Q3 SUBURBAN OFFICE CHICAGO OFFICE MARKET OVERVIEW MARKET INDICATORS Suburban Office Q2 Q3 VACANCY 20.4% 20.4% - YTD ABSORPTION 809,134 793,859 RENTS $19.71 $19.78 INVENTORY 119,350,985 119,350,985 - Hitting the Wall After reaching a four-year low in overall vacancy earlier in the year, the suburban Chicago office market saw stagnant market conditions in the third quarter. While vacancy is still the lowest the suburban Chicago office market has seen since the start of the recession, the number of large users in the market has dissipated as tenants focus on the efficiency of their existing space. TRENDS Although rents are slowly starting to rise in pockets throughout the suburban market, it remains a tenant s market with landlords continuing to offer aggressive incentive packages. While some tenants continue to hold off on making long-term commitments, others that foresee their long-term needs are capitalizing on current concessions. In addition, tenants are taking advantage of recently sold and recapitalized Class A and B+ properties and are continuing to make the flight to higher quality buildings which offer a great value. Another recent trend involves tenants looking for oppotunities to create more efficient work environments though an increase in space density. In turn, they are requiring higher parking ratios. VACANCY Leasing volume in the suburban office market remained flat at 20.4 percent in the third quarter of. While the Northwest and Oak Brook markets showed improvement in the third quarter, the North market reported the lowest overall vacancy rate, ending the third quarter at 17.8 percent. Conversely, the O Hare market obtained the highest vacancy, ending the quarter with 22.5 percent. Overall sublease vacancy increased slightly in the third quarter, rising to 1.7 percent, up from 1.8 percent in the second quarter. While the O Hare market has minimal sublease vacancy at 0.6 percent, the Lisle/Naperville market reported the highest sublease vacancy at 4.2 percent. LEASE AND SALE ACTIVITY Notable lease transactions in the third quarter of include American Imaging Management s 94,000-square-foot renewal/expansion at Corporate 500 Centre in Deerfield, SIRVA Worldwide s 53,500-square-foot lease at Parkview Plaza in Oak Brook and Meridian s 45,000-square-foot renewal/downsize at Nine Parkway North in Deerfield. Top investment transactions of the third quarter include Transwestern s purchase of Corridors I and II, a 299,792-square-foot asset in Downers Grove for $24.0 million ($80.06 per square foot), 25 Northwest Point, a 207,136-square-foot property in Elk Grove Village which sold to Farbman Group for $19.7 million ($95.11 per square foot) and Sara Investment Real Estate s purchase of Naperville www.colliers.com/chicago
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE Financial Center, a 57,878-square-foot property in Naperville for $7.1 million ($66.33 per square foot). ABSORPTION Overall net absorption in the third quarter ended with negative 15,275 square feet, down from positive 16,583 square feet reported in the second quarter. However, with absorption acquired earlier in the year, year-to-date absorption remained healthy at positive 793,895 square feet. The Northwest and Oak Brook markets achieved positive overall absorption in the third quarter, while O Hare, North and Lisle/ Naperville were negative. CONSTRUCTION No new construction was completed in the third quarter of. However, signs of life are beginning to emerge in the suburbs as new office developments were recently announced. This includes J.F. McKinney s four-building, 52,000-square-foot office development on Techny Road, just west of Waukegan Road in Northbrook. In addition, construction has begun on a 50,000-square-foot build-to-suit for Big Ten Conference s headquarters in Rosemont, Universal Technical Institute s two-story, 187,000-square-foot training center in Lisle and Hub Group s 130,000-square-foot build-to-suit headquarters in Oak Brook. All three projects are scheduled to be complete by year-end. Zurich Insurance announced plans to build a new headquarters on Motorola s campus at the intersection of Meacham Road and Interstate 90, which is scheduled to be completed in 2016. NET ABSORPTION AND VACANCY SUBURBAN OFFICE MARKET Square Footage Overall Suburban Office 793,859 1,000,000 708,928 