Q3 2013 INDUSTRIAL CHICAGO INDUSTRIAL MARKET OVERVIEW TENANT DEMAND RISES The metropolitan Chicago area industrial market witnessed increased tenant demand in the third quarter of 2013, partially due to an increase in activity from smaller users with size requirements between 10,000 square feet and 25,000 square feet. As a result, both third quarter net absorption and vacancy improved from second quarter activity. However, construction completions declined from prior results, while sale activity rose slightly. Chicago Metro VACANCY 9.03% 8.8 ABSORPTION 199,188 3,282,973 RENTAL RATE $4.09 $4.12 Chicago-area vacant industrial supply fell by 3.3 million square feet from the previous quarter to 115.5 million square feet in the third quarter. A smaller amount of second generation space reentering the market was a contributing factor in the decline. Strong third quarter leasing activity drove the Chicago area industrial vacancy rate to 8.80 percent a 23-basis-point decline from the second quarter result. Vacancy rate improvement occurred in 15 out of 21 Chicago-area submarkets in the third quarter. The Far South Suburbs and Northwest Suburbs each witnessed a vacancy rate improvement in excess of 100 basis points in the third quarter, while the I-90/Elgin Corridor and Rockford areas experienced an increase in vacancy rate greater than 100 basis points. Third quarter leasing activity measured 9.8 million square feet, up 12.2 percent from the prior quarter. There was a significant increase in tenant demand in spaces between 10,000 square feet and 25,000 square feet, as 102 such leases were consummated in the third quarter versus only 63 in the prior quarter. Absorption and s 2 15.0 1 5.0-5.0-1 -15.0-2 -25.0 2007 2008 2009 2010 2011 2012 2013* 1 1 1 The I-55 Corridor captured the largest leasing volume in the third quarter with a total of 2.3 million square feet. This accounted for 23.5 percent of all third quarter leasing activity. Central DuPage County also witnessed strong leasing activity, reaching 1.4 million square feet in the third quarter. No new leases were signed in the DeKalb County submarket in the third quarter. Although third quarter sale volume of 3.7 million square feet was up 4.1 percent from the 3.5 million square feet posted in the second quarter, it was 4.8 percent lower than the 3.9 million square feet reported in the first quarter. The O Hare market reported the highest quarterly sale volume with a total of 834,200 square feet, whereas no user sales were completed in DeKalb County, I-290 South or the I-39 Corridor. www.colliers.com/chicago
ABSORPTION Heightened third quarter tenant demand drove the Chicago area s net absorption to positive 3.3 million square feet, far surpassing the 199,200 square feet registered in the second quarter. This pushed the year-to-date total to 9.5 million square feet, a considerable improvement from the 6.4 million square feet posted for the same time period one year ago. Fourteen submarkets achieved positive net absorption in the third quarter, with Central DuPage County leading the way with 751,800 square feet absorbed. The I-290 South submarket posted the weakest results during the third quarter with negative 466,000 square feet. Just 816,800 square feet of new construction projects were introduced to the Chicago-area industrial market in the third quarter which was dramatically lower than the 2.4 million square feet delivered in the second quarter. The largest building completed during the third quarter was a 208,400-square-foot speculative facility constructed by Panattoni Development Company at 1925 Busse Road in Elk Grove Village. Despite this, build-to-suit construction volume exceeded third quarter speculative deliveries 508,400 square feet versus 308,400 square feet. Pizzuti has commenced construction on an 898,600-square-foot build-to-suit project at Pinnacle Business Center in Romeoville that will be leased by Pactiv Corporation. The food packaging company is expanding its presence in the I-55 Corridor. Speculative development made an impressive comeback in the third quarter as nine such projects broke ground, ultimately adding 2.5 million square feet to Chicago s inventory base. The largest speculative project to commence construction is a 672,000-square-foot facility at the Pinnacle Business Center in Romeoville which developer Pizzuti is expected to have completed by summer of 2014. PINNACLE BUSINESS CENTER JOLIET, IL P. 2 COLLIERS INTERNATIONAL
Central DuPage After dropping 139 basis points between the first and second quarter, the Central DuPage vacancy rate fell again in the third quarter to 7.67 percent, down from the second quarter level of 8.61 percent. This was the result of extremely strong third quarter tenant demand. Vacancy has not been this low in the Central DuPage market since the first quarter 2001 when it dipped to 7.53 percent. Central DuPage 2Q2013 3Q2013 The vacant supply at the end of the third quarter measured 6.5 million square feet, which was a 10.9 percent improvement from the 7.2 million square feet vacant in the second quarter. Larger blocks of available space are in short supply in Central DuPage as the market s largest vacancy is a 275,300-square-foot space at 980-910 Kimberly Drive in Carol Stream. However, users looking for blocks of space between 10,000 square feet and 25,000 square feet have 79 options. VACANCY 8.61% 7.67% ABSORPTION 331,890 751,837 RENTAL RATE $4.92 $5.00 The Central DuPage market witnessed no new construction deliveries in the third quarter which has