Market Research chicago downtown

Transcription

1 Market Research chicago downtown year-end report

2 METROPOLITAN CHICAGO downtown office Year-End Colliers B&K Success Stories Fenwal 3 Corporate Drive Long Grove, IL 144,000-SF Lease Table of Contents I. Downtown Office Market Overview 2 West Loop 3 Central Loop 3 East Loop 5 North Michigan Avenue 6 River North 7 Year-end 2007 Downtown Office Market Statistics 8 Top Transactions of New Feature: Skyline Report 10 Downtown Office Submarket Map 12 II. About Colliers Bennett & Kahnweiler Inc. 13 Certified Grocers 1 Certified Drive Hodgkins, IL 951,000-SF Sale CenterPoint Properties 21 Buildings 1,957,000-SF Investment Sale TAP Pharmaceuticals Bannockburn Lake Office Plaza II Bannockburn, IL 106,000-SF Renewal Flashpoint Academy 111 W. Washington Chicago, IL 86,000-SF Lease 1

3 METROPOLITAN CHICAGO downtown office Year-End 2007 After a healthy 2007, the Chicago CBD s leasing velocity and investment activity is expected to slow as tenants are becoming more cautious due to economic conditions. vacancy and absorption 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , ,000-1,000, % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% downtown Market Snapshot Downtown Office Overview Rate 15.2% 13.2% 3,668,591 sf 2,621,709 sf Inventory 128,604,196 sf 128,318,739 sf downtown Office Market Overview The overall CBD vacancy rate ended the year at 13.2 percent, a 2.0 percent decrease from the 15.2 percent reported at year-end This marks the fifth consecutive quarterly decrease for the Chicago CBD. Lease and Sale Activity The Chicago CBD achieved healthy leasing activity in 2007 with the West Loop capturing 6 of the year s 10 largest transactions. The largest new lease of 2007 was CME Group s 360,000 square-foot renewal/expansion at 10 & 30 S. Wacker Drive in the West Loop was a year of record-setting volume for investment sales activity. Tishman Speyer Properties purchased seven properties from Blackstone Group for approximately $1.72 billion, adding 6.6 million square feet of Class A properties to their inventory in the city s largest and most closely monitored property sale. The hot investment sales market in the first half of 2007 began to put upward pressure on rents, as landlords increased rates to justify the high purchase prices paid for those assets. The CBD ended 2007 with an impressive positive 2,621,709 square feet of net absorption. However, this was considerably less than the positive 3,668,591 square feet reported at year-end The strong net absorption experienced during 2007 was largely in response to expansions and relocations of tenants in the market, particularly professional services firms. During 2007, the Chicago CBD vacancy rate continued to tighten as absorption remained strong. As a result, landlords began to raise rents and reduce concession packages across all building classes and submarkets for the first time in five years. Construction No new construction was delivered to the CBD during However, numerous office towers are under construction or proposed, potentially adding 7 million square feet of new inventory between 2008 and Roughly 5 million square feet of new projects are currently under construction, including 155 N. Wacker Drive, 300 N. LaSalle Street, 353 N. Clark Street, 22 W. Washington and the vertical expansion of 300 E. Randolph Street. What to Expect in 2008 is expected to be moderately positive but will not likely be near the volume witnessed over the past two years. rates will continue to tighten during 2008 until 3.6 million square feet of new inventory is added to the market in The momentum in leasing activity experienced in 2007 should carry over into 2008, although it is likely to be at a much slower pace due to numerous uncertainties in the economy. Bank of America s acquisition of LaSalle Bank and Royal Bank of Scotland s acquisition of ABN Amro could have a substantial impact on the Chicago market due to announced staff reductions which could lead to substantial additional vacant space being added to the market. Bank of America anticipates that 2,500 employees in Illinois could lose their jobs, leaving questions as to how much space will be vacated as a result. Additionally, the prospect of an economic recession could cause tenants to be more cautious with their immediate and future growth plans. However, with many large tenants currently exploring the market, leasing activity and absorption are expected to remain positive in Investment sales activity will slow down throughout 2008 in response to more conservative lender financing and softer demand. Many landlords will opt to work on leasing up their buildings and wait for the investment market to rebound before attempting to sell. 2