22.0% 356,050 500,000 64,435 21.5% 21.4% 21.5% 0 21.0% 21.1% 21.0% (500,000) (1,000,000) (379,886) 20.4% 20.5% (1,500,000) 20.0% (2,000,000) 19.5% (2,500,000) 19.0% (3,000,000) 18.8% (2,938,267) (3,500,000) 18.5% Source: Costar; Colliers International Research Absorption Vacancy SUBMARKET VACANCY RATES - 30.0% 25.0% 24.0% 23.4% 22.8% 22.5% 22.8% 21.6% 22.1% 21.4% 21.1% 20.0% 19.8% 20.0% 20.0% 18.7% 18.4% 17.8% Vacancy (%) - 15.0% 10.0% 5.0% 0.0% -5.0% O'Hare Northwest North Lisle/Naperville Oak Brook Source: Costar; Colliers International Research Vacancy LARGE BLOCKS OF AVAILABILITY There are currently 41 properties in the suburban office market that can accommodate large (100,000 square feet and above) users, with 27 of them being Class A. While the O Hare and Oak Brook markets have very limited large blocks of space available, the Northwest market offers the majority of large block options. RENTS The average asking rent for all classes in suburban Chicago increased slightly to $19.78 per square foot gross at the end of third quarter compared to $19.71 at the end of second quarter. The average Class A asking rent ended the quarter at $27.35 per square foot gross, up from $27.18 per square foot gross at the end of the second quarter. A continued rise in Class A rates is expected as the economy improves. COLLIERS INTERNATIONAL P. 2
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE O Hare The O Hare market lost some momentum gained in the early part of the year as vacancy rates remained stagnant in the third quarter of. MARKET INDICATORS O Hare Q2 Q3 VACANCY 22.4% 22.5% YTD ABSORPTION 52,206 36,535 RENTS $20.71 $20.71 - INVENTORY 13,613,937 13,613,937 - VACANCY After witnessing several quarters of decreased vacancy, the O Hare market ended the third quarter at 22.5 percent vacancy, nearly flat from the 22.4 percent recorded at the end of the second quarter. While Class B properties reported a slight increase, Class A product reported the lowest vacancy since the first quarter of when 29.1 percent vacancy was reported. While Class B properties remained flat at 32.0 percent, Class A vacancy rose to 17.1 percent, up from 16.9 percent posted in the second quarter. O Hare sublease vacancy remains low at 0.6 percent, down slightly from 0.7 percent in the second quarter. As the O Hare Class A market continues to tighten, options for large space requirements have diminished. There are currently only three properties that can accommodate large users of 100,000 square feet and above, two of which are Class A. LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE 5450 N Cumberland Avenue 143,525 VACANT SPACE BY PROPERTY TYPE 2350-2400 E Devon Avenue 8420 W Bryn Mawr Avenue 104,164 142,596 Class C 383,680 SF 7.4% Vacant Class A 8,072,298 SF 17.1% Vacant 5100 River Road 4825 N Scott Street 1350 E Touhy Avenue 10255 W Higgins Road 74,988 74,656 71,367 69,695 Class B 5,157,959 SF 32.2% Vacant 9500 W Bryn Mawr Avenue 999 W Touhy Avenue 1050 Busse Highway 47,977 60,680 59,710 LEASE AND SALE ACTIVITY Significant third quarter lease transactions in the O Hare market include Mondelez s 16,000-square-foot lease at Triangle Plaza in Chicago and Prologis 12,000-square-foot relocation to One O Hare Centre in Rosemont. No notable investment sales occurred during the third quarter in the O Hare market. However, O Hare Aerospace Center, a three-building, 203,912-square foot portfolio in Schiller Park, is currently under contract. ABSORPTION Third quarter net absorption in the O Hare submarket was negative 15,671 square feet, compared to positive 46,040 square feet in the second quarter. This brings O Hare s year-to-date net absorption to positive 36,535 square feet, all of which comes from Class A product. COLLIERS INTERNATIONAL P. 3