been the case for six consecutive quarters. Speculative development was reintroduced to Central DuPage market in the third quarter as Panattoni commenced construction on a 139,820-square-foot property at Turnberry Lakes International Business Park in Roselle. The last speculative development delivered to the market was in the fourth quarter of 2011 when a 139,790-square-foot facility was completed in the same business park. Absorption and s 2.5 2.0 - - - -2.0 2007 2008 2009 2010 2011 2012 2013 * 1 1 1 The third quarter Central DuPage leasing volume of 1.4 million square feet was the largest quarterly output thus far in 2013, easily eclipsing the second quarter result of 550,200 square feet. Heightened third quarter activity benefited from five lease transactions signed in spaces over 100,000 square feet. These transactions accounted for 743,600 square feet or 55.1 percent of all third quarter leasing volume. The largest lease was secured by Material Supply Corporation which took occupancy of an 181,600-square-foot warehouse/distribution facility at 1575 Hunter Road in Hanover Park. User demand during the third quarter was a respectable 305,000 square feet, however, this marks a 40.9-percent decline from the 515,800 square feet sold in the second quarter. First quarter sales totaled 109,500 square feet. Strong occupant demand in the Central DuPage market during the third quarter resulted in increased net absorption of 751,800 square feet. This was more than twice the second quarter total of 331,900 square feet. The year-to-date volume reached 2.0 million square feet, an astonishing improvement from the 41,600 square feet reported in the same time period last year. Material Supply Corporation 181,635 1575 Hunter Road, Hanover Park Lease Kellstrom Commercial Aerospace 162,840 450 Medinah Road, Roselle Lease CoreCentric Solutions, Inc. 152,320 725 Center Avenue, Carol Stream Lease P. 3 COLLIERS INTERNATIONAL
Chicago Both Chicago markets experienced a vacancy rate decline from the previous quarter. The vacancy rate in Chicago North fell from 7.12 percent in the second quarter to 6.7 percent in the third quarter. The Chicago South vacancy dropped for the fourth consecutive quarter to its current total of 11.48 percent. This marks a 20-basis-point decline from second quarter result. Chicago North VACANCY 7.1 6.7 ABSORPTION 59,221 258,930 RENTAL RATE $5.77 $5.45 Chicago South VACANCY 11.6 11.4 ABSORPTION -200,820 100,389 RENTAL RATE $3.43 $3.70 The Chicago South market has a much larger vacant base than the Chicago North market 9.7 million square feet versus 6.0 million square feet. The majority of that vacant supply is concentrated in spaces between 100,000 square feet and 300,000 square feet, accounting for 3.3 million or 35.5 percent of the overall supply in Chicago South. Conversely, the bulk of available supply in Chicago North is concentrated in spaces over 300,000 square feet, as 2.1 million square feet or 34.6 percent of that market s third quarter available supply is in this big block size range. The Chicago markets have not witnessed any new construction since the third quarter of 2009. Although there were no new industrial developments, the Chicago markets continued to shed nonfunctional buildings. In the third quarter, a 38,800-square-foot manufacturing plant was demolished with the residing.69-acre site available for sale. Chicago North third quarter leasing volume measured 194,900 square feet, which represents 64.6 percent of the year-to-date total of 301,800 square feet. Despite the heightened third quarter result, it was not enough to keep pace with the 464,400 square feet leased during the same time period in 2012. Tenant demand was much weaker in Chicago South as the third quarter leasing volume of 119,300 square feet was less than half of the 282,300 square feet of transactions secured during the second quarter. Absorption and s Chicago North - - - -2.0-2.5 - - - -2.0-2.5-3.0-3.5-4.0 2007 2008 2009 2010 2011 2012 2013 * Chicago South 2007 2008 2009 2010 2011 2012 2013 * 9% 7% 5% 3% 1% 1 1 1 1 Third quarter sale volume was disappointing in both Chicago markets compared to the prior quarter. Chicago North third quarter sale volume totaled only 260,200 square feet, a 38.9-percent decline from second quarter s volume. In Chicago South, the 202,100 square feet of sale activity captured in the third quarter was a 61.6-percent decline from the prior quarter s result. Strong third quarter tenant demand in the Chicago North market resulted in net absorption of 258,900 square feet. This was a significant improvement from the second quarter total of 59,200 square feet. Net absorption in the Chicago South marketreached positive 100,400 square feet in the third quarter, a noteworthy reversal from the negative 200,800 square feet reported in the previous quarter. This can be primarily attributed to less space reentering the market rather than heightened user activity. Chicago Mattress Company 99,984 4444 W. Ohio Street Sale T2 Construction 67,657 3730 S. St. Louis Avenue Sale Google 63,000 949-965 W. Chicago Avenue Lease P. 4 COLLIERS INTERNATIONAL
