Gaining Velocity Research & Forecast Report SUBURBAN CHICAGO | OFFICE Third Quarter 2015 Ronna Larsen Research Manager | Suburban Chicago The suburban Chicago office market continued to gain velocity in the third quarter of 2015, posting the most significant demand seen in nearly three years. While it has been a bumpy road, the suburban Chicago office market reached its lowest vacancy level since the beginning of the recession. As some larger tenants including Motorola, Kraft Heinz and Stats migrate to downtown Chicago locations, there may be some continued hiccups in recovery. However, there have been a growing number of small- to mid-sized tenants expanding their real estate footprints. Trends The increasing velocity of investment and user sales throughout the suburban office market continued in the third quarter. Notable transactions included Columbia Property Trust’s four-building, 792,166-square-foot portfolio sale to Lone Star Funds and GE Capital/Arden’s seven-property, 3.6 million-square-foot portfolio sale to The Blackstone Group. In addition, several investment properties have recently been added to the market, with more expected in the fourth quarter. While the number of large tenants in the market has decreased in recent months, there has been an increase of mid-sized tenants searching for space, with the volume of tenants in the market increasing 10 percent from the previous quarter. In addition, these tenants continue to look for opportunities to create more efficient work environments with ample amenities. Higher parking ratios, employee wellness / fitness centers, food service, tenant lounges and conference centers continue to be a focus in the suburbs, making higher-end Class A space a hot commodity. Subsequently, as the Class A market continues to tighten, rental rates are slowly rising. Vacancy Leasing volume in the suburban office market improved in the third quarter of 2015, with vacancy dropping to 20.3 percent the second quarter rate of 20.7 percent. While the Northwest, North and Oak Brook markets witnessed improvement in the third quarter, the Lisle/Naperville market continued its reign of having the lowest overall vacancy rate in the suburbs, ending the third quarter at 17.9 percent. While vacancy in Class B properties remained flat at 23.6 percent, Class A assets achieved a significant improvement with vacancy dropping to 18.8 percent from 19.4 percent in the previous quarter. Overall sublease vacancy witnessed some improvement in the third quarter, dropping to 1.4 percent. While the O’Hare market has minimal sublease vacancy at 0.5 percent, the Lisle/Naperville market reported the highest sublease vacancy at 2.5 percent. Market Indicators Relative to prior periods Q2 2015 Q3 2015 VACANCY 20.7% 20.3% YTD ABSORPTION 29,183 548,194 RENTAL RATE $20.06 $20.14 INVENTORY 115,441,324 115,441,324 Class A Large Blocks of Space 20,000 SF + 50,000 SF + 100,000 SF + 200,000 SF + O'Hare 14 9 3 0 Northwest 33 18 10 3 North 35 15 8 2 Lisle-Naperville 19 8 3 2 Oak Brook 25 10 3 1 Total 126 60 27 8
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Gaining Velocity
Research & Forecast Report
SUBURBAN CHICAGO | OFFICEThird Quarter 2015
Ronna Larsen Research Manager | Suburban Chicago
The suburban Chicago office market continued to gain velocity in the third quarter of 2015, posting the most significant demand seen in nearly three years.While it has been a bumpy road, the suburban Chicago office market reached its lowest vacancy level since the beginning of the recession. As some larger tenants including Motorola, Kraft Heinz and Stats migrate to downtown Chicago locations, there may be some continued hiccups in recovery. However, there have been a growing number of small- to mid-sized tenants expanding their real estate footprints.
Trends
The increasing velocity of investment and user sales throughout the suburban office market continued in the third quarter. Notable transactions included Columbia Property Trust’s four-building, 792,166-square-foot portfolio sale to Lone Star Funds and GE Capital/Arden’s seven-property, 3.6 million-square-foot portfolio sale to The Blackstone Group. In addition, several investment properties have recently been added to the market, with more expected in the fourth quarter.
While the number of large tenants in the market has decreased in recent months, there has been an increase of mid-sized tenants searching for space, with the volume of tenants in the market increasing 10 percent from the previous quarter.
In addition, these tenants continue to look for opportunities to create more efficient work environments with ample amenities. Higher parking ratios, employee wellness / fitness centers, food service, tenant lounges and conference centers continue to be a focus in the suburbs, making higher-end Class A space a hot commodity. Subsequently, as the Class A market continues to tighten, rental rates are slowly rising.