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE CONSTRUCTION Construction on a 50,000-square-foot build-tosuit for Big Ten Conference s headquarters is scheduled for completion early in the fourth quarter. In addition, AAOS has begun construction on its build-to-suit project at the northwest corner of River and Higgins Roads in Rosemont. 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. RENTS Class A average asking rent for the O Hare market increased slightly to $30.96 per square foot gross in the third quarter of, up from $30.92 in the second quarter. As market conditions in the O Hare market continue to improve, increases in Class A asking rates are expected going into the fourth quarter. The average asking rate for all classes remained flat, ending the third quarter at $20.71 per square foot gross. NET ABSORPTION AND VACANCY O HARE OFFICE MARKET Square Footage 800,000 27.2% 600,000 566,930 25.0% 23.7% 24.0% 22.8% 400,000 165,526 200,000 0 (48,411) -200,000 (294,965) -400,000 (374,618) -600,000 Source: Costar; Colliers International Research Absorption Vacancy ASKING GROSS RENTAL RATES O HARE OFFICE MARKET $35.00 $30.00 $25.00 36,535 22.5% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Vacancy $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research ONE O HARE CENTRE ROSEMONT, IL COLLIERS INTERNATIONAL P. 4
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE Northwest While the Northwest market was hit the hardest during the recession, it saw the greatest improvement of all the submarkets in the third quarter. MARKET INDICATORS Northwest Q2 Q3 VACANCY 21.9% 21.6% YTD ABSORPTION 288,126 376,956 RENTS $17.74 $17.79 VACANCY After a sluggish start to the year, the Northwest market has begun to pick up momentum once again as overall vacancy dropped to 21.6 percent, down from 21.9 percent in the second quarter. This is the lowest vacancy this market has witnessed since year-end. While both Class A and B product registered deceases in vacancy, Class B properties had the most significant change, ending the third quarter with 26.0 percent vacancy, down from 26.5 percent at the end of second quarter. While the Northwest market continues to show signs of improvement, it also continues to offer the most options for large space requirements with 20 properties that can accommodate large (100,000 square feet and above) users. 11 of these properties are Class A. LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE INVENTORY 33,560,728 33,560,728 - *2000 W AT&T Drive 1,207,245 VACANT SPACE BY PROPERTY TYPE 2850 W Golf Road 21440 Lake Cook Road *2001 Lakewood Boulevard 1421-1501 Shure Drive 279,286 277,200 239,250 368,575 Class C 1,334,411 SF 12.7% Vacant Class A 20,272,616 SF 19.7% Vacant 1707 N Randall Road 200 N Martingale Road 5550 Prairie Stone Parkway 1000 E Woodfield Road 196,088 196,026 193,601 183,498 Class B 11,953,701 SF 26.0% Vacant *Sublease 1701 Golf Road 183,506 LEASE AND SALE ACTIVITY There were no notable lease transactions in the third quarter of in the Northwest market. However, there are several mid- to large-sized leases that are expected to sign in the Northwest market by year-end. Significant investment sales in the Northwest market during the third quarter include 25 Northwest Point, a 207,136-square-foot property in Elk Grove Village which sold to Farbman Group for $19.7 million ($95.11 per square foot) and Platinum Office Park, a six-building, 68,500-square-foot property in Rolling Meadows that sold to Moats Office Properties for $2.0 million ($29.20 per square foot). There are several properties currently under contract in the Northwest market. These include three Schaumburg assets: Centennial Center (384,120 square feet), One Century Centre (212,212 square feet), and Two Century Centre (221,177 square feet). 25 Northwest Point, a 207,136-square-foot property in Elk Grove Village, is also under contract. Additionally, Northwest Crossings, a three-building, 692,389-square-foot property in Arlington Heights; 171 Covington Drive, A 110,063-square-foot property in Bloomingdale; and 1501 Feehanville Drive, a 71,310-square-foot property in Mount Prospect were recently added to the market for sale. COLLIERS INTERNATIONAL P. 5
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE ABSORPTION The Northwest market ended the third quarter of with 88,830 square feet of positive absorption. This brings the Northwest s yearto-date absorption total to positive 376,956 square feet, the highest of all the suburban markets. Class A product was responsible for the bulk of positive absorption, contributing 348,500 square feet. CONSTRUCTION No new construction was completed in Northwest market during the third quarter of. However, Zurich Insurance announced plans to build a new headquarters on Motorola s campus at the intersection of Meacham Road and Interstate 90. Zurich Insurance will move from its current Schaumburg