rate $30.00 between 2010 and 2011 seems to suggest a $25.00 stabilization in rates, especially when compared $20.00 to the $1.49 and $2.16 per-square-foot declines $15.00 experienced in 2009 and 2010, respectively. The Class A asking rental rate resides at $37.29 $10.00 per square foot gross, compared to $37.37 per $5.00 square foot at the end of 2010. Class B rental $0.00 rates remained relatively unchanged as well, 2006 2007 2008 2009 2010 2011 ending 2011 at $29.58 per square foot gross, up Source: Costar; Colliers International Research Class A Class B Class C Average slightly from $29.54 per square foot at the end of 2011.
Although vacancy remains over 15.0 percent, rental rates appear to have bottomed-out and are holding steady at current levels. Owners of Class A assets, particularly those that are properly positioned and heading towards the sale block, are likely to begin placing upward pressure on rates in 2012. The highest quality assets in the CBD boast the lowest vacancies and landlords of those assets have pulled back from competing so aggressively for tenants.
Concessions still remain tenant-favorable as many landlords continue to offer decent workletter packages and free rent. Well-capitalized landlords that offered above-market concession packages placed pressure on the rest of the market during much of 2011, creating a divide between landlords with cash and those without. As 2012 gets underway, concession packages are expected to soften a bit in the Class A sector where demand has increased. Most Class B and C Landlords will likely need hold rental rates and continue offering elevated concession packages in order to retain and recruit the value- minded tenants that exist in the market today.
CAPITAL MARKETS
Investment sales in the Chicago CBD picked upInv estment Sales Activity 2006 - 201INVESTMENT1 SALES ACTIVITY 2006 - 2011 pace during the last quarter of the year as seven transactions were closed before year-end. The 70 number of investment sales transactions in 2011 60 60 climbed to a total of 16, a substantial increase 53 over the nine sales reported in 2010 and even 50 further improvement over the virtually non- 40 existent sales activity reported in 2009. 30 During the year, property sales continued to Number of Sales 20 build off the momentum that was initiated in 15 16
2010 when the sale of several core assets 10 9 emphasized the pent-up investment demand 3 that existed in the market and highlighted 0 2006 2007 2008 2009 2010 2011 willingness by lenders to provide financing for Class A Class B Class C stabilized assets. While the focus of 2010 was on trophy assets, 2011 became an opportunity Source: Costar; Colliers International Research for the broader subset of CBD owners to test the market and evaluate what interest existed for product types that are considered core-plus or value-add opportunities with a more moderate risk profile. While activity has been relatively strong, owners of several of these core-plus properties opted to pull their assets from the market after pricing didn’t v meet expectations and strategies were re-evaluated.New Construction One such asset Deliverie wass the Willis Tower which was placed on the market during the second quarter 2000 - 2010 and removed during the fourth quarter.
4,000,000 3,652,913
3,500,000
3,000,000 COLLIERS INTERNATIONAL | P. 6 2,500,000 1,892,4601,897,981 2,000,000 1,745,968 1,504,364 1,500,000 1,331,436 Square Footage 933,710 1,000,000 782,400 665,000 479,000 500,000 0 000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122013
Source: Costar; Colliers International Research
Submarket Vacancy Rates 2009 - 2011
20.0% 17.9% 17.1% 17.0% 17.1% 17.0% 16.4% 15.1% 15.2% 14.8% 14.7% 14.6% 15.0% 14.3% 14.1% 13.3%
) 10.3%
(% 10.0%
Vacancy 5.0%
0.0% Central Loop East Loop North Michigan Ave. River NorthWest Loop
Source: Costar; Colliers International Research 2009 2010 2011 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
CAPITAL MARKETS continued
In addition to increased activity and a return to sales within all asset classes, another positive trend materialized during 2011 with the emergence of new investors to the market. Additionally, some investors that had taken a hiatus from the CBD market after sales activity plummeted returned during 2011.
Although movement in the capital markets appears to be increasing, activity still remains far from the investment volume experienced between 2005 and 2007, prior to credit markets freezing. Macroeconomic uncertainty still threatens to disrupt financing initiatives in 2012 and some experts predict that delinquency levels on securitized loans could increase as loans that were originated in 2006 and 2007 during the height of the market come due. Additionally, refinancing still remains a challenge for some owners of existing assets with high vacancies, causing some to consider seeking outside investors to recapitalize and reposition their buildings. Continued slow improvement in demand is expected into 2012 as the CBD market continues its recovery.
The most noteworthy sales during the fourth quarter included Irvine Company’s purchase of a 49 percent interest in the trophy tower at 1 N. Wacker Drive from Hines Real Estate Investment Trust. The transaction valued the 94 percent leased building at $620 million ($463 per square foot). Block 37 at 22 W. Washington Street also sold during the quarter for $183.5 million ($418 per square foot). The property was sold by a joint venture between Golub & Co. and Blackrock to Prudential Real Estate Investors. Further contributing to a string of blockbuster sales, the Leo Burnett Building at 35 W. Wacker Drive sold for $387 million ($346 per squarefoot) from Piedmont Office Realty Trust to UBS Realty. During the quarter two properties that will undergo repositioning in the market were also sold. 400 S. Jefferson Street will undergo a complete renovation to accommodate the relocation of Sara Lee’s new meat processing headquarters facility. The property was sold to Sterling Bay for $15 million ($49 per square foot). Additionally, 203 N. Wabash Street was purchased by a joint venture between Virgin Hotels and The John Buck Company for $14.8 million ($79 per square foot) from Urban Street Properties. The office building will be converted to a 250-room hotel. 1 N. WACKER DRIVE
CHICAGO CBD SALES ACTIVITY - FOURTH QUARTER 2011 Sub- Status Address Market Class Size (SF) Sale Price Price/SF Seller Buyer
FS 141 W. Jackson Boulevard CL B 1,400,000 TBD TBD CME Group -
FS 200 W. Jackson Boulevard WL B 476,711 TBD TBD Apollo Investment -
FS 32 W. Randolph Street CL C 226,666 TBD TBD David & Barbara Kalish -
UC 200 N. LaSalle Street CL A 645,170 TBD TBD Younan Properties Onni Group
UC 500 N. Michigan Avenue NM B 322,443 TBD TBD Zeller Realty Group Macerich
UC 350 N. Orleans Street RN B 1,243,000 $228,000,000 $183.43 Vornado Realty Trust Shorenstein Properties
UC 33 S. State St. (Foreclosure) EL B 938,994 $128,500,000 $136.85 Joseph Freed & Associates Winthrop Realty Grust
UC 111 E. Wacker Drive EL B 1,002,950 $151,000,000 $150.56 Parkway Properties CommonWealth REIT
Sold 1 N. Wacker Drive WL A+ 1,340,000 $620,000,000 $462.69 Hines Real Estate Inv. Trust Irvine Co.
Sold 35 W. Wacker Drive CL A 1,118,042 $387,000,000 $346.14 Piedmont Office Realty Trust UBS Realty
Sold 400 S. Jefferson Street WL C 304,000 $15,000,000 $49.34 KBK II Partnership Sterling Bay
Sold 55 W. Monroe Street CL B 803,046 $136,000,000 $169.36 LaSalle Investment Management Hearn Co.