Vacancy
Leasing volume in the suburban office market improved in the third quarter of 2015, with vacancy dropping to 20.3 percent the second quarter rate of 20.7 percent. While the Northwest, North and Oak Brook markets witnessed improvement in the third quarter, the Lisle/Naperville market continued its reign of having the lowest overall vacancy rate in the suburbs, ending the third quarter at 17.9 percent.
While vacancy in Class B properties remained flat at 23.6 percent, Class A assets achieved a significant improvement with vacancy dropping to 18.8 percent from 19.4 percent in the previous quarter.
Overall sublease vacancy witnessed some improvement in the third quarter, dropping to 1.4 percent. While the O’Hare market has minimal sublease vacancy at 0.5 percent, the Lisle/Naperville market reported the highest sublease vacancy at 2.5 percent.
Market IndicatorsRelative to prior periods Q2 2015 Q3 2015
VACANCY 20.7% 20.3%
YTD ABSORPTION 29,183 548,194
RENTAL RATE $20.06 $20.14
INVENTORY 115,441,324 115,441,324
Class A Large Blocks of Space20,000 SF + 50,000 SF + 100,000 SF + 200,000 SF +
O'Hare 14 9 3 0
Northwest 33 18 10 3
North 35 15 8 2
Lisle-Naperville 19 8 3 2
Oak Brook 25 10 3 1
Total 126 60 27 8
2 Research & Forecast Report | Third Quarter 2015 | Suburban Chicago / Office | Colliers International
Absorption
Overall net absorption in the third quarter ended with positive 519,011 square feet, up from positive 39,864 square feet reported in the second quarter, bringing year-to-date absorption to positive 548,194 square feet. While all Class A submarkets reported positive absorption, North market accounted for 175,683 square feet of the total.
Large Blocks of Availability
There are currently 37 properties (27 Class A) in the suburban office market that can accommodate large (100,000 square feet and above) users. While the O’Hare and Oak Brook markets have limited large blocks of space available, the Northwest market offers the majority of large block options.
Rents
The average Class A asking rent ended the third quarter at $27.70 per square foot gross, up from $27.63 per square foot gross at the end of the second quarter. Rate increases are expected to continue in higher quality, true Class A assets as the market tightens further.
The average asking rent for all classes in suburban Chicago also increased to $20.14 per square foot gross at the end of third quarter, up from $20.06 at the end of second quarter.
Construction
While there hasn’t been any new speculative development since 2010 and none is expected for the remainder of 2015, build-to-suit activity continues with planned projects in Oak Brook and Naperville. Construction also continues on Zurich North America’s 735,000-square-foot headquarters in Schaumburg.
Net Absorption and Vacancy | Suburban Office Market
Submarket Vacancy Rates 2013 - 2015
Significant Lease and Sale Activity
Top Suburban Office Leasing Activity 3Q 2015TENANT BUILDING TOWN SUBMARKET CLASS SIZE (SF) DEAL TYPE
HSBC Northwest Crossings Arlington Heights NW B 162,500 New
Fullerton Engineering Consultants Woodfield Lake Office Park Schaumburg NW A 32,000 New
Reed Elsevier* 1007 Church Street Evanston N A 28,000 New
Ecra Group Schaumburg Corporate Center Schaumburg NW A 22,500 Sublease
United Healthcare Services* Corporetum Office Campus Lisle LN A 20,500 Renewal
Top Suburban Office Investment Sales Activity 3Q 2015STATUS PROPERTY TOWN SUBMKT CLASS SIZE (SF) SALE PRICE PRICE/SF BUYER SELLER NOTES
Sold 7-Building Portfolio
Various OB, O A 3,455,471 Portfolio Sale
N/A The Blackstone Group
GE Capital/Arden Portion of 188-building $3.3b US portfolio sale
Sold 4-Building Portfolio Various N, LN, OB A 792,166 $118,246,618 $149.27 Lone Star Funds Columbia Prop Trust
Sold 747 E 22nd Street Lombard OB A 209,577 $8,750,000 $41.75 Midas Medical Group Holdings
Vectron Corporation
Sold 1-9 Commerce Drive
Schaumburg NW B 51,513 $5,000,000 $97.06 Carepoint Healthcare
The Missner Group
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
LN=Lisle/Naperville N=North NW=Northwest OB=Oak Brook Area O=O’Hare FS=For Sale NEW=New to Market UC=Under Contract
*Colliers International Transaction
O’HareThe O’Hare market lost momentum as velocity remains lethargic for the third consecutive quarter.