Elgin/I-90 Corridor The vacancy rate in the Elgin/I-90 Corridor was once again negatively impacted by a large facility entering the market. The third quarter rate measured 13.06 percent, a 163-basis-point increase from the prior quarter. The Elgin/I-90 Corridor vacancy rate increase was the largest increase incurred by any Chicago-area submarket during the third quarter. Elgin/I-90 Corridor VACANCY 11.43% 13.0 ABSORPTION -386,191-369,542 RENTAL RATE $4.58 $4.85 The third quarter vacant supply in the Elgin/I-90 Corridor rose from the second quarter level of 2.3 million square feet to the current total of 3.8 million square feet. Two new significant third quarter vacancies in Elgin caused the increase. Ball Corporation put its 407,000-square-foot manufacturing plant on the market while a 246,100-square-foot warehouse at 1600 Fleetwood Drive also became available. Two buildings were delivered to the Elgin/I-90 Corridor during the third quarter, adding 123,800 square feet to the total industrial inventory. Interstate Partners completed a 100,000-square-foot multi-tenant speculative facility at 64-92 Prairie Parkway at the Prairie Business Park in Gilberts. The development was successful in getting tenant commitment for 55,400 square feet prior to completion. Also, Lionheart Engineering moved into 23,800 square feet at 13151 Executive Drive in Huntley. The Elgin/I-90 Corridor witnessed more speculative construction in the third quarter as McShane Corporation commenced construction on 342,000 square feet at Northwest Pointe in Elgin. The facility should be available by the end of 2013. Absorption and s - - 2007 2008 2009 2010 2011 2012 2013 * 1 1 1 Third quarter leasing volume totaled 194,400 square feet, which was a 40.9-percent increase from second quarter volume. However, this marks a sizable decline from one year ago when 450,600 square feet of lease transactions were completed. The Elgin/I-90 Corridor third quarter sale volume jumped 21.8 percent in the third quarter to 177,100 square feet. The increase in sale activity came from small- to mid-sized users as the largest sale captured during the quarter was a 55,300-square-foot facility at 770 Tollgate Road in Elgin. Year-to-date sale activity totaled 322,500 square feet which was an improvement from the 238,100 square feet sold during the same time period last year. Strong third quarter leasing and sale volume did not counteract the large vacancies that came online in the third quarter. The result was negative net absorption of 369,500 square feet. This was only slightly improved from the second quarter total of negative 386,200 square feet. Weber Stephen Products Company 72,408 2700 Alft Lane, Elgin Lease Chemtech Plastics, Inc. 55,260 770 Tollage Road, Elgin Sale Harware Resources 38,000 64-92 Prairie Parkway, Gilberts Lease P. 5 COLLIERS INTERNATIONAL
Fox Valley An insignificant amount of space reentered the Fox Valley market in the third quarter, causing an 85- basis-point drop in the vacancy rate to 7.46 percent. This is the lowest vacancy rate witnessed in Fox Valley since the first quarter of 2001. Fox Valley s vacant industrial supply fell dramatically from the second quarter level of 7.5 million square feet to 6.7 million square feet in the third quarter. Heightened leasing activity contributed to Fox Valley s shrinking supply. Fox Valley 2Q2013 3Q2013 Fox Valley s available supply in the 100,000- to 300,000-square-foot size range had the largest reduction, falling from 12 vacancies in the second quarter to only eight in the third quarter. Just 509,400 square feet of second generation space returned to the Fox Valley market in the third quarter, less than half the 1.3 million square feet that flooded the market in the prior quarter. VACANCY 8.31% 7.4 ABSORPTION -201,223 655,865 RENTAL RATE $4.17 $4.20 Construction deliveries have continued to be sporadic in the Fox Valley market. After seeing 243,700 square feet of new projects in the second quarter, there were no new deliveries in the third quarter. The Fox Valley market has not had a new speculative construction project since the first quarter of 2009 when a 463,600-square-foot facility was completed at the Liberty Business Center in Aurora. Fox Valley experienced stronger tenant demand during the third quarter, which drove leasing volume up 56.1 percent to 973,500 square feet. Absorption and s 2.5 2.0 - - - -2.0-2.5 2007 2008 2009 2010 2011 2012 2013* 1 1 1 1 Four leases were signed in spaces greater than 100,000 square feet, capturing 544,500 square feet or 56 percent of the overall third quarter leasing volume. The second and third quarters both tallied two building sales however the third quarter volume of 55,600 square feet was less than half of the second quarter volume of 135,500 square feet. Sale volume was most prevalent in the first quarter when 207,400 square feet of transactions were completed. Improved tenant demand and a below-average amount of space returning to the market resulted in the third quarter net absorption of 655,900 square feet. This was a swing of 857,100 square feet from the negative 201,200 square feet posted in the second quarter. Accuride Corporation 170,462 950 Raddant Road, Aurora Lease RRD 163,650 2701-2707 Eola Road, Aurora Lease Menlo Logistics 107,800 1070 Swanson Drive, Batavia Lease P. 6 COLLIERS INTERNATIONAL