location in 2016, when the development is completed. RENTS The Northwest suburban Class A average asking rate measured $23.58 per square foot gross, up from the second quarter rate of $23.31. Since the beginning of the year, Class A gross asking rates in the Northwest market have increased $0.30 per square foot, increasing 1.3 percent from $23.28 in the first quarter. The average asking rate for all classes was $17.79 per square foot gross, up slightly from $17.74 during the second quarter of. NET ABSORPTION AND VACANCY NORTHWEST OFFICE MARKET Square Footage Northwest Submarket 600,000 24.0% 376,956 400,000 23.4% 23.5% 267,524 225,362 23.0% 200,000 22.8% 115,635 22.5% 22.2% 0 22.0% 21.6% -200,000 21.4% 21.5% 21.0% -400,000 20.5% -600,000 20.1% (615,963) 20.0% (674,176) -800,000 19.5% Source: Costar; Colliers International Research Absorption Vacancy ASKING GROSS RENTAL RATES NORTHWEST OFFICE MARKET Northwest Submarket $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Vacancy Source: Costar; Colliers International Research 25 NORTHWEST POINT ELK GROVE VILLAGE, IL COLLIERS INTERNATIONAL P. 6
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE North While the North market s recovery has been inconsistent in recent years, it has been able to retain the lowest vacancy in the suburban market. MARKET INDICATORS North Q2 Q3 VACANCY 17.7% 17.8% YTD ABSORPTION 214,663 185,262 RENTS $20.78 $20.87 INVENTORY 29,969,689 29,969,689 - VACANCY The North market ended the third quarter of with 17.8 percent vacancy, up slightly from 17.7 percent at the end of the second quarter. While this may be a minor setback, it is a vast improvement from a year ago when overall vacancy was 19.4 percent. Sublease vacancy rose slightly in the North market 1.7 percent, up from 1.5 percent in the second quarter. Class A sublease vacancy is expected to increase further as Capital One begins to vacate and market nearly 500,000 square feet at Woodland Falls in Mettawa and Dart Containers begins marketing 133,000 square feet in Lake Forest. There are currently ten blocks of space available for large-sized tenants (100,000 square feet and above), with nine of them being Class A. LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE 600 N US Highway 45 1,121,186 VACANT SPACE BY PROPERTY TYPE 5 N Riverwoods Boulevard **1000 Milwaukee Avenue *3 Overlook Point 290,143 405,039 492,948 Class C 1,684,353 SF 15.1% Vacant Class A 18,563,839 SF 19.0% Vacant -300 Tri-State International 300 Tower Parkway *1200 Lakeside Drive 208,808 175,545 170,874 Class B 9,721,497 SF 15.9% Vacant *150 S Saunders Road 1 Overlook Point 2355 Waukegan Road *Sublease **Direct/Sublease Combined 133,218 111,327 106,495 LEASE AND SALE ACTIVITY Top North market lease transactions in the third quarter of include American Imaging Management s 94,000-square-foot renewal/expansion at Corporate 500 Centre in Deerfield; Meridian s 45,000 square-foot renewal/downsize at Nine Parkway North in Deerfield; and Morgan Stanley s 45,000-square-foot renewal/expansion at 111 Pfingsten Road in Deerfield. No significant investment sales occurred in the third quarter of. However, One Conway Park, a 105,000-square-foot property, and West Lake of Conway Park, a 100,000-square-foot property, were recently added to the market. Both properties are located in Lake Forest. ABSORPTION The North market ended the third quarter of with net absorption totaling negative 29,401 square feet, bringing the year-to-date net absorption total to positive 185,262 square feet. Class A product was the sole contributor to the negative absorption in the third quarter. COLLIERS INTERNATIONAL P. 7
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE CONSTRUCTION There was no new construction completed in the third quarter of in the North market. However, J.F. McKinney announced plans to develop a four-building, 52,000-square-foot office development on Techny Road, just west of Waukegan Road in Northbrook, with the first phase scheduled for delivery in March 2014. This will mark the first new spec office development in the North market since Bridge Development s construction of 555 Aptakisic Road in Lincolnshire. There are several sites available for future buildto-suit projects in the North market, including an 800,000-square-foot opportunity at International Corporate Park in