Vacancy
After making a vast improvement in the second half of 2014, the O’Hare market has slowed down throughout 2015. Overall vacancy increased marginally, rising to 20.2 percent from 20.1 percent recorded at the end of the second quarter. While Class A properties witnessed a slight decrease, dropping 16.3 percent from 16.4 percent in the second quarter, Class B properties reported an increase, rising to 27.2 percent from 26.8 percent in the prior quarter.
O’Hare sublease vacancy remains the lowest of all the submarkets 0.5 percent, down slightly from 0.6 percent in the second quarter.
Absorption
Overall net absorption in the O’Hare submarket was negative 12,465 square feet, compared to positive 4,163 square feet in the second quarter. This brings O’Hare‘s year-to-date net absorption to negative 77,754 square feet. Class B properties were the sole contributor of the negative absorption posted in the third quarter.
Rents
Class A average asking rent for the O’Hare market increased to $29.63 per square foot gross in the third quarter of 2015, up from $29.56 in the second quarter.
The average asking rate for all classes also increased, ending the third quarter at $20.84 per square foot gross compared to $20.80 in the second quarter.
Market IndicatorsRelative to prior periods Q2 2015 Q3 2015
VACANCY 20.1% 20.2%
YTD ABSORPTION (65,289) (77,754)
RENTAL RATE $20.80 $20.84
INVENTORY 13,231,498 13,231,498
Vacancy %Class A 16.3%Class B 27.2%Class C 14.6%
Class A 8,128,975 SF 16.3% Vacant
Class B 4,798,093 SF 27.2% Vacant
Class C 304,430 SF
14.6% Vacant
Vacant Space by Property Type
Class A Class B Class C
Vacant Space By Property Type
Net Absorption and Vacancy | O’Hare Office Market
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
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$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
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$10.00
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$20.00
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$35.00
201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
4 Research & Forecast Report | Third Quarter 2015 | Suburban Chicago / Office | Colliers International
Large Blocks of Availability
Options for large space requirements in the O’Hare Class A market are sparse. There are currently only four properties that can accommodate large users of 100,000 square feet and above, with three of them being Class A.
Construction
There was no new construction completed in first half of 2015 in the O’Hare market.
Proposed projects include Pointe O’Hare II and O’Hare Corporate Campus, both in Rosemont. If completed, these projects could add 1.4 million square feet to the O’Hare market. In addition, Hosts Hotels & Resorts, Inc. is currently trying to obtain a zoning amendment to develop a 750,000-square-foot office building on the land next to its O’Hare Marriott property.
Significant Lease and Sale Activity
Top O’Hare Office Leasing ActivityTENANT BUILDING TOWN CLASS SIZE (SF) DEAL TYPE
PICIS /UHG Pointe O'Hare Rosemont A 18,000 Renewal
Asking Gross Rental Rates | O’Hare Office Market
Top 10 Large Available Blocks by Square Feet
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
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$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
9600 W Bryn Mawr Avenue 156,832 A5450 N Cumberland Avenue 143,525 A8420 W Bryn Mawr Avenue 119,228 A1350 E Touhy Avenue 104,304 B8750 W Higgins Road 92,166 A10255 W Higgins Road 66,274 A8725 W Higgins Road 66,037 A1700 W Higgins Road 64,189 A9801 W Higgins Road 62,063 B999 E Touhy Avenue 59,710 B
LARGE BLOCKS AVAILABLETOP 10 BY SQUARE FOOTAGE
CLASS A Class B
*Sublease
156,832
143,525
119,228
104,304
92,166
66,274
66,037
64,189
62,063
59,710
9600 W Bryn Mawr Avenue
5450 N Cumberland Avenue
8420 W Bryn Mawr Avenue
1350 E Touhy Avenue
8750 W Higgins Road
10255 W Higgins Road
8725 W Higgins Road
1700 W Higgins Road
9801 W Higgins Road
999 E Touhy Avenue
Top O’Hare Office Investment Sales ActivitySTATUS PROPERTY TOWN CLASS SIZE (SF) SALE PRICE PRICE/SF BUYER SELLER
Sold Pointe O'Hare Rosemont A 270,512 Portfolio Sale* N/A The Blackstone Group GE Capital/Arden
New O'Hare Corporate Towers Rosemont B 202,325 TBD TBD TBD Lincoln Property
*Portion of a 188-building, $3.3b US portfolio sale
NorthwestDespite being the most challenged suburban submarket, the Northwest market rebounded in the third quarter of 2015.