Sold 203 N. Wabash Avenue EL C 185,895 $14,800,000 $79.61 Urban Street Properties Virgin Hotels/John Buck J.V.
Sold 250 S. Wacker Drive WL A 244,961 $90,000,000 $367.41 AEW Capital Credit Suisse
SOLD 22 W. Washington Street CL A+ 439,434 $183,500,000 $417.58 Golub & Co./Blackrock J.V. Prudential Real Estate Investors
CL = Central Loop EL = East Loop NM = North Michigan Avenue RN = River North WL = West Loop FS = For sale NM = New to Market UC = Under Contract
COLLIERS INTERNATIONAL | P. 7 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
Central Loop Although the Central Loop’s distinction as Chicago’s financial district has faded over recent years, it still remains home to some of the city’s largest financial institutions. As a result, it was among the hardest hit submarkets during the recession as financial services firms and banks either closed their doors or placed space on the sublease market in an effort to ease their financial burdens.
MARKET INDICATORS Further contributing to elevated vacancy levels was the large number of contractions that were Central Loop negotiated as part of lease renewals. Although improvement in the submarket’s fundamentals can be seen by way of a reduction in sublease availabilities and positive absorption gains for the year-end, Year-end Year-end 2010 2011 the Central Loop’s recovery has been more staggered and less evident than many of the other submarkets. VACANCY RATE 14.8% 14.7%
ABSORPTION (SF) -188,517 35,269 There is a palpable division between the health of the submarket’s Class A sector as compared to its Class B and C counterparts. This disparity is chiefly due to a large discrepancy between the vintage, RENTS $30.39 $30.22 space efficiencies, and amenity offerings in the submarket’s second generation Class A buildings and it’s somewhat antiquated Class B and C assets. The average Class A rental rate in the Central Loop INVENTORY 38,212,049 38,212,049 currently stands at $4.50 per square foot less than the pricing reported at the end of 2008. Tenants seeking an opportunity for flight-to-quality have taken advantage of this reduced pricing, as evidenced by a remarkably low Class A vacancy rate in a market that is still recovering. It can be expected that landlords of these Class A assets will place some upward pressure on rates into 2012, while Class B LARGE BLOCKS AVAILABLE and C landlords will need to maintain or even decrease rates in order to attract new tenants. 100,000 + SQUARE FEET: DIRECT
CLASS A CLASS B CLASS C During the fourth quarter, Quantitative Risk Management signed a lease renewal for 68,000 square feet at 181 W. Madison Street. Additionally, Morgan Stanley/Smith Barney renewed its 45,000-square- Central Loop 222 N. LASALLE ST 278,040 SF foot lease at 190 S. LaSalle Street. During 2011, only one lease greater than 100,000 square feet was consummated, with Accenture’s renewal and contraction at 161 N. Clark Street during the second 11 S. LASALLE ST 150,166 SF quarter.
10 S. DEARBORN 139,165 SF One new large block of direct space was placed on the market in the Central Loop during the fourth
161 N. CLARK ST 116,964 SF quarter, bringing the total amount of direct large blocks to four. The 278,000 square foot block is located at 222 N. LaSalle Street, although the majority of the space is not available for occupancy until 2014.
Two major Central Loop properties
CLASS A CLASS B CLASS C traded during the fourth quarter of 2011. 22 W. Washington Street sold East Loop 200 E. RANDOLPH ST 340,959 SF for $183.5 million ($417 per square 303 E. WACKER DR 241,206 SF foot) from a joint venture between 130 E. RANDOLPH ST 185,042 SF Golub & Co. and Blackrock to 55 E. MONROE ST 175,263 SF Prudential Real Estate Investors. 333 S. WABASH AVE 147,500 SF Additionally, the Leo Burnett Building 303 E. WACKER DR 143,960 SF at 35 W. Wacker Drive sold for $387 205/225 N. MICHIGAN AVE 120,446 SF Million ($346 per square foot) from 33 S. STATE ST 117,207 SF Piedmont Office Realty Trust to UBS Realty. 200 N. LaSalle St., listed for sale by Younan Properties, is under
CLASS A CLASS B CLASS C contract for an undisclosed price to the North Mich 22 W. WASHINGTON STREET 35 W. WACKER DRIVE Onni Group. 435-445 N. MICHIGAN AVE 129,947
410 N. MICHIGAN AVE 125,817
401 N. MICHIGAN AVE 104,726
COLLIERS INTERNATIONAL | P. 8
CLASS A CLASS B CLASS C
River North 111 W. ILLINOIS ST. 141,503 SF
CLASS A CLASS B CLASS C West Loop 500 W. MONROE ST. 369,207 SF 233 S. WACKER DR. 299,514 SF
300 S. RIVERSIDE PLZ. 161,708 SF
227 W. MONROE ST. 139,883 SF
500 W. MONROE ST. 106,475 SF RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
VACANCY After increasing to 15.5 percent at the start of 2011, the Central Loop saw positive movement in Net Absorption & Vacancy NETCentral ABSORPTION Loop Submarket & VACANCY CENTRAL LOOP SUBMARKET the last three quarters, ending the year at 14.7 1,500,000 16.0% percent. The majority of gains during the year 14.6% 1,204,463 14.8% 14.7% 14.3% were due to the successful disposition of Net Absorption & Vacancy 14.0% 1,000,000 12.4% sublease space, particularly in the Class B Central Loop Submarket 12.0% 11.5% sector. The Central Loop is home to many of 1,500,000 591,234 16.0%
10.0% Vacanc 500,000 Chicago’s financial services firms and banking 14.6% 1,204,463 14.8% 14.7% 14.3% 14.0% 113,388 8.0% institutions. As economic conditions worsened y 1,000,000 35,269 0 12.4% in past quarters, tenants in Class B properties 6.0% 12.0% Square Footage 11.5% rushed to place excess space on the sublease 591,234 (188,517) 4.0%
10.0% Vacanc market in hopes of recouping expenses. The -500,000500,000 2.0% Class B sublease vacancy rate dramatically 8.0% 113,388 (741,968) 35,269 y spiked from 0.8 percent at the end of 2008 to -1,000,000 0 0.0% 2006 2007 2008 2009 2010 2011 6.0% 3.2 percent by the end of 2009. That rate now Square Footage (188,517) resides at 1.8 percent, a substantial improvement Source: Costar; Colliers International Research Absorption Vacancy 4.0% largely attributable to the absorption of that -500,000 2.0% sublease space by discount-seeking tenants. The Central Loop currently boasts the lowest Class A vacancy rate in the(741,968 CBD) at 10.3 percent. Despite this, Class A vacancy still resides well above the 7.4 percent rate-1,000, that000 was posted pre-recession in 2008. 0.0% 2006 2007 2008 2009 2010 2011
ABSORPTION AskingSource: Gross Costar; Rental Colliers Rate Internationals Research Absorption Vacancy Central Loop Submarket Net absorption during the fourth quarter was positive 103,802 square feet. Due to a dismal first quarter, the year-end total net absorption was only $45.00 positive 35,269 square feet. However, this is the first time in two years that the Central Loop has posted positive net absorption at year-end. Although there is much room for improvement and substantial ground$40.00 to make up, glimmers of recovery are apparent. $35.00 CONSTRUCTION ASKING$30.00 GROSS FACE RATES CENTRAL LOOP SUBMARKET As$2king5.00 Gross Rental Rates No new construction was delivered to Central Central Loop Submarket Loop during the fourth quarter. There are $20.00 $45.00 currently no office developments planned in the $15.00 $40.00 submarket. $10.00 $35.00 $5.00 RENTS $3$00.00.00 2006 2007 2008 2009 2010 2011 After falling in the first quarter of the year, the $25.00 average direct gross asking rate increased every Source: Costar; Colliers International Research Class A Class B Class C Average quarter thereafter, ending the year at $30.22 per $20.00 square foot. This rate still remains below the $15.00
$30.39 per square foot rate posted at the end of $10.00 2010. The average Class A asking rate for the $5.00 fourth quarter was $36.46 per square foot, down $0.00 from $37.12 per square foot one year ago. Class 2006 2007 2008 2009 2010 2011 B rates fell over the past year to $28.69 per Source: Costar; Colliers International Research Class A Class B Class C Average square foot, down from $28.75 per square foot at the end of 2010.