Vernon Hills and Skodun, LLC s 330,000-square-foot project in Northbrook. RENTS Average Class A asking rent in the North market increased to $28.31 in the third quarter, compared to $28.00 per square foot gross during the second quarter of. While this is a 1.1 percent increase from the previous quarter, the rate has remained flat from the same time period in. The average asking rate for all classes increased to $20.87 per square foot gross, up from $20.78 per square foot gross during the second quarter. NET ABSORPTION AND VACANCY NORTH OFFICE MARKET Square Footage North Submarket 400,000 20.0% 200,000 137,918 18.9% 18.7% 18.7% 18.4% 185,262 17.8% 77,930 96,670 18.0% 16.0% 0 15.1% (16,977) 14.0% -200,000 12.0% -400,000 10.0% -600,000 8.0% 6.0% -800,000 4.0% -1,000,000 2.0% (1,018,539) -1,200,000 0.0% Source: Costar; Colliers International Research Absorption Vacancy ASKING GROSS RENTAL RATES NORTH OFFICE MARKET North Submarket $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Vacancy Source: Costar; Colliers International Research CORPORATE 500 CENTRE DEERFIELD, IL COLLIERS INTERNATIONAL P. 8
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE Lisle-Naperville Despite an increase in overall vacancy in the third quarter, the Lisle- Naperville Market continues to have the lowest direct vacancy of all the markets. MARKET INDICATORS Lisle/Naperville Q2 Q3 VACANCY 19.6% 20.0% ABSORPTION (SF) 33,161 (38,892) RENTS $19.98 $20.02 VACANCY The Lisle-Naperville market ended the third quarter of at 20.0 percent overall vacancy, up from 19.6 percent during the second quarter. However, direct vacancy, which is currently 15.7 percent, has been the lowest of all the suburban markets since the recession began. While direct vacancy is the strongest of all of the suburban submarkets, sublease vacancy remains the highest of all the markets at 4.2 percent, up from 4.0 percent in the second quarter. Five buildings in the Lisle-Naperville market can accommodate large (100,000 square feet and above) users, two of which are Class A properties. LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE INVENTORY 18,217,792 18,217,792 - *6200 S Route 53 *4201 Winfield Road 2400 Cabot Drive 217,718 249,996 360,000 VACANT SPACE BY PROPERTY TYPE *750 N Commons Boulevard *2441 Warrenville Road *850-950 Warrenville Road 112,605 103,347 85,530 Class C 1,659,708 SF 6.7% Vacant Class B 7,649,424 SF 24.5% Vacant Class A 8,908,660 SF 18.5% Vacant *Sublease 535 E Diehl Road 4343 Commerce Court 2135 CityGate Lane 701 Warrenville Road 83,792 74,804 70,537 67,233 LEASE AND SALE ACTIVITY Significant lease transactions of the third quarter include Ulta s 42,000-square-foot expansion at Tallgrass Corporate Center in Bolingbrook; JDA Health Systems 39,000-square-foot lease at One Tellabs Center in Naperville; and GSA s 22,500-square-foot lease at Olympian Office Center in Lisle. Significant investment sales completed in the Lisle-Naperville market during the third quarter of include Sara Investment Real Estate s $7.1 million purchase of Naperville Financial Center, a 57,878-square-foot property in Naperville; and American Guardian Warranty Service s purchase of TerraView at Cantera, a 59,989-square-foot property in Warrenville for $4.9 million. Ownership of Central Park of Lisle, a two-building, 663,687-square-foot asset, is finalizing the process of selecting a buyer. 2400 Cabot Drive, a 218,152-square-foot asset is currently under contract, while 215 Shuman Boulevard, a 209,344-square-foot property in Naperville was recently added to the market for sale. ABSORPTION The Lisle-Naperville market ended the third quarter of with 72,053 square feet of negative net absorption, down from negative 17,740 square feet in the second quarter. The year-to-date total is negative 38,892 square feet, below the 33,161 square feet of positive absorption measured at midyear. Class B properties were the only sector to achieve positive absorption in the third quarter, adding positive 34,749 square feet. COLLIERS INTERNATIONAL P. 9