Vacancy
Despite the fact that Motorola, one of the Northwest market’s largest space users, announced it was moving downtown, the Northwest market managed to gain some momentum in the third quarter. Overall vacancy ended at 21.2 percent compared to 21.5 percent reported in the second quarter of 2015.
While both Class A and B properties registered decreases in vacancy, Class A properties had the most significant change, ending the third quarter with 17.2 percent vacancy, down from 17.80 percent at the end of second quarter.
Sublease vacancy in the Northwest market remains low at 0.8 percent.
Absorption
The Northwest market ended the third quarter of 2015 with 102,120 square feet of positive absorption. However, the exodus of some key larger tenants such as GoGo, Inc. earlier in the year has caused year-to-date absorption to remains weak at negative 132,788 square feet.
When considering higher quality, true Class A properties in the Northwest market, year-to-date absorption is positive 105,286 square feet.
Large Blocks of Availability
The Northwest market continues to offer the most options for large space requirements with 14 properties that can accommodate large (100,000 square feet and above) users, 10 of them being Class A.
Market IndicatorsRelative to prior periods Q2 2015 Q3 2015
VACANCY 21.5% 21.2%
YTD ABSORPTION (234,908) (132,788)
RENTAL RATE $18.02 $18.17
INVENTORY 31,947,282 31,947,282
Vacancy %Class A 17.2%Class B 28.6%Class C 17.6%
Class A 19,743,423 SF 17.2% Vacant
Class B 11,064,159SF 28.6% Vacant
Class C 1,139,700 SF 17.6% Vacant
Vacanct Space by Property Type
Class A Class B Class C
Vacant Space By Property Type
Net Absorption and Vacancy | Northwest Office Market
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
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Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
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201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
6 Research & Forecast Report | Third Quarter 2015 | Suburban Chicago / Office | Colliers International
Rents
The Northwest suburban Class A average asking rate measured $24.21 per square foot gross, up slightly from the second quarter 2015 rate of $24.18.
The average asking rate for all classes measured $18.17 per square foot gross, up from $18.02 during the second quarter of 2015.
Construction
No new construction was completed in Northwest market during the third quarter of 2015. However, construction continues on Zurich North America’s 735,000-square-foot headquarters at Meacham Road and Interstate 90 in Schaumburg. Zurich Insurance will move from its current Schaumburg location in 2016, when the development is completed.
Source: Costar; Colliers International Research Class A Class B Average Class C
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$5.00
$10.00
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$35.00
201520142013201220112010
Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
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$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
*2000 W AT&T Drive 1,300,000 A1400 & 1450 American Lane 882,069 A2550 W Golf Road 216,592 A1707 N Randall Road 202,463 A1000 E Woodfield Road 183,498 B21440 Lake Cook Road 145,020 A1501 E Woodfield Road 137,035 A5201 Tollview Road 126,284 B700 N Wood Dale Road 125,323 B777 Big Timber Road 125,000 A
LARGE BLOCKS AVAILABLETOP 10 BY SQUARE FOOTAGE
CLASS A Class B
*Sublease
1,300,000
882,069
216,592
202,463
183,498
145,020
137,035
126,284
125,323
125,000
*2000 W AT&T Drive
1400 & 1450 American Lane
2550 W Golf Road
1707 N Randall Road
1000 E Woodfield Road
21440 Lake Cook Road
1501 E Woodfield Road
5201 Tollview Road
700 N Wood Dale Road
777 Big Timber Road
Significant Lease and Sale Activity
Top Northwest Office Investment Sales ActivitySTATUS PROPERTY TOWN CLASS SIZE (SF) SALE PRICE PRICE/SF BUYER SELLER
Sold 1-9 Commerce Dr Schaumburg B 51,513 $5,000,000.00 $97.06 Carepoint Healthcare The Missner Group
New 777 Big Timber Rd Elgin A 127,280 TBD TBD TBD InterCoastal Group
New Golf Corporate Centre Arlington Heights B 93,000 TBD TBD TBD Chicagoland Commercial
Top Northwest Office Leasing ActivityTENANT BUILDING TOWN CLASS SIZE (SF) DEAL TYPE
HSBC Northwest Crossings Arlington Heights B 162,500 New
Fullerton Engineering Consultants Woodfield Lake Office Park Schaumburg A 32,000 New
Ecra Group Schaumburg Corporate Center Schaumburg A 22,500 Sublease
The Shelby Group* Embassy Plaza Schaumburg A 15,500 New
Caremark/CVS* Kensington Business Center Mount Prospect B 15,250 Renewal
iMortgage Woodfield Corporate Center Schaumburg A 16,500 New
*Colliers International Transaction
NorthThe North market continued to gain momentum for the fifth consecutive quarter.