I-290 North Vacant supply in the I-290 North market totaled 8.5 million square feet at the end of the third quarter, which was only marginally improved from the 8.6 million square feet vacant in the previous quarter. Less space returning to the market not user demand kept the third quarter vacant supply from escalating. I-290 North 2Q2013 3Q2013 The third quarter vacancy rate measured 11.17 percent, falling 10 basis points from the second quarter mark of 11.27 percent. The vacancy rate decline was more pronounced when compared to one year ago when it reached 12.27 percent. The majority of I-290 North market s vacant supply is concentrated in large vacancies. Currently there are 22 available options greater 100,000 square feet. With current absorption patterns, this represents an eight-year supply. VACANCY 11.27% 11.17% ABSORPTION -992,030-124,802 RENTAL RATE $3.61 $3.61 _ This mature industrial market has reported no construction deliveries since the fourth quarter of 2010. After posting strong leasing volume of 805,400 square feet in the second quarter, the I-290 North market captured just three leases during the third quarter, totaling a disappointing 179,900 square feet. This is the weakest total in the market since the first quarter of 2011 when only 55,500 square feet of lease transactions were completed. Absorption and s - - - -2.0-2.5-3.0-3.5-4.0-4.5 2007 2008 2009 2010 2011 2012 2013* 1 1 1 Third quarter sale volume fell by 50 percent from the second quarter level to 71,400 square feet. This represents the third consecutive quarterly decline in I-290 North s sale activity. Despite weaker tenant demand in the third quarter, year-to-date totals for both leasing and sale volume exceeded the level of activity posted for the same time period in 2012. Leasing volume nearly doubled to a total of 1.6 million square feet while sale volume increased from 344,600 square feet to 406,300 square feet. Dismal third quarter user demand resulted in net absorption of negative 124,800 square feet. Although negative, this is a sizable improvement from second quarter s total of negative 992,000 square feet. In the third quarter of 2012, net absorption in the I-290 North market totaled negative 131,900 square feet. Cortina Tool & Molding Company 99,600 2425-2553 Edgington Street, Franklin Park Lease GA Paving 42,349 1100 S. 25th Avenue, Bellwood Sale Duray Manufacturing 33,817 9400 W. King Avenue, Franklin Park Lease P. 7 COLLIERS INTERNATIONAL
I-290 South A tremendous amount of space was returned to the I-290 South market in the third quarter, negatively impacting vacancy statistics. The vacancy rate rose 103 basis points in the third quarter to 6.72 percent, however, it is still below the 7.55 percent posted one year ago. Despite extremely impressive tenant demand during the third quarter, the I-290 South s vacant supply swelled to 3.0 million square feet, a 400,000-square-foot increase from the second quarter level of 2.6 million square feet. I-290 South VACANCY 5.69% 6.7 ABSORPTION -24,563-466,029 RENTAL RATE $3.83 $3.95 The rise in I-290 South s vacant supply was influenced by two spaces brought to the market in Forest View. The larger is a 208,700-square-foot multi-tenant warehouse building at 6400-6480 W. 51st Street. The second facility is a 185,200-square-foot building formerly occupied by Fashion Bed, who has expanded into a 255,000-square-foot space at 6755 W. 65th Street in Bedford Park. The I-290 South market has experienced no new construction deliveries over the past 12 months. Bridge Development broke ground on a 365,400-square-foot build-to-suit project on a 33.5-acre site in McCook for Freeman Decorating Services, Inc. The trade show set up company will be relocating from 5040 Roosevelt Road in Chicago to lease the new facility. The Freeman Decorating Services, Inc. lease transaction pushed third quarter leasing volume to 576,100 square feet, a tremendous improvement from the second quarter total of just one lease measuring 52,700 square feet. Absorption and s 2.0 - - - 2007 2008 2009 2010 2011 2012 2013* 1 1 The third quarter leasing volume of 576,100 square feet is the highest volume captured in the I-290 South market in the past decade. No sales were reported during the third quarter, while 76,500 square feet of sale transactions were completed during the previous quarter. No sales were noted during the third quarter of 2012. An enormous increase in third quarter leasing activity did not keep I-290 South s net absorption from posting negative results for the second consecutive quarter. The third quarter total of negative 466,000 square feet followed the second quarter total of negative 24,600 square feet. Freeman Decorating Services, Inc. 365,359 8201 W. 47th Street, McCook Lease Arro Corporation 90,344 7220 Santa Fe Drive, Hodgkins Lease Arro Corporation 81,600 7250 Santa Fe Drive, Hodgkins Lease P. 8 COLLIERS INTERNATIONAL
I-55 Corridor The I-55 Corridor vacancy rate continued to improve in the third quarter of 2013, dropping 56 basis points from the second quarter rate to 9.13 percent. The vacancy rate has improved significantly from one year ago when it reached 11.3 percent. The third quarter vacancy rate of 9.13 percent marks only the third time since 2000 that it has fallen below 1 percent. I-55 Corridor VACANCY 9.69% 9.13% ABSORPTION 1,083,561 412,998 RENTAL RATE $4.86 $4.81 Vacant industrial supply in the I-55 Corridor totaled 6.8 million square feet at the end of the third quarter. This marks a 5.8 percent decline from the 7.2 million square feet reported vacant in the second quarter. The improvement was more significant when compared to the first quarter of 2013 when 8.3 million square feet were available. There are only four vacant options above 300,000 square feet in the I-55 Corridor, down from five in the second quarter. This does not include three buildings being marketed today that are slated to be vacated in the spring of 2014 that will add 2.0 million square feet to I-55 Corridor s available base. Construction deliveries have been very quiet this year in the I-55 Corridor. The only completion occurred in the second quarter when a small 