COLLIERS INTERNATIONAL | P. 9 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
CENTRAL LOOP LEASE ACTIVITY
FOURTH QUARTER 2011
Tenant Address Class Size (SF) Deal Type Quantitative Risk Management 181 W. Madison Street A 68,000 Renewal Morgan Stanley/Smith Barney 70 W. Madison Street A 45,000 Renewal Loop Capital 111 W. Jackson Boulevard B 30,000 New Lease International Fellowship of Christians & Jews 30 N. LaSalle Street B 25,000 Renewal/Expansion
181 W MADISON STREET
CENTRAL LOOP SALES ACTIVITY 22 W. WASHINGTON STREET 35 W. WACKER DRIVE 200 N. LASALLE STREET
FOURTH QUARTER 2011
Status Address Class Size (SF) Sale Price Price/SF Seller Buyer
SOLD 22 W. Washington Street A+ 439,434 $183,500,000 $417.58 Golub & Co./Blackrock J.V. Prudential Real Estate Investors
UC 200 N. LaSalle Street A 645,170 TBD TBD Younan Properties Onni Group
SOLD 35 W. Wacker Drive A 1,118,042 $387,000,000 $346.14 Piedmont Office Realty Trust UBS Realty
FS 141 W. Jackson Boulevard B 1,400,000 TBD TBD CME Group -
SOLD 55 W. Monroe Street B 803,046 $136,000,000 $169.36 LaSalle Investment Management Hearn Co.
FS 32 W. Randolph Street C 226,666 TBD TBD David & Barbara Kalish -
FS = For sale UC = Under Contract
COLLIERS INTERNATIONAL | P. 10 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
East Loop
The East Loop’s diverse inventory offers quality space options at an affordable price compared to its direct competitors in the Central and West Loop. Additionally, the submarket’s convenient proximity to area parks and a growing retail and entertainment presence provide its tenants with an opportunity for a greater work-life balance.
The unique office environment in the East Loop attracts a very diverse tenant base including major corporations, advertising firms, universities and not-for-profit organizations. Prior to the economy entering a recession, several landlords took advantage of market conditions by restoring many of the MARKET INDICATORS East Loop’s Class B and C properties. The outdated buildings were converted to modernized East Loop residential or office condo properties. While the condo market has slowed substantially in light of Year-end Year-end recent economic conditions, the renovated buildings have helped to further diversify and invigorate 2010 2011 CLASS A CLASS B CLASS C the East Loop, bringing new vitality to the submarket. VACANCY RATE 17.1% 16.4% Central Loop 222 N. LASALLE ST 278,040 SF During 2011, several factors contributed to a fairly successful year for the submarket. The burn-off -9,560 167,578 ABSORPTION (SF) and absorption of sublease space helped the East Loop make traction on its path to recovery, reducing 11 S. LASALLE ST 150,166 SF RENTS $30.08 $29.65 vacancy by 70 basis points over the past year. Additionally, in the last part of 2011, the submarket made significant headway with the completion of several large renewals. These renewals were long- 10 S. DEARBORN 139,165 SF INVENTORY 25,763,627 25,763,627 term commitments made by existing East Loop tenants, thereby mitigating landlord risk to losing
161 N. CLARK ST 116,964 SF those tenants to other submarkets in the near future.
The largest transaction in the CBD during the fourth quarter occurred in the East Loop. Aon LARGE BLOCKS AVAILABLE 100,000 + SQUARE FEET: DIRECT Corporation’s 15-year lease renewal for 400,000 square feet at its namesake building at 200 E. Randolph Street garnered headlines during the quarter. Although Aon Corporation will be moving its CLASS A CLASS B CLASS C main headquarters overseas to London, the company will continue to keep its space at Aon Center as East Loop 200 E. RANDOLPH ST 340,959 SF an America’s headquarters office. Also during the quarter, Publicis Worldwide doubled its space at 303 E. WACKER DR 241,206 SF 111 E. Wacker Drive to 66,000 square feet, accommodating the relocation of one of its business units
130 E. RANDOLPH ST 185,042 SF into the building. The East Loop reported five leasing transactions that were 100,000 square feet or greater during 2011, an impressive gain for the submarket considering it did not have any such 55 E. MONROE ST 175,263 SF transactions throughout all of 2010. The abundance of leasing velocity experienced in the East Loop 333 S. WABASH AVE 147,500 SF is a testament to cost-conscious tenants’ desire for value-play opportunities combined with the 303 E. WACKER DR 143,960 SF appeal of the East Loop’s unique office culture. 205/225 N. MICHIGAN AVE 120,446 SF 33 S. STATE ST 117,207 SF Despite this positive news, East Loop landlords are not out of the clear as the submarket still retains the largest number of contiguous blocks greater than 100,000 square feet available for lease in the CBD. Only two of these nine contiguous blocks reside in Class A buildings. Landlords will need to
CLASS A CLASS B CLASS C maintain their willingness to offer reduced rental rates and provide maximum concessions relative to North Mich other submarkets in order to successfully fill these 435-445 N. MICHIGAN AVE 129,947 blocks of vacant space. Landlords will likely look to recruit tenants from neighboring North Michigan 410 N. MICHIGAN AVE 125,817 Avenue and River North as well as lure tenants from the suburbs. 401 N. MICHIGAN AVE 104,726 During the fourth quarter, 203 N. Wabash sold for $14.8 million ($80 per square foot) from Urban Street Properties to a joint venture between Virgin
CLASS A CLASS B CLASS C Hotels and The John Buck Company. Additionally, Sullivan Center at 33 S. State Street is under River North 111 W. ILLINOIS ST. 141,503 SF contract for $128.5 million ($137 per square foot).