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE CONSTRUCTION No new construction was completed in the Lisle-Naperville market during the third quarter of. However, Universal Technical Institute s two-story, 187,000-square-foot training center in Lisle is currently under construction with completion scheduled early in the fourth quarter of. RENTS The average Class A asking rent in the Lisle- Naperville market measured $26.74 per square foot gross at the end of third quarter, down slightly from $26.78 per square foot at the end of the second quarter. The average asking rate for all classes also increased slightly to $20.02 per square foot gross from $19.98 at the end of second quarter. NET ABSORPTION AND VACANCY LISLE-NAPERVILLE OFFICE MARKET Square Footage 800,000 21.5% 627,539 600,000 21.0% 21.0% 20.5% 400,000 184,27420.0% 20.0% 20.0% 200,000 19.8% 45,635 19.8% 19.5% 0 (38,892) 19.0% (200,000) (144,231) 18.5% (400,000) (391,355) 18.0% 17.7% (600,000) 17.5% Source: Costar; Colliers International Research Absorption Vacancy ASKING GROSS RENTAL RATES LISLE-NAPERVILLE OFFICE MARKET Vacancy $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research TALLGRASS CORPORATE CENTER BOLINGBROOK, IL COLLIERS INTERNATIONAL P. 10
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE Oak Brook The Oak Brook market, which typically benefits from steady leasing velocity among tenants smaller than 15,000 square feet, witnessed a noteworthy increase in activity in the third quarter of. MARKET INDICATORS Oak Brook Q2 Q3 VACANCY 21.2% 21.1% YTD ABSORPTION 220,978 233,998 RENTS $19.33 $19.49 VACANCY The Oak Brook market reported a modest decrease in overall vacancy, dropping to 21.1 percent from 21.2 percent in the second quarter. While the number of large users in the market has dissipated, the Oak Brook market has been able to remain stable as velocity of 1,000- to 5,000-square-foot users has increased. Overall sublease vacancy showed a slight increase in the third quarter to 1.6 percent, up from 1.5 percent in the second quarter. Three buildings in the Oak Brook market can accommodate large (100,000 square feet and above) users, all of them being Class A. LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE INVENTORY 23,988,839 23,988,839-700 Oakmont Lane 256,767 VACANT SPACE BY PROPERTY TYPE 2655 Warrenville Road *3500 Lacey Road 600-680 Oakmont Lane 2000 S Finley Road 3050 Highland Parkway *3333 Finley Road 149,896 112,834 89,634 78,300 74,319 70,613 Class C 1,051,137 SF 15.8% Vacant Class A 13,746,991 SF 20.5% Vacant 1333 Butterfield Road 1000 Royce Boulevard 1 Parkview Plaza *Sublease 70,251 70,000 69,069 Class B 9,190,711 SF 22.8% Vacant LEASE AND SALE ACTIVITY Top third quarter Oak Brook market leases include SIRVA Worldwide s 53,500-square-foot lease at Parkview Plaza in Oakbrook Terrace; Autotrader s 29,000-square-foot lease at Oakbrook Terrace Corporate Center I in Oakbrook Terrace; and Federal Signal s 17,500-square-foot renewal at Oak Brook Regency Towers in Oak Brook. Significant investment sales completed in the Oak Brook market during the third quarter include Transwestern s purchase of Corridors I and II, a 299,792-square-foot asset in Downers Grove for $24.0 million ($80.06 per square foot), and The Crossings, a 303,510-square-foot, two-building asset in Oak Brook which sold to Adventus Realty Services Inc. for $35.7 million ($117.45 per square foot). ABSORPTION The Oak Brook market ended the third quarter of with 13,020 square feet of positive net absorption, down from positive 70,031 square feet in the second quarter. Year-to-date absorption in the Oak Brook market totaled positive 233,998 square feet, down from the cumulative mid-year total of positive 220,978 square feet. Class A properties were the sole contributor to the negative absorption in the third quarter. COLLIERS INTERNATIONAL P. 11
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE CONSTRUCTION No new construction was completed in Oak Brook market during the third quarter of. Hub Group s 130,000-square-foot build-to-suit headquarters in Oak Brook is currently under construction with completion scheduled for late. RENTS The current Class A average asking rent in the Oak Brook market measured $27.14 per square foot gross, increasing from $26.88 in the second quarter of. NET ABSORPTION AND VACANCY OAK BROOK OFFICE MARKET Square Footage 300,000 200,000 100,000 0 (100,000) (200,000) (300,000) (400,000) (500,000) (600,000) (700,000) 233,998 175,404 22.1% 22.0% 21.7% 21.4% 21.1% (59,225) (177,143) (442,039) 19.1% (617,445) 22.5% 22.0% 21.5% 21.0% 20.5% 20.0% 19.5% 19.0% 18.5% Vacancy The average asking rate for all classes also increased, rising to $19.49 per square foot gross, up from $19.33 per square foot gross in second quarter of. Source: Costar; Colliers International Research Absorption Vacancy ASKING GROSS RENTAL RATES OAK BROOK OFFICE MARKET $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research OAK BROOK EXECUTIVE CENTER OAK BROOK, IL COLLIERS INTERNATIONAL P. 12