46,000-square-foot new facility was constructed. Pactiv Corporation has contracted with Pizzuti to construct an 898,600-square-foot facility, the largest building to commence construction in any Chicago market in 2013. The food packaging company is expanding its presence in the I-55 Corridor and will lease back the facility when it is completed. Absorption and s 4.0 3.5 3.0 2.5 2.0 2007 2008 2009 2010 2011 2012 2013 * 1 1 1 1 1 Speculative development continues to thrive in the I-55 Corridor as two large projects commenced construction in the third quarter. Pizzuti started site work for a 672,100-square-foot development in the Pinnacle Business Center in Romeoville, while IDI broke ground on a 602,600-square-foot speculative facility at Bolingbrook Corporate Center West. After posting only 753,800 square feet of lease transactions in the first quarter, I-55 Corridor leasing volume rose to 2.0 million square feet in the second quarter and another 7.0 percent in the third quarter to 2.1 million square feet. Pactiv Corporation s 898,600-square-foot build-to-suit lease transaction was the largest lease signed so far in 2013. After posting 301,800 square feet of sale transactions in the second quarter, only two buildings were sold in the third quarter totaling 145,100 square feet. The larger of the two was Insulation Products Corporation s purchase of a 120,000-square-foot warehouse facility at 250 Gibraltar Drive in Bolingbrook. Despite heightened tenant demand during the third quarter, net absorption measured only 223,200 square feet, down from 1.1 million square feet in the second quarter. Pactiv Corporation s lease will not have a positive effect unit the company takes occupancy of the facility. Pactiv Corporation 898,560 Pinnacle Business Park, Romeoville Lease Valspar Corporation 400,856 1160 W. Crossroads Parkway, Romeoville Lease Bunzl Papercraft 301,474 901 W. Crossroads Parkway, Romeoville Lease P. 9 COLLIERS INTERNATIONAL
I-80/Joliet Corridor User demand in the I-80/Joliet Corridor continued to outpace space returning to the market in the third quarter. This dropped the vacancy rate to 10.26 percent, a 47-basis-point improvement from the second quarter level of 10.73 percent. Available space in the I-80/Joliet Corridor fell slightly to 7.2 million square feet in the third quarter, down 4.1 percent from the second quarter level of 7.5 million square feet. This was partially attributed to increased sale activity during the quarter. I-80/Joliet Corridor VACANCY 10.73% 10.2 ABSORPTION 2,240,011 473,672 RENTAL RATE $3.36 $3.44 With five vacant properties over 300,000 square feet, the I-80/Joliet Corridor has the second most big box options of any market in Chicago. The largest such vacancy is million square feet at 3851 Youngs Road in Joliet. This does not include two properties totaling million square feet which are currently on the market but will be vacated at a future date. Build-to-suit activity continues to drive new construction deliveries in the I-80/Joliet Corridor. Two build-to-suit truck terminal projects were completed at the Crest Hill Business Park in the third quarter, adding 198,800 square feet to I-80/Joliet Corridor s inventory base. Dayton Freight moved into 131,300-square-foot, 186-door terminal while Old Dominion took possession of a 67,500-squarefoot, 100-door terminal. One speculative development commenced construction in the third quarter. CenterPoint Properties is building a 485,000-square-foot facility at CIC Joliet Park, just the second large scale speculative development to break ground in the submarket since 2008. Absorption and s 3.0 2.5 2.0 2007 2008 2009 2010 2011 2012 2013* 25% 2 15% 1 5% The I-80/Joliet Corridor third quarter leasing activity total of 654,500 square feet was the market s lowest quarterly output so far this year, declining from 913,300 square feet leased in the second quarter. One significant lease transaction occurred in the third quarter when Electrolux expanded into 365,300 square feet at 801 Midpoint Road in Minooka. The kitchen appliances distributor now occupies the whole 965,200-square-foot facility. This transaction alone represented over one-half of all I-80/ Joliet Corridor third quarter transactions. Three sales were recorded in the I-80/Joliet Corridor during the third quarter, bringing the total transaction volume to 215,100 square feet. Only 13,200 square feet of sale transactions were completed in the prior quarter. Heightened sale activity contributed to the positive net absorption of 473,700 square feet reported in the third quarter. However, this is considerably lower than the second quarter mark of 2.2 million square feet which was bolstered by a 1.6 million-square-foot build-to-suit lease that came on line during that time. Electrolux 365,303 801 Midpoint Road, Minooka Lease Dayton Freight Lines 131,300 16911 Enterprise Boulevard, Crest Hill Sale Black Horse Carriers, Inc. 100,144 4000 Rock Creek Boulevard, Joliet Lease P. 10 COLLIERS INTERNATIONAL
