Chicago Downtown Office Market Report 3Q ‘08 CBD Market will Decline through 2009 While the Chicago’s CBD Office Market Remains Strong, Activity has Slowed, Rates are Dropping, and Market is Poised for a Downturn Flattening Rental Rates By The Numbers The current average asking rate, $30.13 gross cost per square foot, is slightly down from last quarter’s all-time high of $30.16, and ends 6 Chicago CBD – Availability vs. Rental Rates consecutive quarters of increasing rates. Asking rental rates are likely Space Available Average Gross Asking Rent to hold steady for the next few months, as landlords wait to see what 14% $31 impact the ongoing financial crisis will have on the Chicago market. 13% $30 Slowing Activity Year-to-date net absorption rose again during the third quarter, to 1,928,616 square feet. About 400,000 square feet of this activity is 12% $29 due to office space being converted to other uses during the second quarter. Discounting these transactions, we see year-to-date net ab- 11% $28 sorption of about 1.5 million square feet. At the end of the third quarter in 2007, year-to-date net absorption was over 2.6 million 10% $27 square feet. 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Downturn in 2009 - But for how long? Chicago CBD - Existing Buildings 2Q 2008 Available sublease space has taken a small rise, increasing approxi- mately 150,000 square feet to 1,809,272 square feet. Chicago MSA’s Existing RBA - Overall (583 buildings) 153,214,559 unemployment was reported at 7.1% for August, another sharp in- Existing RBA - Class A (80 buildings) 68,077,970 crease over the 6.5% figure for May. Illinois’ unemployment figures Existing RBA - Class B (205 buildings) 58,589,807 remain among the highest in the nation. Existing RBA - Class C (298 buildings) 26,546,782 While these trends indicate a downturn in the Chicago CBD office Total Vacant Sq. Ft. 15,696,174 market, it is not clear how far or for how long the market will drop. In Percent Vacant 10.2% a stronger economy, the small drops in pricing and activity shown here Total Available Sq. Ft. 16,577,642 would not be considered a downturn at all. However, while Chicago Percent Available 10.8% is likely to suffer less and for a shorter period than other markets, we are seeing the affects of the financial crisis, and we are unlikely to see Gross Average Asking Rental Rate (Overall) $30.13 it reverse again before 2010. Year-To-Date Net Absorption 1,928,616 Noteworthy Leases Tenant Address Sq. Ft. Type Walgreens Co. 2 Overlook Parkway, Lincolnshire 321,320 New - Sublease Baker & McKenzie LLP 444 West Lake Street 300,000 Relocation BP PLC 10 and 30 South Wacker Drive 225,000 Relocation Solo Cup Company 150 South Saunders Road, Lake Forest 133,441 Relocation Aviva plc 300 North LaSalle Street 49,088 Relocation - Expansion The OfficeLinks 233 South Wacker Drive 30,000 New M3 Capital Partners LLC 155 North Wacker Drive 27,115 Relocation - Expansion Chambers Business Suites 35 East Wacker Drive 21,802 New Marketing Innovators International, Inc. 9701 West Higgins Road, Rosemont 20,418 Renewal Robbins, Schwartz, Nicholas, Lifton & Taylor, Ltd. 55 West Monroe Street 18,638 Relocation - Expansion Reyes Holdings, L.L.C. 9500 West Bryn Mawr Avenue, Rosemont 18,249 Expansion Iowa Foundation for Medical Care 711 Jorie Boulevard, Oak Brook 14,607 Relocation Jack Morton Worldwide 217 North Jefferson Street 10,150 Relocation Interfaith Youth Core 910 West Van Buren Street 10,000 Relocation Transactions completed by Bradford Allen. © 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. Walton The Cancer Treatment Centers Locustof America acquiredWWashingtonashington 500 Square Delaware Locust Remington Road in Schaum- burg, paying $4.05 million to AST Remington, LLC for the Chestnut Chestnut Chestnut38,555-square-foot building. Dewitt Mies van der Rohe der van Mies Pearson In a sale/leaseback transaction, Kendall College Institute Northwestern Memorial Old Hospital closed on its acquisi- sold its 178,490-square-foot Goose Island Water campus at 900 North North Branch Street to an Tower tion of 211 East Ontario Chicago aliate of New York-basedChicago W.P. Carey & Co. for Chicago Street, paying $35.7 million Chicago almost $29.4 million. Baltimore-based Laureate to Woodland Hills, CA-based Education Inc., Kendall College’s parent company, Younan Properties, Inc. for signed a long-term lease for the property, with Superior the 172,446-square-foot Superior options to renew its lease for up to 20 years. property. ells State W St. Clair St. Wabash Rush Michigan Clark Dearborn La Salle La Franklin Kingsbury Orleans Huron Huron Halsted River Erie North Erie