4 metropolitan chicago downtown office Year-End 2007 West Loop The West Loop vacancy rate ended the year at 12.7 percent, a significant reduction from the 15.3 percent reported in the fourth quarter of The vacancy rate decrease in the West Loop continues to be driven by tenant demand for high-quality space on or near Wacker Drive and proximity to transit. Lease and Sale Activity The West Loop maintained its position as one of the submarkets with the strongest leasing activity during the fourth quarter. The most notable lease signing during fourth quarter was American Hospital Association s new lease at 155 N. Wacker Drive for 115,000 square feet. The association is now the third tenant to sign a lease at the tower scheduled for delivery in Additionally, the General Services Administration signed a new lease for 33,351 square feet at 500 W. Madison Street for space to be utilized by the U.S. Census Bureau. During the fourth quarter, Hewitt Associates also expanded to occupy approximately 30,000 square feet at 311 S. Wacker Drive by relocating within the building due to a lack of contiguous space. Several noteworthy investment sales occurred during the fourth quarter. The John Buck Company sold 200 W. Monroe Street to General Electric Pension Trust for $115 million or $215 per square foot. Additionally, Kushner Companies purchased 225 W. Randolph from AT&T for $295 million, who then leased back the entire 900,000-square-foot building. During the fourth quarter, the portfolio sale of 200 S. Wacker Drive, 10 and 120 S. Riverside, and 440 S. LaSalle Street (located in the Central Loop) closed. The portfolio was sold to Behringer Harvard by Beacon Capital Partners for $850 million. The West Loop ended 2007 with positive 1,196,977 square feet of net absorption, down from the 2,002,078 square feet reported at year-end The positive absorption witnessed during the year was largely attributed to a strong fourth quarter when 670,974 square feet of net absorption was reported. Class A space comprised a majority of the absorption reported for fourth quarter with positive 646,338 square feet. Navteq s occupancy of 273,000 square feet at 100 N. Riverside played a sizable role in the West Loop s positive absorption for the quarter. With the exception of the negative 235,611 square feet of absorption reported in the third quarter, the West Loop continued to perform as one of the strongest submarkets in the CBD. Construction No new construction was delivered to the West Loop during the 4th Quarter. However, construction remains underway on 155 N. Wacker Drive, the John Buck Company s new 1.1 million-square-foot office tower. Delivery is expected in the summer Hines is in lease negotiations and has signed a letter of intent with William Blair to anchor a new 1.1 million-square-foot office tower at 200 N. Riverside Plaza. Other rumored developments include Hines new office tower at 200 N. Riverside Plaza (1.1 million square feet), the renovation and vertical expansion of Union Station at 210 S. Canal Street (1.5 million square feet), Fifield s two-tower development at W. Monroe Street (1.2 million square feet), and Beitler s development at 301 S. Wacker Drive. What to Expect in 2008 Rental rates and concession packages will remain stable in will likely tighten further and absorption should continue to be positive, although it is not likely to be as strong as the absorption witnessed over the past two years. The West Loop should maintain its status as the preferred tenant submarket due to new office developments and easy access to transit, which should help fuel more positive absorption into The West Loop continued to be a hotbed of activity in 2007 as tenants are attracted to the area s new trophy product and proximity to public transportation. vacancy and absorption 2,500,000 2,000,000 1,500,000 1,000, , , % 18% 16% 14% 12% 10% downtown Market Snapshot West Loop Rate 15.3% 12.7% 2,002,078 sf 1,196,977 sf Inventory 44,781,738 sf 44,496,281 sf 3