203 N WABASH AVE 33 S STATE STREET
COLLIERS INTERNATIONAL | P. 11
CLASS A CLASS B CLASS C West Loop 500 W. MONROE ST. 369,207 SF 233 S. WACKER DR. 299,514 SF
300 S. RIVERSIDE PLZ. 161,708 SF
227 W. MONROE ST. 139,883 SF
500 W. MONROE ST. 106,475 SF RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
VACANCY During the fourth quarter of 2011 East Loop Net Absorption & Vacancy vacancy declined further to end the year at 16.4 NETEast ABSORPTIONLoop Submarket & VACANCY EAST LOOP SUBMARKET percent, a marked decrease from the 17.1 percent 800,000 20.0% 620,653 558,304 vacancy rate reported at the end of 2010. While 600,000 17.9% 18.0% Net Absorption & Vacancy 17.1% the direct vacancy rate has remained steady at 400,000 16.4% East Loop Submarke15.6% t 239,479 16.0% 167,578 15.4 percent throughout much of 2011, sublease 200,000 14.7% 800,000 14.0% 20.0% vacancy has dramatically fallen from 2.4 percent 0 620,653 Vacanc 558,304 12.2% 12.0% 600,000 17.9(9,560% ) 18.0% at the end of 2010 to its current level of 1.0 -200,000 17.1% 10.0% 16.4%
400,000 y -400,000 15.6% 239,479 16.0% percent. A decrease in sublease vacancy levels 167,578 200,000 14.7% 8.0% are a positive sign for East Loop landlords as Square Footage -600,000 14.0% 6.0% -800,0000 Vacanc they no longer have to compete with an 12.2% (9,560) 12.0% -1,000,-200,000000 4.0% exorbitant amount of subleases that are priced 10.0%
2.0% y at a large discount to direct space. Despite this -1,200,-400,000000 (1,134,981) -1,400,000 0.0% 8.0% positive movement, the East Loop’s vacancy rate Square Footage -600,000 2006 2007 2008 2009 2010 2011 6.0% still remains the highest of any other submarket -800,000 Source: Costar; Colliers International Research Absorption Vacancy in the CBD. -1,000,000 4.0% 2.0% -1,200,000 (1,134,981) ABSORPTION -1,400,000 0.0% 2006 2007 2008 2009 2010 2011 Net absorption during the fourth quarter ended at positive 59,245 square CONSTRUCTION feet. Year-end net absorption totaled positive 167,578 squareSource: feet, Costar; making Colliers International Research Absorption Vacancy it the best performing year for the submarket since 2008.Asking Gross Both RentalClass RatesA No new construction was delivered to the East Loop during the East Loop Submarket fourth quarter. At this time, there are not any plans for new office and B properties recorded positive absorption at the$4 end5.00 of 2011 with 76,811 square feet and positive 90,900 square feet, respectively, while developments in the submarket. $40.00 Class C space posted negative 133 square feet. $35.00
$30.00 RENTS Asking Gross Rental Rates ASKING$25.00 GROSS FACE RATES EAST LOOP SUBMARKET During the fourth quarter, the average direct East Loop Submarket $20.00 gross asking rate increased to $29.65 per square $45.00 $15.00 foot from $29.42 per square foot in the prior $40.00 $10.00 quarter. One year ago at the end of 2010, the $35.00 average direct gross asking rate was $30.08 per $5.00 $30.00 square foot, a $0.43 per square foot increase $0.00 2006 2007 2008 2009 2010 2011 over the current rate. While Class B and C $25.00 Source: Costar; Colliers International Research Class A Class B Class C Average buildings remained consistent or saw an increase $20.00 in rental rates over the past year, Class A $15.00 properties posted significant reductions with the current rate of $35.63 per square foot far below $10.00 the $38.03 per square foot rate posted at the end $5.00 of 2010. $0.00 2006 2007 2008 2009 2010 2011
Source: Costar; Colliers International Research Class A Class B Class C Average
COLLIERS INTERNATIONAL | P. 12 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
EAST LOOP LEASE ACTIVITY
FOURTH QUARTER 2011
Tenant Address Class Size (SF) Deal Type Aon Corporation 200 E. Randolph Street A 400,000 Renewal United Healthcare 200 E. Randolph Street A 55,000 New Lease Roundarch 300 E. Randolph Street A 22,000 New Lease Publicis Worldwide 111 E. Wacker Drive B 66,000 Renewal/Expansion
200 E. RANDOLPH 111 E. WACKER STREET DRIVE
EAST LOOP SALES ACTIVITY 203 N. WABASH AVENUE 33 S. STATE STREET
FOURTH QUARTER 2011
Status Address Class Size (SF) Sale Price Price/SF Seller Buyer
UC 33 S. State Street (foreclosure) B 938,994 $128,500,000 $136.85 Joseph Freed & Associates Winthrop Realty Grust
UC 111 E. Wacker Drive B 1,002,950 $151,000,000 $150.56 Parkway Properties CommonWealth REIT
SOLD 203 N. Wabash Avenue C 185,895 $14,800,000 $79.61 Urban Street Properties Virgin Hotels/John Buck J.V.
UC = Under Contract
COLLIERS INTERNATIONAL | P. 13 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
North Michigan Avenue As the smallest submarket in the CBD, North Michigan Avenue’s office
CLASS A CLASS B CLASS C towers are interspersed with high-class residential towers that lie along a world-renowned retail corridor. This submarket is also home Central Loop 222 N. LASALLE ST 278,040 SF to Northwestern Memorial Hospital and is furthering its medical office 11 S. LASALLE ST 150,166 SF presence with the opening of Children’s Memorial Hospital in 2012. 10 S. DEARBORN 139,165 SF The combination of residents, office workers, tourists and healthcare
161 N. CLARK ST 116,964 SF providers within the submarket creates a vastly diverse working MARKET INDICATORS environment that is unique to North Michigan Avenue. North Michigan Avenue Year-end Year-end 2010 2011 This distinctive submarket was initially sheltered from the economic downturn and still boasts the CLASS A CLASS B CLASS C lowest vacancy rate due to a very loyal tenant base and small office inventory. Despite its position as VACANCY RATE 13.3% 14.1% East Loop 200 E. RANDOLPH ST 340,959 SF the least vacant CBD submarket, its current vacancy rate of 14.1 percent remains at a 10-year ABSORPTION303 E. WACKER (SF) DR -387,014 241,206-106,107 SF historical high. The submarket is suffering from a slower pace of recovery compared to its more traditional counterparts and ended 2011 as the only submarket to post losses at year-end. 130 E. RANDOLPHRENTS ST $31.36185,042 SF $31.59 55 E. MONROE ST 175,263 SF The only large lease transaction recorded during the fourth quarter in North Michigan Avenue was a INVENTORY 13,087,879 13,087,879 333 S. WABASH AVE 147,500 SF sublease. SMS Assist subleased space at the John Hancock Center at 875 N Michigan Avenue, thus 303 E. WACKER DR 143,960 SF removing a large block of sublease availability from the market. The company relocated from 6 W. 205/225 N. MICHIGAN AVE 120,446 SF Hubbard Street in River North where it leased 11,000 square feet of space. SMS Assist nearly 33 S. STATE ST 117,207 SF quadrupled its space taking 41,000 square feet of space in the John Hancock Center. LARGE BLOCKS AVAILABLE 100,000 + SQUARE FEET: DIRECT During the quarter, three large blocks of contiguous and direct space greater than 100,000 square feet became available in North Michigan Avenue. Blocks were added at 435-445 N. Michigan CLASS A CLASS B CLASS C North Mich Avenue and 410 N. Michigan Avenue. Additionally, more space became available at 401 N. Michigan 435-445 N. MICHIGAN AVE 129,947 Avenue, creating another large block of space.