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE TOP OFFICE LEASE TRANSACTIONS THIRD QUARTER - SUBURBAN CHICAGO TENANT ADDRESS SUBMARKET SIZE (SF) TYPE American Imaging Managment* Corporate 500 Centre, Deerfield North 94,000 Renewal/Expansion SIRVA Worldwide* Parkview Plaza, Oakbrook Terrace Oak Brook 53,500 New Meridian Nine Parkway North, Deerfield North 45,000 Renewal/Downsize Morgan Stanley 111 Pfingsten Road, Deerfield North 45,000 Renewal/Expansion Ulta* Tallgrass Corporate Center, Bolingbrook Lisle/Naperville 42,000 Expansion JDA Health Systems* One Tellabs Center, Naperville Lisle/Naperville 39,000 New SAC Wireless Schaumburg Corporate Center, Schaumburg Northwest 32,500 New Autotrader Oakbrook Terrace Corp Ctr I, Oakbrook Terrace Oak Brook 29,500 New Berkley Underwriting Naperville Corporate Center, Naperville Lisle/Naperville 24,000 New GSA* Olympian Office Center, Lisle Lisle/Naperville 22,500 New NorthShore University HealthSystem* The 909 Davis Building, Evanston North 20,000 Renewal Federal Signal Oak Brook Regency Towers, Oak Brook Oak Brook 17,500 Renewal Mondelez Triangle Plaza, Chicago O Hare 16,000 New Medline Industries* 544 Lakeview Pky, Vernon Hills North 15,000 New Prologis* One O Hare Centre, Rosemont O Hare 12,000 New *Colliers International Transaction ONE TELLABS CENTER NAPERVILLE, IL COLLIERS INTERNATIONAL P. 13
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE THIRD QUARTER MARKET STATISTICS LOCAL STANDARDS INVENTORY VACANCY ABSORPTION CONSTRUCTION RENTS Class Bldgs Total Inventory SF O'HARE Direct Vacancy Rate Sublease Vacancy Rate Vacancy Rate Current Qtr Vacancy Rate Prior Qtr Net Absorption 1st Qtr - SF Net Absorption YTD - SF Completions Current Qtr - SF Under Construction - SF A 38 8,072,298 16.2% 0.9% 17.1% 16.9% (15,399) 70,641 0 0 $30.96 B 57 5,157,959 32.0% 0.2% 32.2% 32.2% (272) (23,832) 0 0 $18.02 C 10 383,680 7.4% 0.0% 7.4% 7.4% - (10,274) 0 0 $13.16 Total 105 13,613,937 21.9% 0.6% 22.5% 22.4% (15,671) 36,535 0 0 $20.71 Rents NORTHWEST A 88 20,272,616 18.5% 1.1% 19.7% 19.8% 25,221 348,500 0 0 $23.58 B 181 11,953,701 25.6% 0.4% 26.0% 26.5% 62,337 9,976 0 0 $16.32 C 30 1,334,411 12.4% 0.3% 12.7% 12.8% 1,272 18,480 0 0 $13.48 Total 299 33,560,728 20.8% 0.8% 21.6% 21.9% 88,830 376,956 0 0 $17.79 NORTH A 110 18,563,839 16.5% 2.5% 19.0% 18.7% (60,980) 69,672 0 0 $28.31 B 157 9,721,497 15.7% 0.2% 15.9% 15.9% 3,322 68,462 0 0 $18.61 C 38 1,684,353 14.1% 1.0% 15.1% 16.8% 28,257 47,128 0 0 $15.68 Total 305 29,969,689 16.1% 1.7% 17.8% 17.7% (29,401) 185,262 0 0 $20.87 LISLE/NAPERVILLE A 49 8,908,660 14.3% 4.3% 18.5% 17.4% (97,716) (63,719) 0 0 $26.74 B 128 7,649,424 19.4% 5.1% 24.5% 25.0% 34,749 30,918 0 187,000 $18.07 C 25 1,659,708 6.7% 0.0% 6.7% 6.2% (9,086) (6,091) 0 0 $15.26 Total 202 18,217,792 15.7% 4.2% 20.0% 19.6% (72,053) (38,892) 0 187,000 $20.02 OAK BROOK A 69 13,746,991 18.3% 2.2% 20.5% 20.0% (70,545) 208,519 0 0 $27.14 B 150 9,190,711 21.9% 0.8% 22.8% 23.1% 35,224 (17,147) 0 0 $17.21 C 20 1,051,137 15.8% 0.0% 15.8% 20.4% 48,341 42,626 0 0 $14.12 Total 239 23,988,839 19.6% 1.6% 21.1% 21.2% 13,020 233,998 0 0 $19.49 SUBURBAN TOTAL A 354 69,564,404 17.1% 2.1% 19.2% 18.9% (219,419) 633,613 0 0 $27.35 B 673 43,673,292 22.3% 1.2% 23.5% 23.9% 135,360 68,377 0 187,000 $17.65 C 123 6,113,289 11.6% 0.3% 11.9% 13.1% 68,784 91,869 0 0 $14.34 Total 1,150 119,350,985 18.7% 1.7% 20.4% 20.4% (15,275) 793,859 0 187,000 $19.78 QUARTERLY COMPARISON AND TOTALS Q3-13 1,150 119,350,985 18.7% 1.7% 20.4% 20.4% (15,275) 793,859 0 187,000 $19.78 Q2-13 1,148 119,350,985 18.8% 1.6% 20.4% 20.4% 16,583 809,134 0 79,847 $19.71 Q1-13 1,148 119,350,985 18.9% 1.5% 20.4% 21.1% 792,551 792,551 0 0 $19.78 Q4-12 1,148 119,350,985 19.5% 1.6% 21.1% 21.1% 58,768 356,050 0 0 $19.90 Q3-12 1,148 119,350,985 18.3% 1.6% 21.1% 21.1% 13,254 297,282 0 0 $19.76 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. COLLIERS INTERNATIONAL P. 14