5 METROPOLITAN CHICAGO downtown office Year-End 2007 The Central Loop benefited dramatically in 2007 from tenants seeking a more cost effective alternative to the West Loop. vacancy and absorption 1,400,000 1,200,000 1,000, , , , , ,000 0 downtown Market Snapshot % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Central Loop Rate 16.3% 13.0% 561,840 sf 1,151,964 sf Inventory 35,709,704 sf 35,709,704 sf Central Loop The Central Loop s vacancy rate improved significantly from 16.3 percent at year-end 2006 to 13.0 percent at year-end This vacancy rate decrease is an indication that many tenants view the Central Loop as an economically beneficial alternative to the pricier West Loop. Lease and Sale Activity The only notable lease signing in the Central Loop during the fourth quarter was Regus Group s renewal of 23,361 square feet at 70 W. Madison Street. However, earlier in 2007, the Central Loop witnessed very strong leasing activity with numerous renewals and expansions. Two noteworthy investment sales occured in the Central Loop during the quarter. The Inland Steel Building at 30 W. Monroe Street was sold by a group of investors including Frank Gehry, Alfred D Ancona and Harvey Camins to Capital Properties LP for $57 million or $241 per square foot. Also, Broadway Partners sold 209 S. LaSalle Street (The Rookery) to Metzler North American Corporation for $73 million ($257 per square foot). Despite a slow fourth quarter with absorption of only positive 55,834 square feet, the Central Loop ended the year at a remarkable positive 1,151,964 square feet, up from 561,840 square feet of positive absorption posted in The submarket saw positive absorption during all quarters in In terms of demand, the Central Loop is a close second only to the West Loop. In addition to potential price reductions relative to the West Loop, many tenants that vacated the Central Loop to occupy new space in the West Loop have left behind highly desired and well built-out large blocks of space that had to be re-leased by landlords. Other tenants were quick to back-fill this space during 2007, contributing to the positive absorption witnessed during the year. Construction No new construction was delivered to the Central Loop during the fourth quarter. The mixed-use, 400,000-square-foot development at 22 W. Washington Street is expected to be completed in early Anchored by Morningstar, this will be the first new office delivery to the CBD in the past five quarters. What to Expect in 2008 Class A rents should remain stable or increase only slightly in 2008, as much of the highquality space that was available in 2007 has been leased. Rents for Class B and C space could increase slightly to be more proportionate to rates being charged for Class A space. Concession packages should remain stable. in 2008 should remain positive but will not be nearly as strong as figures posted in Additionally, Bank of America s acquisition of LaSalle Bank could potentially add a substantial amount of vacant space to the Central Loop if the company downsizes and reduces the amount of space it occupies at 135 S. LaSalle Street and 231 S. LaSalle Street. 4

6 metropolitan chicago downtown office Year-End 2007 East Loop There were no dramatic changes in the East Loop s vacancy rate in 2007 as the year ended at 15.3 percent. This is only a nominal increase from the 15.1 percent reported at the end of The East Loop was the only submarket to show an increase in overall vacancy rate compared to year-end 2006, due in part to the submarket s difficulty with recruiting new tenants. Lease and Sale Activity Numerous lease transactions were completed in the East Loop during 2007, most of which were expansions or renewals of existing tenants. However, the fourth quarter witnessed a surge of new lease transactions, an indication that the economic incentives offered in the East Loop may begin to attract tenants from other more expensive submarkets. Microsoft Corporation signed a 75,000-square-foot lease at 200 E. Randolph Street (Aon Center). The firm will relocate from its current Central Loop location at 77 W. Wacker Drive. Argosy University signed a new 70,383-square-foot lease at 205/225 N. Michigan Avenue (Michigan Plaza) to consolidate its two existing River North and Central Loop locations. Also, Gensler signed a new 55,000-square-foot lease at 33 S. State Street with plans to relocate from 30 W. Monroe Street. Other notable fourth quarter lease transactions include Conference Center Concepts renewal and expansion of 33,137 square feet at 205 N. Michigan Avenue. There were no significant investment sales reported in the East Loop during the fourth quarter. The East Loop ended 2007 with negative 48,362 square feet of absorption, a dramatic decrease from positive 815,115 square feet at year-end During 2007, the conversion of the former Carson Pirie Scott retail space into office space largely contributed to the shift. During the fourth quarter, the U.S. General Services Administration notified all tenants at 220 S. State Street that they must vacate as plans for an expansion of the downtown federal courthouse progress. As a result, all tenants at the 181,000-square-foot building will be forced to relocate, which could impact future absorption in the East Loop. Construction No new construction was delivered to the East Loop during the fourth quarter. The 800,000-square-foot vertical expansion of the Blue Cross Blue Shield headquarters at 300 E. Randolph Street is still underway. Fifty percent of the expansion is anticipated to be leased to other tenants in the market when the building is completed in What to Expect in 2008 Rents in the East Loop should remain stable throughout is expected to increase slightly as tenants that signed leases in the second and third quarters of 2007 begin to assume occupancy. The East Loop will remain an appealing alternative for many small- to mid-sized tenants looking for more affordable rental rates. However, the East Loop is plagued by uncertainty as numerous potential large vacancies loom in 2009 and beyond, such as Kirkland and Ellis (400,000 square feet), KPMG (230,000 square feet), Integrys Energy Group (240,000 square feet) and Baker & McKenzie (240,000 square feet). The East Loop has the potential to experience a considerable amount of negative absorption in the future if existing large tenants cannot be retained. The East Loop continued to struggle with attracting new tenants and is facing substantial excess vacancy in 2009 as major tenants ponder relocations. vacancy and absorption 1,000, , , , , , , , ,000-1,000, % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% downtown Market Snapshot East Loop Rate 15.1% 15.3% 815,115 sf -48,362 sf Inventory 24,332,094 sf 24,332,094 sf 5