Leasing activity tends to be slower in North Michigan Avenue and as 410 N. MICHIGAN AVE 125,817 such any changes in the submarket’s vacancy rate typically occur more gradually. It can be expected that North Michigan Avenue will have a 401 N. MICHIGAN AVE 104,726 longer and more labored recovery than most of the other CBD submarkets and will maintain an elevated vacancy rate until a more pronounced economic recovery is underway. Additionally, a lack of modern inventory and a fringe location will hinder the submarket’s CLASS A CLASS B CLASS C recovery as demand is stronger for newer buildings in a location that River North 111 W. ILLINOIS ST. 141,503 SF is more ideal for the typical office user.
No investment sales occurred in North Michigan Avenue during the fourth quarter. However, 500 N. Michigan Avenue is currently under contract for an undisclosed sum. The 322,000-square-foot building is being sold by Zeller Realty Group to Macerich.
. 500 N MICHIGAN AVENUE
CLASS A CLASS B CLASS C West Loop 500 W. MONROE ST. 369,207 SF 233 S. WACKER DR. 299,514 SF
300 S. RIVERSIDE PLZ. 161,708 SF
227 W. MONROE ST. 139,883 SF COLLIERS INTERNATIONAL | P. 14
500 W. MONROE ST. 106,475 SF RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
VACANCY The overall vacancy rate for North Michigan Avenue changed minimally during the fourth NORTH MICHIGAN SUBMARKET NETNet ABSORPTION Absorption & Vacancy & VACANCY quarter, with a slight increase to 14.1 percent, up North Michigan Avenue Submarket from 14.0 percent in the previous quarter. 400,000 16.0%
Relative to the end of 2010, vacancy has 274,254 300,000 14.1% 14.0% 13.3% increased 80 basis points over the last year, 200,000 12.0% making it the only submarket to show a rise in 117,941 11.8%
100,000 Vacanc 10.3% 10.0% vacancy during 2011. Since the end of 2009 9.7% 9.9% Net Ab0 sorption & Vacancy when vacancy was at 10.3 percent, vacancy in North Michigan Avenue Submarket (21,868) 8.0% y -100,000 (59,757)
the submarket has steadily increased for eight Square Footage 400,000 (106,107) 6.0% 16.0% consecutive quarters. Class A space in the -200,000 274,254 300,000 4.0% 14.1% 14.0% -300,000 submarket has seen the largest increases in 13.3% 200,000 vacancy during the downturn, with the current -400,000 2.0% 12.0% 117,941 11.8% (387,014)
100,000 Vacanc 18.3 percent vacancy rate well above the 12.0 -500,000 10.3% 0.0% 2006 2007 9.7% 2008 9.9% 2009 2010 2011 10.0% percent rate posted just two years ago. 0
Source: Costar; Colliers International Research y Absorption(21,868) Vacancy 8.0% ABSORPTION -100,000 (59,757) Square Footage (106,107) 6.0% Total net absorption for the fourth quarter was negative 5,101-200,000 square feet, 4.0% bringing the year-end total to negative 106,107 square feet.-300,000 The largest CONSTRUCTION absorption loss for the submarket resulted from Cushman-400,000 & Wakefield 2.0% (387,014) vacating 24,000 square feet at 455 N. Cityfront Plaza, nearly doubling its No new construction was delivered to North Michigan Avenue Asking-500,000 Gross Rental Rates 0.0% space in a move to the West Loop at 200 S. WackerNorth Drive. Michigan Demand Avenue for200 Submarke 6 t during2007 the fourth2008 quarter. There2009 are currently no2010 office developments2011 space in North Michigan Avenue is expected to remain $4low5.00 until there is a planned in the submarket. Source: Costar; Colliers International Research Absorption Vacancy more sustained economic recovery. However, the opening$40.00 of Children’s
Memorial Hospital in 2012 and the growth of Northwestern$35.00 Memorial
Hospital could increase the demand for medical office$30.00 space in North
Michigan Avenue, benefiting the submarket’s recovery. $25.00
$20.00
RENTS $15.00 AASKINGsking Gross GROSS Rental FACE Rates RATES NORTH MICHIGAN SUBMARKET Despite labored fundamentals in the submarket, North$10.00 Michigan Avenue Submarket the average direct gross asking rate increased $4$55.00.00 from $30.82 per square foot in third quarter to $4$00.00.00 2006 2007 2008 2009 2010 2011 $31.59 per square foot in the fourth quarter. $35.00Source: Costar; Colliers International Research Class A Class B Class C Average However, the current asking rate remains virtually unchanged from the rate posted at the $30.00 end of 2010. The average asking Class A rate for $25.00 fourth quarter resides at $36.25 per square foot $20.00 while Class B rates are at $31.17 per square foot. $15.00
$10.00
$5.00
$0.00 2006 2007 2008 2009 2010 2011
Source: Costar; Colliers International Research Class A Class B Class C Average
COLLIERS INTERNATIONAL | P. 15 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
NORTH MICHIGAN LEASE ACTIVITY
FOURTH QUARTER 2011
Tenant Address Class Size (SF) Deal Type SMS Assist 875 N. Michigan Avenue A 41,000 Sublease
875 N. MICHIGAN AVENUE | JOHN HANCOCK TOWER
NORTH MICHIGAN SALES ACTIVITY
FOURTH QUARTER 2011
Status Address Class Size (SF) Sale Price Price/SF Seller Buyer
UC 500 N. Michigan Avenue B 322,443 TBD TBD Zeller Realty Group Macerich
UC = Under Contract
500 N. MICHIGAN AVENUE
COLLIERS INTERNATIONAL | P. 16 CLASS A CLASS B CLASS C
222 N. LASALLE ST 278,040 SF Central Loop RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
11 S. LASALLE ST 150,166 SF 10 S. DEARBORN 139,165 SF River North 161 N. CLARK ST 116,964 SF Known for its diverse tenant base housed in a similarly varied inventory base, River North remains an equally attractive option to both traditional users of office space, such as law firms, as well as more unconventional CLASS A CLASS B CLASS C tenants, including technology and software providers. East Loop 200 E. RANDOLPH ST 340,959 SF 303 E. WACKER DR 241,206 SF In 2009, deteriorating economic conditions coupled with the delivery of nearly 2.5 million square feet 130 E. RANDOLPH ST 185,042 SF of office inventory at 300 N. LaSalle Street and 353 N. Clark Street caused a dramatic spike in the 55 E. MONROE ST 175,263 SF submarket’s vacancy rate. However, since reaching its peak rate of 17.0 percent in the fourth quarter 333 S. WABASH AVE 147,500 SF of 2009, River North has made substantial gains. As tenants gradually took occupancy of the new MARKET INDICATORS 303 E. WACKER DR 143,960 SF Class A office towers and landlords in the loft-style Class B sector benefitted from expansions within River North 205/225 N. MICHIGAN AVE 120,446 SF the technology industry, overall vacancy in the submarket has descended over 240 basis points Year-end Year-end 33 S. STATE ST 117,207 SF during the last two years. 2010 2011 VACANCY RATE 15.1% 14.6% Two significant River North lease transactions were consummated during the fourth quarter. Both of the transactions occurred at 330 N. Wabash Avenue, thereby removing one of the few large blocks of ABSORPTION (SF) CLASS304,988 A CLASS B 89,228CLASS C contiguous direct space from the market. The large block that was removed has been on the market North Mich since 2009 when law firm, Jenner and Block relocated from the building. The American Medical 435-445 N. MICHIGANRENTS AVE $32.97 129,94$32.657 Association (“AMA”) decided to relocate from its long-term headquarters and namesake building at INVENTORY 16,456,857 16,456,857 410 N. MICHIGAN AVE 125,817 515 N. State Street in 2013. The association will be occupying 275,000 square feet on the top eight floors of 330 N. Wabash Avenue. As part of the transaction, naming rights to the building were
401 N. MICHIGAN AVE 104,726 secured and the tower will be renamed AMA Plaza when the association relocates. Additionally, SmithBucklin signed an 111,000 SF lease at 330 N. Wabash, with plans to relocate in 2013 upon lease LARGE BLOCKS AVAILABLE expiration. Lastly, law firm Latham & Watkins has committed to occupying 160,000 square feet at 100,000 + SQUARE FEET: DIRECT 330 N. Wabash. This recent leasing activity in River North is not only significant for the submarket
CLASS A CLASS B CLASS C but also for the CBD as a whole as they make a statement that the number of large blocks of available space are dwindling fast, putting pressure on larger tenants to accelerate their decision making 111 W. ILLINOIS ST. River North 141,503 SF processes.