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE THIRD QUARTER MARKET STATISTICS INCLUDES OWNER OCCUPIED PROPERTIES Class Bldgs Total Inventory SF O'HARE Direct Vacancy Rate Sublease Vacancy Rate Total Vacancy Current Qtr Total Vacancy Prior Qtr Quarterly Net Absorption - SF Net Absorption YTD - SF Completions - Current Qtr Under Construction - SF Class A 36 8,072,298 16.2% 0.9% 17.1% 16.9% (15,399) 70,641 0 50,000 Class B 66 5,858,480 26.9% 0.3% 27.3% 27.2% (1,792) (17,429) 0 0 Class C 19 736,742 6.6% 0.0% 6.6% 6.6% (520) (12,926) 0 0 Subtotal 121 14,667,520 20.0% 0.6% 20.6% 20.5% (17,711) 40,286 0 50,000 NORTHWEST Class A 95 21,252,276 19.3% 1.1% 20.4% 20.5% 25,221 348,500 0 0 Class B 325 18,457,827 19.3% 0.3% 19.6% 20.0% 74,128 68,126 0 0 Class C 66 2,044,248 13.8% 2.1% 15.9% 15.6% (5,919) 40,524 0 0 Subtotal 486 41,754,351 19.0% 0.8% 19.8% 20.0% 93,430 457,150 0 0 NORTH Class A 130 23,628,162 13.1% 2.0% 15.0% 14.7% (63,117) 67,535 0 0 Class B 275 19,817,587 8.4% 0.1% 8.5% 10.7% 64,495 (141,114) 0 0 Class C 66 2,557,766 11.6% 0.6% 12.2% 14.2% 50,259 93,519 0 0 Subtotal 471 46,003,515 11.0% 1.1% 12.1% 12.9% 51,637 19,940 0 0 LISLE/NAPERVILLE Class A 55 10,282,441 13.1% 3.8% 16.9% 15.9% (97,716) (118,019) 0 0 Class B 197 11,512,091 15.4% 3.3% 18.7% 19.1% 55,011 69,720 0 187,000 Class C 53 2,446,690 8.1% 0.0% 8.1% 7.9% (6,559) 6,815 0 0 Subtotal 305 24,241,222 13.7% 3.2% 16.8% 16.6% (49,264) (41,484) 0 187,000 OAK BROOK Class A 71 14,305,673 17.5% 2.1% 19.6% 19.1% (70,545) 208,519 0 0 Class B 222 12,815,335 17.0% 0.6% 17.6% 18.0% 51,235 (5,500) 0 0 Class C 51 2,077,674 14.3% 0.0% 14.3% 14.7% 8,770 (3,552) 0 0 Subtotal 344 29,198,682 17.0% 1.3% 18.3% 18.3% (10,540) 199,467 0 0 TOTAL SUBURBAN OFFICE Class A 387 77,540,850 15.9% 1.9% 17.8% 17.5% (221,556) 577,176 0 50,000 Class B 1,085 68,461,320 15.7% 0.8% 16.5% 17.4% 243,077 (26,197) 0 187,000 Class C 255 9,863,120 11.4% 0.6% 12.0% 12.5% 46,031 124,380 0 0 Subtotal 1,727 155,865,290 15.5% 1.3% 16.9% 17.1% 67,552 675,359 0 237,000 QUARTERLY COMPARISONS Q3-13 1,727 155,865,290 15.5% 1.3% 16.9% 17.1% 67,552 675,359 0 0 Q2-13 1,728 156,265,290 15.9% 1.3% 17.1% 17.0% (193,960) 607,807 0 79,847 Q1-13 1,727 156,245,290 15.8% 1.2% 17.0% 17.5% 801,767 801,767 0 61,786 Q4-12 1,726 156,183,290 16.2% 1.3% 17.5% 17.5% 179,504 1,142,052 0 181,786 Q3-12 1,725 156,063,290 16.2% 1.3% 17.5% 17.5% 24,983 962,548 0 0 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. COLLIERS INTERNATIONAL P. 15
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE SUBURBAN OFFICE SUBMARKET MAP HARVARD MCHENRY CRYSTAL LAKE 12 WAUCONDA MARENGO 2 LAKE ZURICH CARY BARRINGTON LAKE CO. HUNTLEY COOK CO. 4 68 PALWAUKEE NORTHBROOK 12 FIELD SLEEPY 14 21 41 72 ROLLING HOLLOW 62 MEADOWS 94 59 ARLINGTON 53 HEIGHTS GLENVIEW 90 294 HOFFMAN MOUNT ELGIN ESTATES PROSPECT SCHAUMBURG 58 ELK GROVE VILLAGE 20 COOK CO. DuPAGE CO. 31 190 90 20 290 ITASCA O'HARE ROSEMONT HANOVER PARK INTERNATIONAL AIRPORT CAROL STREAM 290 FRANKLIN PARK 64 53 ADDISON ST. CHARLES 355 1 64 Elgin-O'Hare Expy. WEST CHICAGO 83 MELROSE PARK BATAVIA OAK PARK ELMHURST 59 290 KANE CO. DuPAGE CO. KANE CO. McHENRY CO. 34 88 294 McCOOK AURORA NAPERVILLE LISLE DOWNERS GROVE HINSDALE 55 BURR RIDGE East-West Tollway 3 GURNEE NORTH WAUKEGAN 0 1 5 10 miles NORTH CHICAGO GRAYSLAKE 45 LIBERTYVILLE LAKE FOREST 83 60 VERNON HILLS 83 94 22 45 LINCOLNSHIRE HIGHLAND PARK DEERFIELD BUFFALO GROVE Lake Cook Rd. OAKBROOK BROADVIEW 43 CICERO LOMBARD 88 45 MIDWAY AIRPORT BEDFORD PARK WINNETKA WILMETTE SKOKIE EVANSTON 41 94 90 CHICAGO 34 50 43 53 KANE CO. 355 55 KENDALL CO. WILL CO. 12 20 5 DuPAGE CO. COOK CO. 1. O HARE 2. NORTHWEST 3. NORTH 4. LISLE/NAPERVILLE 5. OAK BROOK 90 94 94 90 Lake Michigan 482 offices in 62 countries on 6 continents United States: 147 Canada: 37 Asia: 13 Australia/New Zealand: 165 Latin Ameria: 19 EMEA: 118 > $2.0 billion in annual revenue > 1.12 billion square feet under management > 13,500 professionals @ColliersChicago www.colliers.com/chicago WOODRIDGE KENDALL CO. WILL CO. PLAINFIELD BOLINGBROOK WILL CO. ROMEOVILLE 53 171 7 COOK CO. COOK CO. WILL CO. ILL CO. OOK CO. ORLAND PARK 45 50 ALSIP 57 94 LLINOIS NDIANA HAMMOND GAR RESEARCHER: Suburban Chicago Ronna Larsen Research Manager Colliers International 6250 N. River Road, Suite 11-100 Rosemont, IL 60018 TEL +1 847 698 8517 ronna.larsen@colliers.com Accelerating success. www.colliers.com/marketname