7 METROPOLITAN CHICAGO downtown office Year-End 2007 North Michigan Avenue managed to improve its vacancy rate despite the fact that there were very few lease transactions completed in vacancy and absorption 150, ,000 50,000-50, , , , , % 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% downtown Market Snapshot North Michigan Avenue Rate 13.9% 13.1% 30,461 sf 84,588 sf Inventory 10,490,143 sf 10,490,143 sf North Michigan Avenue North Michigan Avenue s vacancy rate ended the year at 13.1 percent, an improvement from 13.9 percent at year-end Lease and Sale Activity Consistent with leasing activity in other recent quarters, there was only one notable lease transaction completed in North Michigan Avenue during the fourth quarter. Regus Group renewed its 21,334-square-foot lease at 980 N. Michigan Avenue. Despite the negative 33,852 square feet of net absorption reported during the fourth quarter, North Michigan Avenue ended 2007 with positive 84,588 square feet, up from the 30,461 square feet posted at year-end Most of the positive absorption in North Michigan Avenue is typically driven by expansions from hospitals, universities and related fields. There is limited velocity for most office tenants in North Michigan Avenue, as most transactions tend to be small. Construction No new construction was delivered to the North Michigan Avenue submarket during the fourth quarter. What to Expect in 2008 Rents are expected to remain stable with the potential for a slight increase, depending on demand in the medical and education fields. Concession packages should also remain consistent in rates are likely to decrease slightly and absorption should remain slightly positive, particularly as Northwestern Memorial Hospital occupies its new space at 541 N. Fairbanks in Additionally, the hospital is already rumored to be expanding. When Children s Memorial Hospital completes construction on its new facility in Streeterville, the submarket may see more positive absorption as other tenants affiliated with the hospital consider relocating to North Michigan Avenue to be in closer proximity. 6