Lake County Lake County s vacancy rate remained nearly flat in the third quarter at 18 percent. Steady user demand kept pace with space returning to the market, holding vacancy rate to its current level. Only 458,400 square feet of space was brought on the market in Lake County, which was considerably less than the million square feet returned to the market in the second quarter. Lake County VACANCY 19% 1 ABSORPTION -461,983 222,555 RENTAL RATE $5.20 $5.31 _ The third quarter available industrial supply in Lake County was unchanged from the previous quarter s total of 7.5 million square feet. As a comparison, 7.9 million square feet were vacant one year ago. Lake County has three vacancies that can accommodate a 300,000-square-foot user, however, two of those options are in facilities built before 1970. Two building additions were completed in Lake County in the third quarter. Kanaflex Corporation completed a 98,000-square-foot addition in Vernon Hills and FedEx Ground moved into its 87,800-square-foot expansion in Grayslake. Two buildings broke ground in Waukegan in the third quarter that will add 240,500 square feet to Lake County s inventory base. The larger development was a speculative project the first in this market since 2009. HSA Commercial commenced construction on a 218,500-square-foot facility on a 22.72-acre site at 2431 Delany Road. Absorption and s 2.0 - - - -2.0 2007 2008 2009 2010 2011 2012 2013 * 1 1 1 1 Third quarter leasing activity was concentrated mostly in smaller spaces which brought the total to 207,200 square feet. This was significantly lower than the second quarter volume of 694,600 square feet. The largest third quarter lease transaction occurred when Sigma Services leased 80,000 square feet at 2701 Deborah Avenue in Zion. The remaining leases were between 10,000 square feet and 21,000 square feet. Third quarter sale activity was up 8.7 percent from the second quarter volume of 139,800 square feet to the current level of 151,900 square feet. However, first quarter sale volume of 383,600 square feet exceeded the combined results of the second and third quarters. Lake County third quarter net absorption measured 222,600 square feet, a significant increase from the negative 495,100 square feet reported in the prior quarter. A smaller amount of space returned to the market during the quarter, contributing to improved third quarter results. AB Specialty Silicone 96,529 3725-3729 Hawthorne Court, Waukegan Sale Sigma Services 80,000 2501-2503 Deborah Avenue, Zion Lease Auto Parts City 36,700 3059 Washington Street, Waukegan Lease P. 11 COLLIERS INTERNATIONAL
North Suburbs Despite an uptick in sale activity, vacancy increased slightly in the North Suburbs, rising from the second quarter level of 8.09 percent to 8.12 percent in the third quarter. North Suburbs third quarter industrial supply totaled 4.7 million square feet, unchanged from the second quarter total. North Suburbs VACANCY 8.09% 8.1 ABSORPTION 88,002-19,682 RENTAL RATE $5.12 $5.16 There are two North Suburban vacancies greater than 300,000 square feet, which is highly unusual for this market. However, the facilities have contracts pending and will both be razed with one being redeveloped for non-industrial use. This mature industrial market does not witness the level of construction that other markets experience. The last development to be delivered to the market was in the fourth quarter of 2011 when Engis Corporation built a 54,000-square-foot addition on a building at 105 Hintz Road in Wheeling. North Suburbs third quarter leasing volume totaled 84,200 square feet. Despite having one more completed lease transaction in the third quarter versus the total number of signed leases in the second quarter, this marks a 14.9-percent decline from the second quarter volume of 98,900 square feet. Leasing volume remained below 100,000 square feet for the second consecutive quarter a first in the North Suburbs. Absorption and s - - - -2.0-2.5-3.0 2007 2008 2009 2010 2011 2012 2013* 1 1 Buyer activity continued to flourish in the North Suburban market. Third quarter sale activity measured 440,700 square feet a 79.8-percent increase from the second quarter level. Woodward Industries purchase of a 383,200-square-foot warehouse at 6300 Howard Street in Niles greatly contributed to the rise in third quarter sale volume. This was one of the largest user sale transactions to occur in the North Suburbs over the past decade. The heightened demand for buildings for sale in the North Suburbs has exceeded leasing volume for the past two quarters. Strong sale volume was not enough to keep North Suburbs net absorption from reaching negative 19,700 square feet. This is a decline from positive 88,000 square feet witnessed in the prior quarter. Woodward Industries 383,230 6300 W. Howard Street, Niles Sale Edwards Label 32,470 5115 Suffield Terrace, Skokie Sale Private Individual 25,000 1885 Holste Road, Northbrook Sale P. 12 COLLIERS INTERNATIONAL
Northwest Suburbs The Northwest Suburbs third quarter vacancy rate measured 8.16 percent in the third quarter, an impressive 129-basis-point decline from the second quarter rate of 9.45 percent. The improvement is further pronounced when considering the vacancy rate in third quarter 2012 of 10.22 percent. The third quarter vacancy decline of 129 basis points is the most significant quarterly decrease of any Chicago-area industrial market. Northwest Suburbs 2Q2013 Absorption and s 3Q2013 VACANCY 9.45% 8.1 ABSORPTION 60,755 424,764 RENTAL RATE $4.66 $4.69 Available industrial supply in the Northwest Suburbs continued to shrink in the third quarter. The total supply of 2.8 million square feet represents a 13.7-percent decline from the 3.2 million square feet available in the second quarter. Strong third quarter leasing activity played a significant role in driving down this market s vacant supply. The last time Northwest Suburbs vacant supply fell below 3.0 million square feet was in the first quarter 2009 when 2.6 million square feet were available. No new construction was delivered to the North Suburbs in the third quarter. However, two developments have commenced construction. Sunstar Americas purchased an 80-acre site in Schaumburg and has started construction on a 302,000-square-foot manufacturing facility. Additionally, a 90,200-square-foot speculative warehouse/distribution is now underway at Brewster Creek Business Park in Bartlett. One lease transaction pushed third quarter leasing volume to 395,900 square feet, eclipsing the 122,100 square feet leased in the prior quarter. 