Vacancy
The North market ended the third quarter of 2015 with 20.7 percent overall vacancy, an ample improvement from 21.4 percent in the previous quarter. Class A product is responsible for the majority of the decrease in vacancy as it fell to 24.1 percent in the third quarter compared to 25.0 percent in the previous quarter.
When considering high quality, true Class A assets, the improvement in vacancy is more significant at 17.0 percent, compared to 19.6 in the previous quarter.
Absorption
The North market ended the third quarter of 2015 with overall net absorption totaling positive 188,484 square feet, bringing year-to-date absorption to a respectable 558,602 square feet, the highest of all the submarkets.
While all classes posted positive absorption for the third quarter, Class A properties, contributed the majority with 175,683 square feet.
Large Blocks of Availability
All eight blocks of space available for large-sized tenants (100,000 square feet and above) in the North market are Class A. However, when considering high quality, true Class A properties, options are limited.
Market IndicatorsRelative to prior periods Q2 2015 Q3 2015
VACANCY 21.4% 20.7%
YTD ABSORPTION 370,118 558,602
RENTAL RATE $21.68 $21.89
INVENTORY 28,694,846 28,694,846
Vacancy %Class A 24.1%Class B 15.3%Class C 12.0%
Class A 18,374,563 SF 24.1% Vacant Class B
8,630,978 SF 15.3% Vacant
Class C 1,689,305 SF 12.0% Vacant
Vacant Space by Property Type
Class A Class B Class C
Vacant Space By Property Type
Net Absorption and Vacancy | North Office Market
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
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Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
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Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
8 Research & Forecast Report | Third Quarter 2015 | Suburban Chicago / Office | Colliers International
Rents
Average Class A asking rent in the North market increased to $29.81 per square foot gross in the third quarter, up from $28.63 per square foot gross during the second quarter of 2015.
The average asking rate for all classes increased to $21.89 per square foot gross, up from $21.68 per square foot gross during the second quarter.
Construction
No new construction was completed in the third quarter of 2015 in the North market.
There are a few sites available for future build-to-suit projects in the North market, including Janko’s 170,000 square-foot project in Lake Forest. In addition, John Buck Company has a 200,000-square-foot project in Deerfield which is currently under contract.
Asking Gross Rental Rates | North Office Market
Top 10 Large Available Blocks by Square Feet
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
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$10.00
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Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
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Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
600 N US Highway 45 972,531 A**1000 Milwaukee Avenue 405,039 A300 Tower Parkway 175,545 A26125 N Riverwoods Boulevard 159,821 A*150 S Saunders Road 143,161 A3000 Lakeside Drive 111,141 A1 Overlook Point 107,984 A2355 Waukegan Road 106,495 A100 S Saunders Road 85,816 A200 Tri State International 78,997 A
LARGE BLOCKS AVAILABLETOP 10 BY SQUARE FOOTAGE
CLASS A Class B
*Sublease**Direct/Sublease Combined
972,531
405,039
175,545
159,821
143,161
111,141
107,984
106,495
85,816
78,997
600 N US Highway 45
**1000 Milwaukee Avenue
300 Tower Parkway
26125 N Riverwoods Boulevard
*150 S Saunders Road
3000 Lakeside Drive
1 Overlook Point
2355 Waukegan Road
100 S Saunders Road
200 Tri State International
Significant Lease and Sale Activity
Top North Office Investment Sales ActivitySTATUS PROPERTY TOWN CLASS SIZE (SF) SALE PRICE PRICE/SF BUYER SELLER
Sold One Parkway North Deerfield A 271,500 Portfolio Sale* The Blackstone Group
GE Capital/Arden
Sold 544 Lakeview Parkway Vernon Hills
A 145,000 $21,644,150.00 $149.27 Lone Star Funds Columbia Property Trust
New Edens Corporate Center Northbrook A 181,330 TBD TBD TBD The Davis Companies
Top North Office Leasing ActivityTENANT BUILDING TOWN CLASS SIZE (SF) DEAL TYPE
Reed Elsevier* 1007 Church Street Evanston A 28,000 New
*Colliers International Transaction
*Portion of a 188-building, $3.3b US portfolio sale
Lisle-NapervilleDespite a lackluster third quarter, the Lisle-Naperville market continues to have the lowest direct vacancy rate of all markets.