8 metropolitan chicago downtown office Year-End 2007 River North Ending 2007 with a vacancy rate of 11.9 percent, River North achieved a substantial decrease from the 13.6 percent vacancy rate reported in fourth quarter of Much of this vacancy decrease can be attributed to the positive publicity from new developments such as 353 N. Clark Street and 300 N. LaSalle Street. As a result of these new Class A projects, tenants are beginning to take a second look at River North. Lease and Sale Activity Several noteworthy lease transactions were completed in River North during the fourth quarter. Draftfcb renewed its 83,000-square-foot lease at 633 N. St. Clair Street. The renewal also included a floor and a half contraction which will be immediately absorbed by the American College of Surgeons, the landlord of the building. Upshot Marketing signed a new 41,486-square-foot lease at 350 N. Orleans Street with plans to relocate from its existing East Loop location at 303 E. Wacker Drive. Harris Alternatives also signed a new lease to occupy 40,703 square feet at 300 N. LaSalle Street. There were no noteworthy fourth quarter investment sales reported in River North. of positive 64,648 square feet in the fourth quarter helped boost River North s 2007 year-end figure to positive 236,542 square feet, down slightly from the positive 259,097 square feet posted at year-end Much of the positive absorption witnessed in River North for the year stemmed from numerous occupancies and expansions at 600 W. Chicago Avenue, including the Big Ten Network, Echo Global Logistics, and Celsis, Inc. Construction There were no new construction deliveries to River North during the fourth quarter. However, the submarket has two large development projects underway. Hines development at 300 N. LaSalle Street, a 1.4 million-square-foot tower anchored by Kirkland & Ellis, is expected to be delivered in early Additionally, 353 N. Clark Street, a 1.2 millionsquare-foot office tower anchored by Jenner & Block, is expected to be delivered in July of Prime Group Realty Trust is currently seeking landmark designation from the Commission on Chicago Landmarks for 330 N. Wabash Avenue (formerly known as IBM Plaza). The Landlord plans to convert the first 14 floors of the tower, currently office space, into a five-star luxury hotel. What to Expect in 2008 Rents in River North are expected to increase slightly during 2008 in response to the tightening vacancy experienced in the submarket throughout 2007 and because of the renewed interest and strong activity in the submarket. Concession packages are expected to remain stable. should remain slightly positive during 2008, but will shift when 2.6 millionsquare-feet of new developments are completed in Despite this future addition of inventory, these developments, which are substantially pre-leased, come with increased amenities such as new retail options and more parking. Experts are hopeful that this could continue to attract many smaller tenants to River North and help to partially offset some of the new space that will be added to the submarket. River North has been invigorated due to the promise of new Class A product such as 353 North Clark Street and 300 North LaSalle Street. vacancy and absorption 400, , , , , , ,000 50,000-50, , % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% downtown Market Snapshot River North Rate 13.6% 11.9% 259,097 sf 236,542 sf Inventory 13,290,517 sf 13,290,517 sf 7

9 METROPOLITAN CHICAGO downtown office Year-End 2007 Fourth quarter 2007 market statistics Class Bldgs DOWNTOWN TOTAL Total Inventory Sq. Ft. Direct SF Vacant Sublease SF Vacant Total Vacant SF Direct Rate Class C: 27 4,079, , , , % 2.6% 21.7% 20.1% (115,151) 49,552 (65,599) (365,678) Subtotal: vacancy 86 and 44,496,281 absorption 4,934, ,133 5,657, % 1.6% 12.7% 14.2% 567, , ,974 1,196,977 downtown Class C: 5 Market 441,175 Snapshot 21, , % 0.0% 4.8% 7.5% 7,073 4,720 11, Subtotal: 33 10,490,143 1,212, ,534 1,371, % 1.5% 13.1% 12.8% (30,916) (2,936) (33,852) 84,588 Sublease Rate Total Rate - 3rd Quarter Total Rate - Prior Qtr. Total Direct Net Total Sublease Net Total Net - 3rd Qtr. Net YTD-Sq. Ft. Class A: 77 68,377,784 7,448,632 1,097,559 8,546, % 1.6% 12.5% 13.8% 892,957 (34,181) 858,776 2,840,502 Class B: ,040,113 6,166, ,847 6,571, % 0.9% 14.0% 13.9% (41,867) 15,187-26,680 (121,274) Class C: 93 12,900,842 1,737, ,248 1,859, % 0.9% 14.4% 13.8% (121,888) 46,387 (75,501) (97,519) Subtotal: ,318,739 15,352,211 1,625,654 16,977, % 1.3% 13.2% 13.8% 729,202 27, ,595 2,621,709 WEST LOOP Class A: 30 28,414,136 3,120, ,821 3,660, % 1.9% 12.9% 15.2% 592,227 54, ,338 1,212,617 Class B: 29 12,003,115 1,035,714 75,899 1,111, % 0.6% 9.3% 10.0% 90,619 (384) 90, ,038 CENTRAL LOOP Class A: 21 19,011,239 1,826, ,825 1,959, % 0.7% 10.3% 11.1% 157,275 2, ,977 1,255,580 Class B: 32 14,810,559 2,328, ,963 2,431, % 0.7% 16.4% 15.9% (45,623) (36,058) (81,681) (102,149) Class C: 10 1,887, ,367 6, , % 0.4% 14.0% 12.8% (15,809) (6,653) (22,462) (1,467) Subtotal: 63 35,709,704 4,412, ,441 4,655, % 0.7% 13.0% 13.2% 95,843 (40,009) 55,834 1,151,964 EAST LOOP Class A: 12 12,602,828 1,554, ,008 1,897, % 2.7% 15.1% 14.9% 46,477 (62,934) (16,457) 83,931 Class B: 17 7,445,866 1,313,468 18,195 1,331, % 0.2% 17.9% 17.8% 6,201 (9,265) (3,064) (319,312) Class C: 24 4,283, ,003 1, , % 0.0% 11.4% 11.8% 18,542 (30) 18, ,019 Subtotal: 53 24,332,094 3,354, ,933 3,717, % 1.5% 15.3% 15.3% 71,220 (72,229) (1,009) (48,362) NORTH MICHIGAN AVE. Class A: 10 5,494, ,880 57, , % 1.1% 10.4% 11.2% 45,093 (3,821) 41, ,395 Class B: 18 4,554, , , , % 2.2% 17.1% 15.2% (83,082) (3,835) (86,917) (104,027) RIVER NORTH Class A: 4 2,855, ,016 24, , % 0.8% 16.0% 16.9% 51,885 (24,239) 27,646 99,979 Class B: 22 8,225, , , , % 1.3% 11.2% 11.8% (9,982) 64,729 54,747 54,176 Class C: 27 2,209, ,834 6, , % 0.3% 9.1% 8.3% (16,543) (1,202) (17,745) 82,387 Subtotal: 53 13,290,517 1,437, ,613 1,575, % 1.0% 11.9% 12.3% 25,360 39,288 64, ,542 QUARTERLY COMPARISON AND TOTALS Q ,318,739 15,352,211 1,625,654 16,977, % 1.3% 13.2% - 729,202 27, ,595 Q ,318,739 16,081,413 1,653,047 17,734, % 1.3% 13.8% - 793,184 (61,436) 731,748 Q ,377,739 16,874,597 1,591,611 18,466, % 1.2% 14.4% - 859,669 79, ,502 Q ,604,196 17,734,266 1,671,444 19,405, % 1.3% 15.1% - 298,556 (104,692) 193,864 Q ,604,196 18,032,822 1,566,752 19,599, % 1.2% 15.2% - 1,057, ,979 1,307,213 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. 8