3D Exhibits, Inc. leased 250,300 square feet at 798-800 W. Albion Avenue in Schaumburg. The balance of leases signed during the quarter occurred in spaces ranging from 10,000 square feet to 35,000 square feet. 0.9 0.6 0.3-0.3-0.6-0.9-1.2-2007 2008 2009 2010 2011 2012 2013 * 1 9% 3% Third quarter leasing activity exceed the combined totals of the first and second quarters (153,600 square feet). The Northwest Suburbs secured three sales in the third quarter totaling 66,100 square feet, which was slightly ahead of the 62,800 square feet sold in the second quarter. One year ago, sale activity in this market totaled 152,100 square feet. Third quarter net absorption totaled 424,800 square feet, a dramatic improvement from the 60,800 square feet posted in the second quarter. Strong third quarter tenant demand was a key factor in the improvement. Strong third quarter results pushed the year-to-date volume to 447,700 square feet which far exceeded the 113,900 square feet registered for the first three quarters of 2012. 3D Exhibits, Inc. 250,259 798-800 W. Albion Avenue, Schaumburg Lease RMS Properties 38,703 1333-1339 N. Basswood Road, Schaumburg Sold Lighthouse Christian Products Company 35,815 2401 N. Palmer Drive, Schaumburg Lease P. 13 COLLIERS INTERNATIONAL
O Hare The O Hare vacancy rate continued its dramatic improvement in the third quarter, dropping 34 basis points to 8.10 percent. The vacancy rate has recovered more than five full percentage points from the all-time high of 13.17 percent posted in the second quarter of 2011. Available supply at the end of the third quarter totaled 11.3 million square feet, a decline of 400,000 square feet from the 11.7 million square feet available in the second quarter. Third quarter sale activity was the primary contributor to the improvement. O Hare VACANCY 8.4 8.1 ABSORPTION -257,574 386,613 RENTAL RATE $4.72 $4.82 While the decrease in vacant space in the O Hare market is encouraging, there are still 28 vacancies between 100,000 square feet and 300,000 square feet that account for 3.9 million square feet or 34.9 percent of the overall vacant supply. The O Hare market witnessed it first speculative delivery since 2007 in the third quarter. Panattoni Development completed a 208,400-square-foot warehouse/distribution facility at 1925 Busse Road in Elk Grove Village. A 212,400-square-foot facility was demolished in the third quarter at 2201 Lunt Avenue in Elk Grove Village. Owner Bridge Development Partners immediately began construction on a 150,500-squarefoot speculative warehouse/distribution facility. Bridge also has a 124,000-square-foot facility underway at 2475 Touhy Avenue in Elk Grove Village. The facility broke ground in the second quarter. Lastly, ProLogis, which recently razed a 316,300-square-foot facility at 2299 Busse, Elk Grove Village just sold the 12.7-acre landsite to DuPont Fabros Development, LLC. The operator and manager of wholesale data center plans to build another Hotel Carrier Internet facility. Absorption and s 3.0 2.0 - -2.0-3.0-4.0 2007 2008 2009 2010 2011 2012 2013 * 1 1 1 Third quarter leasing volume of 986,800 square feet was the weakest quarterly output posted in the O Hare market so far in 2013. In the prior quarter, leasing activity totaled 1.2 million square feet. Tenant demand in the O Hare market was primarily concentrated in spaces below 50,000 square feet as 30 of the 34 leases signed during the quarter fell in that size range. The O Hare market experienced a surge in sale activity as 834,200 square feet of sale transactions were completed in the third quarter, nearly tripling the 291,500 square feet sold in the second quarter. User demand last reached this level in the second quarter of 2012 when 927,300 square feet were sold. The third quarter sale volume drove year-to-date activity to 1.2 million square feet, a 200,000-squarefoot increase from the same time period one year ago. O Hare s third quarter net absorption totaled positive 386,600 square feet, countering the negative 257,600 square feet reported in the second quarter. Extremely strong sale activity during the quarter boosted O Hare s net absorption. O Hare s year-to-date net absorption has reached 1.3 million square feet, an impressive improvement from the negative 641,900 square feet posted one year ago. Wayne Properties, LLC 140,698 1401 Kirk Street, Elk Grove Village Sale Basic Enterprises, Inc. 101,536 2567 Greenleaf Avenue, Elk Grove Village Lease Cretors & Company 98,652 170-176 W. Mittel Drive, Wood Dale Sale P. 14 COLLIERS INTERNATIONAL