The removal of space at 330 N. Wabash Avenue during the fourth quarter due to AMA and SmithBucklin’s leasing signings further constrained the availability of large, contiguous blocks in River North. 111 W. Illinois Street currently has the only large block greater than 100,000 square feet on a contiguous and direct basis in River North, with 141,503 square feet of available space. As evidenced by the flurry of leasing at 330 N. Wabash, sizeable tenants with looming lease expirations are expanding their boundaries and relocating to areas, such as River North, that historically were not considered prime office locations for large users due to limited large block availability across the market.
After being on the market twice during 2011, the sale of the former Apparel Center at 350 W. Mart Center, closed during the fourth CLASS A CLASS B CLASS C quarter. The property was purchased by San Francisco investor Shorenstein Properties LLC for $228 million ($190 per square foot) 500 W. MONROE ST. 369,207 SF West Loop from New York-based Vornado Realty Trust. Shorenstein Properties 233 S. WACKER DR. 299,514 SF has one other investment property in Chicago, a joint-venture stake in 311 S. Wacker Drive that was acquired in 2006. 300 S. RIVERSIDE PLZ. 161,708 SF
227 W. MONROE ST. 139,883 SF .
500 W. MONROE ST. 106,475 SF
350 W MART CENTER
COLLIERS INTERNATIONAL | P. 17 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
VACANCY The River North vacancy rate held steady during the fourth quarter at 14.6 percent. After rising RIVER NORTH SUBMARKET NETNet ABSORPTION Absorption & Vacancy & VACANCY sharply to 17.0 percent in 2009 with the delivery River North Submarket of three new office towers, the submarket’s 1,000,000 18.0% 927,237 17.0% vacancy rate has steadily descended to its 900,000 16.0% 15.1% 800,000 14.6% current level. Despite descending 100 basis 14.0% 13.2% points during the fourth quarter, River North’s 700,000
12.0% Vacancy Class A vacancy rate of 26.3 percent remains Net600,00 Ab0sorption & Vacancy 10.8% 10.0% the most elevated for Class A space in the CBD. River500,00 North0 Submarket 8.9% 8.0% 1,000,400,000000 18.0% This elevated rate is largely due to a smaller Square Footage 338,233 927,237 17.0% 304,988 6.0% inventory base and the existence of large blocks 90300,000,0000 265,990 16.0% 15.1% 4.0% 80200,000,0000 177,164 14.6% of availability at 330 N. Wabash Avenue. 14.0% 13.2% 89,228 2.0% However, with two large lease signings totaling 70100,000,000
12.0% Vacancy 386,000 square feet at the property, vacancy is 0 0.0% 600,000 2006 2007 10.8% 2008 2009 2010 2011 expected to descend once the tenants take 10.0% 500,000 Source: Costar; Colliers International Research Absorption 8.9% Vacancy occupancy in 2013. Available Class A subleases 8.0% 400,000 are also inflating the vacancy rate. AT&T has Square Footage 338,233 304,988 6.0% 161,000 square feet listed for sublease at 350 N. Orleans and30 0,00Level0 3 Communications265,990 4.0% is attempting to dispose of 117,000 square feet via sublease200,000 at 600 W. Chicago 177,164 89,228 Avenue. 100,000 2.0% Asking Gross0 Rental Rates 0.0% 2006 2007 2008 2009 2010 2011 ABSORPTION River North Submarket CONSTRUCTION $4Source:5.00 Costar; Colliers International Research No newAbsorption constructionVacanc wasy delivered to River North during Net absorption during the fourth quarter was positive$4 6,3020.00 square feet of net absorption, carried by positive 50,971 square feet of net absorption within the Class A the fourth quarter. There are currently no office $35.00 sector. Net absorption for 2011 totaled positive 89,228 square feet for River North, developments planned in the submarket. $30.00 compared to positive 304,988 square feet at the end of 2010. Since the second $25.00 quarter of 2009 when vacancy levels peaked, the submarket has sustained eleven consecutive quarters of positive gains. $20.00 AASKINGsking$15.00 Gross GROSS Rental Rates FACE RATES RIVER NORTH SUBMARKET River North Submarket RENTS $10.00 $45.00 $5.00 The average direct gross asking rate decreased $40.00 $0.00 to $32.65 per square foot during the fourth 2006 2007 2008 2009 2010 2011 $35.00 quarter, down from $33.37 per square foot in the Source: Costar; Colliers International Research Class A Class B Class C Average prior quarter. At the end of 2010, the average $30.00 direct gross asking rate resided at $32.97. The $25.00 average asking Class A rate for the fourth quarter $20.00 was $38.78 per square foot, up from $38.18 per square foot one year ago. Conversely, Class B $15.00 rates fell over the past year to $26.96 per square $10.00 foot, down from $27.09 per square foot at the $5.00 end of 2010. $0.00 2006 2007 2008 2009 2010 2011
Source: Costar; Colliers International Research Class A Class B Class C Average
COLLIERS INTERNATIONAL | P. 18 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
RIVER NORTH SALES ACTIVITY
FOURTH QUARTER 2011
Tenant Address Class Size (SF) Deal Type American Medical Assocition 330 N. Wabash Avenue A 275,000 New Lease SmithBucklin Corp 330 N. Wabash Avenue A 111,000 New Lease
330 N WABASH
RIVER NORTH SALES ACTIVITY 350 W MART CENTER
FOURTH QUARTER 2011
Status Address Class Size (SF) Sale Price Price/SF Seller Buyer
UC 350 N. Orleans Street B 1,243,000 $228,000,000 $183.43 Vornado Realty Trust Shorenstein Properties
UC = Under Contract
COLLIERS INTERNATIONAL | P. 19 CLASS A CLASS B CLASS C
Central Loop 222 N. LASALLE ST 278,040 SF
11 S. LASALLE ST 150,166 SF
10 S. DEARBORN 139,165 SF
161 N. CLARK ST 116,964 SF
RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
CLASS A CLASS B CLASS C East Loop 200 E. RANDOLPH ST 340,959 SF 303 E. WACKER DR 241,206 SF West Loop 130 E. RANDOLPH ST 185,042 SF 55 E. MONROE ST 175,263 SF Ending 2011 with seven consecutive quarters of net absorption gains, 333 S. WABASH AVE 147,500 SF
303 E. WACKER DR 143,960 SF the West Loop is undoubtedly the strongest CBD submarket as a result 205/225 N. MICHIGAN AVE 120,446 SF of its ability to maintain a sustained recovery and the pace at which it 33 S. STATE ST 117,207 SF is rebounding from recessionary conditions that persisted for much of the last three years.