10 metropolitan chicago downtown office Year-End 2007 Large lease transactions of 2007 *Colliers Bennett & Kahnweiler Transactions Tenant Address Submarket Landlord Rep. SF Type of Deal CME Group, Inc. 10 & 30 S. Wacker Drive West Loop Tishman Speyer Properties 360,000 Renewal/Expansion Citigroup 227 W. Monroe Street West Loop Tishman Speyer 235,000 New Lease Blue Cross Blue Shield Association 225 N. Michigan Avenue East Loop MB Real Estate 214,474 Renewal Bankers Life & Casualty Co. 600 W. Chicago Avenue River North 207,536 Renewal/Consolidation Skadden, Arps, Slate, Meagher & Flom 155 N. Wacker Drive West Loop John Buck Company 165,000 New Lease Northwestern Memorial Hospital 541 N. Fairbanks Street N. Michigan Ave. Golub 150,000 New Lease Calyon Financial 550 W. Jackson Street West Loop JF McKinney 134,114 Renewal/Expansion Boston Consulting Group 300 N. LaSalle Street River North Hines 125,000 New Lease Robert W. Baird & Co. 227 W. Monroe Street West Loop Tishman Speyer 116,000 New Lease/Expansion American Hospital Association 155 N. Wacker Drive West Loop John Buck Company 115,000 New Lease/Contraction Chicago Stock Exchange 440 S. LaSalle Street Central Loop Jones Lang LaSalle 112,403 Renewal/Contraction Cash America International 200 W. Jackson Street West Loop MB Real Estate vacancy 105,000 and Expansion absorption Flashpoint the Academy of Media Arts and Sciences 111 W. Washington Street Central Loop CB Richard Ellis 86,412 New Lease/Expansion Draftfcb 633 N. St. Clair Street River North Jones Lang LaSalle 83,000 Renewal/Contraction Bridge Finance Group 155 N. Wacker Drive West Loop John Buck Co. 82,700 New Lease Microsoft 200 E. Randolph Street East Loop Jones Lang LaSalle 75,000 New Lease/Expansion Blackman Kallick 10 S. Riverside Plaza West Loop Jones Lang LaSalle 70,500 Expansion Leydig Voit & Mayer Ltd. 180 N. Stetson Avenue East Loop J.F. McKinney & Associates 70,408 Renewal/Expansion Argosy University N. Michigan East Loop MB Real Estate 70,383 New Lease Ambrosi 1 N. Dearborn Street Central Loop MB Real Estate 69,000 Consolidation CB Richard Ellis 311 S. Wacker Drive West Loop J.F. McKinney & Associates 68,000 Renewal/Expansion Morgan Stanley 440 S. LaSalle Street Central Loop Jones Lang LaSalle 64,000 Renewal/Expansion Segal McCambridge Singer & Mahoney 233 S. Wacker Drive West Loop CB Richard Ellis 63,813 New Lease Cassiday Schade & Gloor LLP 20 N. Wacker Drive West Loop Equity Office Properties Trust 62,863 Renewal Infinium Capital Management 600 W. Chicago Avenue River North Jones Lang LaSalle 62,837 New Lease/Expansion downtown Market Snapshot Health Care Services/Blue Cross Blue Shield 111 E. Wacker Drive East Loop J.F. McKinney 61,000 Expansion Recycled Paper Greetings 111 N. Canal Street West Loop Albert Frank Associates 57,800 New Lease Gensler 33 S. State Street East Loop HSA Commercial 55,000 New Lease/Expansion Aetna 1 S. Wacker Drive West Loop Jones Lang LaSalle 54,348 New Lease Corporate Executive Board 550 W. Jackson Drive West Loop JF McKinney 51,939 New Lease BMO Financial Group 115 S. LaSalle Street Central Loop Hines 51,814 Expansion Oracle 233 S. Wacker Drive West Loop U.S. Equities 51,400 Renewal EA Sports 215 W. Ohio Street River North Ameritus LLC 50,212 New Lease GTCR Golder Rauner LLC 300 N. LaSalle Street River North Hines 50,000 New Lease VOA Associates 224 S. Michigan Avenue East Loop Hamilton Partneres 45,743 Renewal/Expansion Duane Morris 190 S. LaSalle Street Central Loop CB Richard Ellis 45,546 New Lease Regus Group PLC 200 S. Wacker Drive West Loop John Buck Company 44,740 Renewal U.S. Census Bureau 500 W. Madison Street West Loop MB Real Estate 42,539 New Lease Merrill Corp. 311 S. Wacker Drive West Loop J.F. McKinney & Associates 42,365 Expansion Upshot Marketing 350 N. Orleans Street River North CB Richard Ellis 41,486 New Lease OptionsXpress 311 W. Monroe Street West Loop J.F. McKinney 41,000 New Lease Harris Alternatives 300 N. LaSalle Street River North Hines 40,703 New Lease Acquity Group LLC 500 W. Madison Street West Loop MB Real Estate 37,000 New Lease/Expansion Regent Business Centers 222 S. Riverside Plaza West Loop CB Richard Ellis 35,545 New Lease Wayne Hummer Investments 222 S. Riverside Plaza West Loop CB Richard Ellis 35,545 New Lease Ernst & Young 233 S. Wacker Drrive West Loop U.S. Equities 35,000 Expansion Morgan Lewis & Bockius 77 W. Wacker Dr. Central Loop Prime Group Realty Trust 34,157 Renewal/Expansion Barack Obama Campaign 233 N. Michigan Ave. East Loop J.F. McKinney 33,500 Sublease 9