Vacancy
The Lisle-Naperville market ended the third quarter of 2015 at 17.9 percent overall vacancy, flat from the second quarter results. While vacancy increased at Class B properties, Class A properties improved, ending the third quarter with 13.6 percent vacancy, down from 13.9 percent in the previous quarter.
While direct vacancy is the healthiest of all of the suburban submarkets at 15.3 percent, sublease vacancy remains the highest of all the markets. However, sublease vacancy showed improvement in the third quarter as it decreased to 2.5 percent, down from 4.0 percent in the second quarter.
Absorption
The Lisle-Naperville market ended the third quarter of 2015 with 11,990 square feet of positive net absorption, bringing year-to-date overall net absorption to negative 91,822 square feet.
While absorption declined in Class B properties, Class A properties witnessed positive absorption in the third quarter with 36,054 square feet, compared to negative 65,688 square feet in the previous quarter.
Large Blocks of Availability
Six properties in the Lisle-Naperville market can accommodate large (100,000 square feet and above) users, three of them being Class A.
Market IndicatorsRelative to prior periods Q2 2015 Q3 2015
VACANCY 17.9% 17.9%
YTD ABSORPTION (103,812) (91,822)
RENTAL RATE $19.94 $19.85
INVENTORY 17,991,215 17,991,215
Vacant Space By Property Type
Net Absorption and Vacancy | Lisle-Naperville Office Market
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
Vacancy %Class A 13.6%Class B 24.5%Class C 8.8%
Class A 9,587,981 SF 13.6% Vacant
Class B 7,488,852 SF 24.5% Vacant
Class C 914,382 SF 8.8% Vacant
Vacant Space by Property Type
Class A Class B Class C
10 Research & Forecast Report | Third Quarter 2015 | Suburban Chicago / Office | Colliers International
Rents
The average Class A asking rent in the Lisle-Naperville market measured $26.87 per square foot gross at the end of third quarter, down marginally from $26.89 per square foot at the end of the second quarter.
The average asking rate for all classes also decreased to $19.85 per square foot gross from $19.94 at the end of second quarter 2015.
Construction
No new construction was completed in the Lisle-Naperville market during the third quarter of 2015 and no notable construction is planned or underway.
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
*6200 S Route 53 360,000 B263 Shuman Boulevard 354,000 A*4201 Winfield Road 249,996 A2600 Lucent Lane 225,000 A2400 Cabot Drive 205,633 B2441 Warrenville Road 148,243 A*750 N Commons Boulevard 112,605 B4343 Commerce Court 96,278 A535 E Diehl Road 83,792 A1245 Corporate Boulevard 82,000 B
LARGE BLOCKS AVAILABLETOP 10 BY SQUARE FOOTAGE
CLASS A Class B
*Sublease
360,000
354,000
249,996
225,000
205,633
148,243
112,605
96,278
83,792
82,000
*6200 S Route 53
263 Shuman Boulevard
*4201 Winfield Road
2600 Lucent Lane
2400 Cabot Drive
2441 Warrenville Road
*750 N Commons Boulevard
4343 Commerce Court
535 E Diehl Road
1245 Corporate Boulevard
Significant Lease and Sale Activity
Top Lisle-Naperville Office Investment Sales ActivitySTATUS PROPERTY TOWN CLASS SIZE (SF) SALE PRICE PRICE/SF BUYER SELLER
Sold 215 W Diehl Road Naperville A 150,000 $22,390,500 $149.27 Lone Star Funds Columbia Property Trust
Sold Lisle Executive Center Lisle B 150,000 Undisclosed Boxer Property Pearlmark Real Estate Partners
UC Metrowest Naperville A 205,055 TBD TBD TBD Franklin Partners
New Central Park of Lisle Lisle A 622,287 TBD TBD TBD The Blackstone Group
New Corporetum VI Lisle A 172,695 TBD TBD TBD Winthrup Realty Trust
New Corporetum III Lisle A 91,722 TBD TBD TBD Prudential Life Insurance
Top Lisle-Naperville Office Leasing ActivityTENANT BUILDING TOWN CLASS SIZE (SF) DEAL TYPE
United Healthcare Services* Corporetum Office Campus Lisle A 20,500 Renewal
*Colliers International Transaction
Oak BrookThe Oak Brook market continued to rebound in the third quarter after suffering a hiccup earlier in the year.