Ontario OhioNorth Ontario Michigan Ohio Avenue Ohio Grand Grand Kingsbury LEVEL U/L Cityfront Plaza Dr. U/L Illinois Illinois Ogden Hubbard Plaza E. HUBBARD ST U/L LEVEL PIONEER COURT Cityfront Plaza N. Park Dr. L/L St. Clair St. Hubbard U/L Cityfront Plaza Dr. Miami-based Cape Horn E. North Water St. L/L Fairbanks U/L LEVEL N. ORLEANS ST. Group LLC closed on its E. North Water St. U/L LEVEL acquisition of 205 West Wacker L/L E. KINZIE ST. Kinzie Kinzie Drive, paying $30.5 million to a fund managed by Newport, E. North Water St. CARROLL AVE. CA-based L LEVEL KBS Realty Advisors LLC for the 243,147-square- Union Carol foot building. Wayman C Michigan h Stetson i c Milwaukee a g Fulton o Columbus Wacker R S.Water i Des Plaines Des v e r East Lake Lake Chicago- based Zonta International Foundation acquired an oce 90 condo at 55 West Wacker Drive, Loop Randolph Randolph paying $1,715,000 for the 9,275- Randolph Randolph square-foot unit. In addition, it has Street METRA CHICAGO Metra 94 NORTHWESTERN put up for sale its 21,800-square- Station TERMINAL Millennium Garland foot headquarters building at 557 Park Washington West Randolph Street.Washington Ogilvie Transportation Center Central Madison Madison State ells abash acker Loop Dearborn W W Michigan Franklin LaSalle Clark W West Canal Green Clinton Peoria Halsted Jefferson Monroe Loop Monroe Art Institute School of Adams of Chicago the Art Adams 10 S. Institute Lake Shore Drive Shore Lake Quincy Petrillo Quincy Music Shell Jackson Jackson Jackson Gladys Pritzker Van Buren Park Metra Van Buren Van Buren Station 400 S. Green Peoria Halsted Columbus Financial Buckingham 290 Congress Fountain LaSalle Street Station (Metra) Grant Harrison Harrison Harrison Park r Harrison e LakeMichigan v i ells R Clark W Canal Clinton Federal La Salle La o Sherman g Plymouth Jefferson a c Des Plaines Des i h SouthC Balbo W Lexington Tempel Steel Company will close its 177,040-square- Seattle-based Washington Mutual Inc. (WaMu) was seized by the Federal In a sale/leaseback transaction, Schaumburg-based Motor Coach Polk foot Libertyville plant and, with a $7-million subsidyPolk Deposit InsuranceLoop Corp. and its banking assets were then sold to JP Morgan Lexington Homes acquired 2200 Industries International, Inc. from the city of Chicago and the state, will renovate its Chase & Co. for $1.9 billion. Chase plans to write-down WaMu’s loan portfolio by East Golf Road in Des Plaines, (MCI)8th and six aliates, the Chicago manufacturing campus at 5454 and 5500 North about $31 billion. The acquisition will give Chase 5,400 branches in 23 states paying $10.5 million to United biggest U.S. supplier of long- Wolcott Avenue. The rm, which had considered relocat- and it plans to close less than 10 percent of the two rms’ branches overall. Stationers Supply Co. for the distance buses, led for Chapter ing the plant to Monterrey, Mexico where it already has a Chase has approximately 340 branches in the Chicago market and WaMu has 117 135,999-square-foot building, 11 bankruptcy, citing falling plant, will move all 350 of the suburban jobs into the Chicago-area branches and sources indicate Chase is likely to shut down all but which then leased back the demand,9th the rising cost of steel city, increasing its Chicago work force to 800. 15-20% of WaMu’s Chicago-area branches. building. and the weak U.S. dollar. Taylor 11th Walton The Cancer Treatment Centers Locustof America acquiredWWashingtonashington 500 Square Delaware Locust Remington Road in Schaum- burg, paying $4.05 million to AST Remington, LLC for the Chestnut Chestnut Chestnut38,555-square-foot building. Dewitt Mies van der Rohe der van Mies Pearson In a sale/leaseback transaction, Kendall College Institute Northwestern Memorial Old Hospital closed on its acquisi- sold its 178,490-square-foot Goose Island Water campus at 900 North North Branch Street to an Tower tion of 211 East Ontario Chicago aliate of New York-basedChicago W.P. Carey & Co. for Chicago Street, paying $35.7 million Chicago almost $29.4 million. Baltimore-based Laureate to Woodland Hills, CA-based Education Inc., Kendall College’s parent company, Younan Properties, Inc. for signed a long-term lease for the property, with Superior the 172,446-square-foot Superior options to renew its lease for up to 20 years. property. ells State W St. Clair St. Wabash Rush Michigan Clark Dearborn La Salle La Franklin Kingsbury Orleans Huron Huron Halsted River Erie North Erie Ontario OhioNorth Ontario Michigan Ohio Avenue Ohio Grand Grand Kingsbury LEVEL U/L Cityfront Plaza Dr. U/L Illinois Illinois Ogden Hubbard Plaza E. HUBBARD ST U/L LEVEL PIONEER COURT Cityfront Plaza N.