11 METROPOLITAN CHICAGO downtown office Year-End 2007 skyline report: super class a properties in chicago s cbd Recently, Class A properties have evolved into two distinct categories based on technological capabilities, efficiency, location, amenities, environmental certification, overall appearance, and quality. Properties that attract high-quality tenants, provide state-of-the-art infrastructure, and use the highest quality materials and finishes are in a class of their own known as Super Class A or A+. Most Super Class A properties have been constructed within the last five years and have extremely efficient floor plates. These buildings are particularly attractive to large tenants seeking greater efficiencies that have had difficulty finding large blocks of available space in existing properties. This report takes a closer look at Super Class A properties as a function of total inventory and how demand for this class has contributed to overall vacancy. The total vacancy rate at the end of 2007 was 13.2 percent with Class A space, inclusive of Super Class A space, at 12.5 percent, Class B space at 14.0 percent and Class C at 14.4 percent. However, when considering Super Class A properties alone, those buildings ended the year with a vacancy rate of only 4.5 percent, an indication that this space is in high demand. Furthermore, of the 4.5 percent vacant Super Class A space, much of it is considered to be encumbered option space for the future use of existing tenants. As a result, this encumbered space is not as marketable to outside tenants, making the actual unencumbered vacant space for lease in these properties less than 4.5 percent. Between 2008 and 2012, over 7 million square feet of new inventory will likely be delivered to the CBD, with the majority considered to be Super Class A space. rates are expected to increase due to the addition of new inventory. However, Super Class A properties have remained highly desirable and it is very likely that the new buildings will continue to attract tenants from existing properties. This new generation space could have a substantial impact on the CBD, leaving behind large vacancies in existing properties. Based upon recent performance of these assets, we anticipate that the trend will continue, with the new Super Class A properties leasing up space fairly quickly. Six of Chicago s Super Class A properties are profiled in this report below. Available Direct Space Available Sublet Space Mechanical Space Floor 10