CLASS A CLASS B CLASS C With a highly desirable location that allows for immediate access to commuter rail lines combined with North Mich an inventory comprised of nearly 60 Class A space, the West Loop’s resiliency in this market is not 435-445 N. MICHIGAN AVE 129,947 unexpected. In 2008, prior to the office market realizing the effects of a faltering economy, the West Loop’s vacancy rate stood at 11.6 percent. By early 2010, vacancy had soared by 660 basis points to 410 N. MICHIGAN AVE 125,817 an astounding 18.3 percent. The last time the submarket had posted such a staggering increase in vacancy was during the 2001/2002 market cycle. However, with a cumulative 1.4 million square feet 401 N. MICHIGAN AVE 104,726 of positive net absorption reported in the submarket during the last seven quarters, the West Loop’s vacancy rate now resides at 15.2 percent, an impressive rebound in a relatively short period of time. MARKET INDICATORS Although several more quarters of positive gains will be required for the submarket to make a full recovery, it appears to be progressing in an optimistic direction. As 2012 commences, barring any West Loop CLASS A CLASS B CLASS C unforeseen economic events, the West Loop is likely to continue being the beneficiary of occupancy Year-end Year-end River North 111 W. ILLINOIS ST. 141,503 SF gains, particularly in the Class A segment. 2010 2011 VACANCY RATE 17.0% 15.2% The second largest lease transaction in the CBD for 2011 occurred in the West Loop during the fourth ABSORPTION (SF) 73,256 810,142 quarter. GE Capital signed a 371,000-square-foot renewal at 500 W. Monroe Street. As part of the transaction, the company expanded by approximately 79,000 square feet. Also during the quarter, the RENTS $32.94 $33.13 West Loop successfully recruited two major tenants from the suburbs. Devry, Inc. decided to open a downtown office to support its online courses, a move that could bring as many as 1,000 jobs to the 47,273,794 47,273,794 INVENTORY city. The school signed a lease for 77,000 square feet at 300 S. Riverside Plaza. Sara Lee made headlines during the quarter with its 235,000-square-foot commitment to relocate from suburban Downers Grove to 400 S. Jefferson Street in the West Loop in 2013. As part of the transaction, 400 S. Jefferson will undergo a complete redevelopment, providing Sara Lee with a unique office facility. LARGE BLOCKS AVAILABLE 100,000 + SQUARE FEET: DIRECT Both of these transactions are indicative of an evident trend involving corporate migration from the suburbs to downtown, as companies increasingly look to take advantage of the ease the city offers for CLASS A CLASS B CLASS C commuting as well as tap into a larger talent pool for employees. West Loop 500 W. MONROE ST. 369,207 SF The number of available blocks of space 100,000 square feet or greater shrunk by one block during 233 S. WACKER DR. 299,514 SF the fourth quarter. Although 300 S. Riverside Plaza added a 161,708 square foot block of space to the market, another block of space at 300 S. Riverside Plaza was removed as well as a space at 101 N. 300 S. RIVERSIDE PLZ. 161,708 SF Wacker Drive. With only four blocks of 100,000 square feet or greater space available on a direct and
227 W. MONROE ST. 139,883 SF contiguous basis in the West Loop, discussions surrounding the development of new office towers have emerged. Furthermore, only two of these large blocks reside in 500 W. MONROE ST. 106,475 SF the building high rise. As the market continues to stabilize and the Class A, quality, good-view sector of the market becomes further constrained, developers have begun proactively marketing new development opportunities, most of which are located in the desirable West Loop.
During the fourth quarter, 250 S. Wacker Drive was sold for $90 million ($367 per square foot). The property, home to MillerCoors, was sold by AEW Capital to Credit Suisse. Additionally, Hines Real Estate Investment Trust sold a 49 percent interest in the trophy asset at 1 N. Wacker Drive to Irvine Co. valuing the building at $620 million ($463 per square foot). 250 S WACKER DRIVE
COLLIERS INTERNATIONAL | P. 20 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
VACANCY During the fourth quarter, the West Loop’s overall vacancy rate declined to 15.2 percent, WEST LOOP SUBMARKET NETNet ABSORPTIONAbsorption & Vacanc y& VACANCY down from 15.5 percent in the prior quarter. West Loop Submarket Relative to the end of 2010, the West Loop’s 2,500,000 18.0% 17.1% vacancy rate has fallen 1.8 percent, making it the 2,029,259 17.0% 2,000,000 16.0% 15.2% 14.8% 1,639,111 most improved submarket of the past year. Both 14.0% 1,500,000 Net Absorption & Vacancy 12.9% Class A and Class B properties are faring well at 12.4% West Loop Submarket 12.0% Vacanc 14.9 and 14.7 percent and all three asset classes 1,000,000 810,142 2,500,000 10.0% 18.0% posted gains during the quarter, another sign of 17.1% y 500,000 2,029,259 17.0% relative health in the submarket. 2,000,000 73,259 8.0% 16.0% Square Footage 15.2% 0 14.8% 1,639,111 6.0% 14.0% 1,500,000 (500,000) 12.9% ABSORPTION 12.4(481,216)% 4.0% 12.0% Vacanc 1,000,000 (1,000,000) 2.0%810,142 Net absorption during the fourth quarter was (983,216) 10.0% positive 132,096 square feet. With a 2011 year- (1,500,000500,00) 0 0.0% y 2006 2007 2008 2009 2010 2011 end total of positive 810,142 square feet of net 73,259 8.0% Square Footage 0 absorption compared to positive 73,259 square Source: Costar; Colliers International Research Absorption Vacancy 6.0% (500,000) feet at the end of 2010, the West Loop vastly (481,216) 4.0% improved and far outperformed all other (1,000,000) 2.0% submarkets. Although the submarket still has (983,216) (1,500,000) 0.0% ground to make up before reaching the 1 million RENTS 2006 2007 2008 2009 2010 2011 plus absorption figures it typically experiences in The average direct gross asking rate increased to $33.13 per square foot