Vacancy
The Oak Brook market continued its decline in vacancy, ending the third quarter at 20.5 percent compared to 21.5 percent in the previous quarter. Vacancy decreased in all of Oak Brook’s property classes in the third quarter.
Class A properties saw a significant decrease in vacancy as the rate dropped to 19.0 percent from 19.8 percent in the previous quarter. When considering high quality, true Class A assets, vacancy is even lower at 13.0 percent, down from 14.2 percent in the second quarter.
Absorption
The Oak Brook market ended the third quarter of 2015 with 228,882 square feet of positive net absorption, up from positive 98,854 square feet in the second quarter. This sizable rebound brought year-to-date absorption to positive 291,956 square feet.
While all sectors achieved positive absorption in the third quarter, Class A properties were the highest contributor, adding 99,791 square feet of positive net absorption.
Large Blocks Of Availability
Four properties in the Oak Brook market can accommodate large (100,000 square feet and above) users. Three of the four properties are Class A.
Market IndicatorsRelative to prior periods Q2 2015 Q3 2015
VACANCY 21.5% 20.5%
YTD ABSORPTION 63,074 291,956
RENTAL RATE $19.85 $19.93
INVENTORY 23,576,483 23,576,483
Vacancy %Class A 19.0%Class B 22.7%Class C 19.1%
Class A 13,200,293 SF 19.0% Vacant
Class B 9,327,317 SF 22.7% Vacant
Class C 1,048,873 SF 19.1% Vacant
Vacant Space by Property Type
Class A Class B Class C
Vacant Space By Property Type
Net Absorption and Vacancy | North Office Market
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Oak Brook Submarket
Source: Costar; Colliers International Research Class A Class B Average Class C
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
201520142013201220112010
Asking Gross Rental Rates Overall Suburban Office
Source: Costar; Colliers International Research Class A Class B Class C Average
21.2% 22.0%
18.3% 17.8%
22.8%
19.6% 20.8%
22.7%
17.4%
21.7% 20.2%
21.2% 22.7%
17.9%
20.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
O'Hare Northwest North Lisle/Naperville Oak Brook
Vaca
ncy (
%)
Submarket Vacancy Rates 2013 - 2015
2013 2014
Source: Costar; Colliers International Research
12 Research & Forecast Report | Third Quarter 2015 | Suburban Chicago / Office | Colliers International
Rents
The current Class A average asking rent in the Oak Brook market measured $27.98 per square foot gross, an increase from $27.90 in the second quarter of 2015.
The average asking rate for all classes also increased, rising to $19.93 per square foot gross, up from $19.85 per square foot gross in second quarter of 2015.
Construction
While there wasn’t any new speculative development in the Oak Brook market during the third quarter and none is expected for the remainder of 2015, build-to-suit activity continues as Chamberlain Group, a division of Duchossois Group, plans to build a 252,600-square-foot office development on the land it acquired from Follett Corporation on Swift Drive in Oak Brook. In addition, SKF Group is now seeking a tenant for its 130,000-square-foot R&D center in Naperville that was originally intended for Gothernburg, a Sweden-based manufacturer. Construction on the property is scheduled for later this fall.
Asking Gross Rental Rates | Oak Brook Office Market
Top 10 Large Available Blocks by Square Feet
Chicago Suburban Office | Local Standards - 3rd Quarter 2015Office Market Statistics | Charts
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
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