12 metropolitan chicago downtown office Year-End 2007 Building Class as % of Total CBD A+ 1.82% Total SF Vacant SF Class A+: 6,918, , % % Vacant Class A (Excl. Class A+): 61,459,779 8,237, % Class B: 47,040,113 6,571, % Class C: 12,900,842 1,859, % Total CBD: 128,318,739 16,977, % C 10.95% B 38.71% A 48.52% Super Class A vacant space (308,364 SF) represents only 1.82% of total vacant space (16,977,865 SF). 11

13 METROPOLITAN CHICAGO downtown office Year-End 2007 Chicago Downtown Office Submarket Map 12

14 metropolitan chicago market research year-end 2007 About Colliers Bennett & Kahnweiler Colliers Bennett & Kahnweiler Inc. is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 267 offices throughout more than 57 countries worldwide. Locally, Colliers Bennett & Kahnweiler offers full service real estate services including office, retail, investment, and industrial brokerage; development; project/construction management; and property/asset/facility management. In total, some 160 persons are employed by the firm nearly half of which are brokerage professionals. Headquarters Colliers Bennett & Kahnweiler Inc N. River Road, Suite Rosemont, IL / (main number) 847/ (fax) Principals David Kahnweiler, SIOR Chairman and CEO William Fausone, SIOR President David Bercu, SIOR Colliers Manager Daniel Arends Ronald Behm, SIOR Richard Berger Gerald Cernick Robert Chodos, SIOR Kevin Clifton, SIOR Jeffrey Devine Steven Disse Jeffrey Kahan Jeffrey Kapcheck, SIOR Steven Kling Gregory Pacelli, SIOR Francis Prock Jack Rosenberg, SIOR Andrew Sexson Matthew Stauber, SIOR Department Leadership Daniel Arends Richard Berger Robert Chodos, SIOR Directors of Corporate Office Group David Bilfeld Director of Multi Family Advisory Group Kevin Clifton, SIOR Director of Suburban Office Group James Degnan, SIOR Director of Industrial Services Group Jeffrey Kahan Director of Investment Services Group Philip Stafford Senior Vice President Colliers B&K Real Estate Management Services LLC Gregory Pacelli, SIOR Director of Land Group Aimee Course Director of Marketing and Communications George Cutro Vice President, Market Research Mark Las Director of Information Technology Branch Offices Colliers Bennett & Kahnweiler Inc. 200 S. Wacker Drive, Suite 700 Chicago, IL / (main number) 312/ (fax) Colliers Bennett & Kahnweiler Inc South Ulster Street Suite 1000 Denver, CO / (main number) 313/ (fax) Colliers International COLLIERS INTERNATIONAL With more than 10,000 employees worldwide, Colliers International is composed of the best local real estate companies in key world markets. Each member provides immense local insight as to customs, trends and cultural standards; a sound experiential base and an extraordinary staff of professionals committed to all Colliers International clients. Market coverage of Colliers International spans the Americas, Europe, Africa, the Middle East and Asia/Pacific. 13

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