during the fourth quarter, up a healthy market, this is the first year-end with AskingSource: Gross Costar; Rental Colliers Rate Internationals Research Absorption Vacancy fromWest $32.96 Loop Submarke per squaret foot in the prior quarter. At the end of 2010, the average direct gross asking such substantial gains since 2007 rate$4 resided5.00 at $32.94. The average asking Class A rate for the fourth quarter was $37.94 per square CONSTRUCTION foot,$4 up0.00 slightly from $37.49 per square foot one year ago. Class B rates also increased over the past year$3 5.00to $30.38 per square foot, up from $30.27 per square foot at the end of 2010. No new construction was delivered to the West $30.00 Loop during the fourth quarter. There are $25.00 currently no office developments slated in the ASKING GROSS FACE RATES WEST LOOP SUBMARKET $2A0.00sking Gross Rental Rates submarket although developers are actively West Loop Submarket $15.00 marketing sites to potential anchor tenants in an $45.00 effort to launch a new building amidst a further $10.00 $40.00 constraining large block sector of the market. $5.00 $0.0$305.00 2006 2007 2008 2009 2010 2011 $30.00 Source: Costar; Colliers International Research Class A Class B Class C Average $25.00
$20.00
$15.00
$10.00
$5.00
$0.00 2006 2007 2008 2009 2010 2011
Source: Costar; Colliers International Research Class A Class B Class C Average
COLLIERS INTERNATIONAL | P. 21 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
WEST LOOP LEASE ACTIVITY
FOURTH QUARTER 2011
Tenant Address Class Size (SF) Deal Type GE Capital 500 W. Monroe Street A 371,000 Renewal/Expansion DeVry 300 S. Riverside Plaza B 77,000 New Lease Epstein International 600 W. Fulton Avenue C 60,000 Renewal National Futures Association 300 S. Riverside Plaza B 60,000 Renewal/Expansion Segal & Co. 101 N. Wacker Drive B 52,000 West Loop West Monroe Partners 222 W. Adams Street A 43,000 New Lease Savo Group 155 N. Wacker Drive A+ 42,000 New Lease/Expansion LinkedIn 525 W. Monroe Street A 41,000 Renewal/Expansion Attorney's Liability Assurance Society 311 S. Wacker Drive A 40,000 Renewal Townsend Analytics 100 S. Wacker Drive B 40,000 Renewal 500 W MONROE STREET Jacobs Engineering 525 W. Monroe Street A 37,000 Renewal Ryerson Steel 227 W. Monroe Street A 29,000 Sublease
WEST LOOP SALES ACTIVITY 1 N. WACKER DRIVE
FOURTH QUARTER 2011
Status Address Class Size (SF) Sale Price Price/SF Seller Buyer
SOLD 1 N. Wacker Drive A+ 1,340,000 $620,000,000 $462.69 Hines Real Estate Inv. Trust Irvine Co.
SOLD 250 S. Wacker Drive A 244,961 $90,000,000 $367.41 AEW Capital Credit Suisse
FS 200 W. Jackson Boulevard B 476,711 TBD TBD Apollo Investment -
SOLD 400 S. Jefferson Street C 304,000 $15,000,000 $49.34 KBK II Partnership Sterling Bay
FS = For sale
COLLIERS INTERNATIONAL | P. 22 RESEARCH REPORT | YEAR-END 2011 | DOWNTOWN CHICAGO | OFFICE
FOURTH QUARTER 2011 OFFICE MARKET STATISTICS | LOCAL STANDARDS (Includes competitve owner-occupied properties) VACANCY ABSORPTION RENTS Direct Sublease Total Net Asking Full Service Total Direct SF Sublease SF Vacancy Vacancy Total Vacancy Total Direct Net Total Sublease Absorption Net Absorption Average Direct Class Inventory SF Vacant Vacant Total Vacant SF Rate Rate Rate 2Q 2011 Absorption Net Absorption 2Q 2011 YTD SF Rent Per SF Central Loop Class A: 15,691,789 1,520,817 99,005 1,619,822 9.7% 0.6% 10.3% (43,328) (29,544) (72,872) (161,555) $36.46 Class B: 17,945,662 2,976,830 322,040 3,298,870 16.6% 1.8% 18.4% 68,991 34,988 103,979 243,879 $28.69 Class C: 4,574,598 664,110 42,353 706,463 14.5% 0.9% 15.4% 67,970 4,725 72,695 (47,055) $20.15 Subtotal: 38,212,049 5,161,757 463,398 5,625,155 13.5% 1.2% 14.7% 93,633 10,169 103,802 35,269 $30.22
East Loop Class A: 6,663,954 1,166,358 134,801 1,301,159 17.5% 2.0% 19.5% 13,734 0 13,734 76,811 $35.63 Class B: 11,395,063 2,022,013 116,595 2,138,608 17.7% 1.0% 18.8% 23,866 49,056 72,922 90,900 $29.78 Class C: 7,704,610 780,643 17,642 798,285 10.1% 0.2% 10.4% (31,492) 4,081 (27,411) (133) $23.11 Subtotal: 25,763,627 3,969,014 269,038 4,238,052 15.4% 1.0% 16.4% 6,108 53,137 59,245 167,578 $29.65
North Michigan Avenue Class A: 4,254,962 727,444 51,099 778,543 17.1% 1.2% 18.3% (15,458) 11,742 (3,716) (3,014) $36.25 Class B: 6,033,152 694,305 53,094 747,399 11.5% 0.9% 12.4% 6,413 0 6,413 (52,928) $31.17 Class C: 2,799,765 317,981 0 317,981 11.4% 0.0% 11.4% (7,798) 0 (7,798) (50,165) $22.66 Subtotal: 13,087,879 1,739,730 104,193 1,843,923 13.3% 0.8% 14.1% (16,843) 11,742 (5,101) (106,107) $31.59
River North Class A: 5,124,846 1,237,144 109,739 1,346,883 24.1% 2.1% 26.3% 22,504 28,467 50,971 (5,796) $38.78 Class B: 9,017,871 439,595 338,349 777,944 4.9% 3.8% 8.6% (14,183) 2,774 (11,409) 111,284 $26.96 Class C: 2,314,140 276,070 0 276,070 11.9% 0.0% 11.9% (33,260) 0 (33,260) (16,260) $21.12 Subtotal: 16,456,857 1,952,809 448,088 2,400,897 11.9% 2.7% 14.6% -24,939 31,241 6,302 89,228 $32.65
West Loop Class A: 27,005,704 3,703,821 330,693 4,034,514 13.7% 1.2% 14.9% 113,683 (30,899) 82,784 357,615 $37.94 Class B: 16,038,767 2,260,216 91,427 2,351,643 14.1% 0.6% 14.7% (1,789) 429 (1,360) 196,559 $30.38 Class C: 4,229,323 819,352 0 819,352 19.4% 0.0% 19.4% 39,256 11,416 50,672 255,968 $20.72 Subtotal: 47,273,794 6,783,389 422,120 7,205,509 14.3% 0.9% 15.2% 151,150 (19,054) 132,096 810,142 $33.13
CBD Total Class A: 58,741,255 8,355,584 725,337 9,080,921 14.2% 1.2% 15.5% 91,135 -20,234 70,901 264,061 $37.29 Class B: 60,430,515 8,392,959 921,505 9,314,464 13.9% 1.5% 15.4% 83,298 87,247 170,545 589,694 $29.58 Class C: 21,622,436 2,858,156 59,995 2,918,151 13.2% 0.3% 13.5% 34,676 20,222 54,898 142,355 $21.55 Subtotal: 140,794,206 19,606,699 1,706,837 21,313,536 13.9% 1.2% 15.1% 209,109 87,235 296,344 996,110 $31.45
The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability. As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports.
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