South Suburbs Despite less space re-entering the market during the third quarter, South Suburbs vacancy rate edged up from the second quarter level of 10.20 percent to the current rate of 10.24 percent. The vacancy rate has climbed 86 basis points since dipping to 9.38 percent in the first quarter. With more than 1 million square feet vacant, the South Suburbs has the second highest concentration of available space of any Chicago market. It has increased slightly from the second quarter total of 10.4 million square feet. South Suburbs VACANCY 10.2 10.2 ABSORPTION -829,914-57,784 The South Suburbs has the largest number of vacancies above 300,000 square feet than any other Chicago-area market. There are seven vacant options in this size range, accounting for 3.5 million square feet or 33.3 percent of all South Suburbs available inventory. Just two of those options are in buildings with ceiling heights in excess of 28 clear. There have been no construction deliveries in the South Suburbs in 2013, whereas 267,000 square feet of new projects were constructed during the same time period in 2012. RENTAL RATE $4.17 $4.16 _ Intermodal Maintenance commenced construction on a 36,000-square-foot truck facility on a 18- acre site at 5444 W. 73rd Street in Bedford Park. The building is scheduled for completion in the first quarter 2014. Two large blocks of space were leased during the third quarter which propelled leasing volume to 479,500 square feet. This easily surpassed the second quarter volume of 238,600 square feet. Absorption and s 2.0 - - - -2.0-2.5-3.0 2007 2008 2009 2010 2011 2012 2013 * 1 1 1 Although third quarter volume exceeded second quarter results, the first quarter volume of 889,100 square feet was the strongest contributor to the year-to-date figure of 1.6 million square feet. The first three quarters of 2012 were witness to even stronger cumulative leasing volume of 1.8 million square feet. South Suburbs sale activity also benefited from stronger demand during the quarter registering 229,800 square feet sold. This was a 9 percent increase in activity from the prior quarter level of 120,700 square feet. Similar to leasing volume, sale activity was most prevalent in the first quarter as 404,800 square feet or 53.6 percent of the year s total volume occurred then. The year-to-date total of 755,300 square feet was down from the 1.1 million square feet sold during the first three quarters of 2012. ABSORPTION Stronger user demand was not enough to counter the level of space reentering the market, resulting in negative net absorption of 57,800 square feet. However, this is a sizable improvement from the second quarter volume of negative 829,900 square feet. Menasha Packaging 166,683 7770 W. 71st Street, Bridgeview Lease Northcape 127,942 5625 W. 115th Street, Alsip Lease Comprehensive Logistics 75,135 480 E. Lincoln Highway, Chicago Heights Lease P. 15 COLLIERS INTERNATIONAL
Southeast Wisconsin User demand in Southeast Wisconsin continued to exceed space returning to the market, bringing the third quarter vacancy rate down to 5.05 percent. This was a 29-basis-point decline from the 5.34 percent vacant in the second quarter. The Southeast Wisconsin market has the lowest vacancy rate of any core market in Chicago in the third quarter. Southeast Wisconsin VACANCY 5.3 5.05% ABSORPTION 278,728 139,355 RENTAL RATE $4.23 $4.13 Southeast Wisconsin s available vacant supply totaled 2.4 million square feet in the third quarter, falling modestly from the 2.6 million square feet available in the second quarter. The decline was more significant when compared to the 3.0 million square feet vacant one year ago a 600,000-squarefoot drop. Tenants looking for big blocks of space (over 300,000 square feet) in the Southeast Wisconsin market will only have one option 363,500 square feet at 9201 Wilmont Road, Pleasant Prairie. This facility has clear height of 22 which is better suited for manufacturing or assembly user. Just one building has been delivered to the Southeast Wisconsin market in 2013. A 208,000-squarefoot addition was completed by Rudd Lighting at 9201 Washington in Sturtevant in the first quarter. In 2012, only two new construction projects were completed, totaling just 96,000 square feet. Kenall Manufacturing purchased 34 acres in Kenosha in the third quarter with plans to construct a 354,000-square-foot facility. The manufacturer of impact and vandal resistant lighting products will relocate from Gurnee. Absorption and s 3.0 2.5 2.0-2007 2008 2009 2010 2011 2012 2013* 1 1 1 Three leases were signed in the Southeast Wisconsin market in the third quarter, which was one more than the second quarter total. However, the total volume of 268,400 square feet was lower than the second quarter volume of 358,600 square feet. Tenant demand was strongest in the first quarter when 471,400 square feet of lease transactions were completed. For the third consecutive quarter, just one property was sold in the Southeast Wisconsin market. A 10,500-square-foot facility at 2425 S. Memorial Drive in Racine was purchased by Tower Energy Investments, LLC. This marks the lowest total quarterly sale volume of 2013 in this market. ABSORPTION Third quarter net absorption measured 139,400 square feet. Although positive, it was 50 percent lower than the 278,700 square feet reported in the second quarter. Weaker third quarter user demand contributed to the inferior results. Hanna Cylinders, LLC 105,637 8901 102nd Street, Pleasant Prairie Lease Undisclosed 59,290 6200 Regency West Drive, Racine Lease Gallo Manufacturing 58,000 2745 Chickory Road, Mt. Pleasant Lease P. 16 COLLIERS INTERNATIONAL
THIRD QUARTER 2013 MARKET STATISTICS Sub-Market Total Inventory Sq. Ft New Supply Came on Market Vacancy Rate Current Qtr Vacancy Rate Prior Qtr Net Absorption Current Qtr-SF Net Absorption YTD-SF Leased SF Current Qtr. Sold SF Current Qtr. Under Construction Current Qtr. Ave Annual Asking Rate/SF Central DuPage County 84,175,674 0 1,149,254 7.67% 8.61% 751,837 1,964,647 1,354,453 304,990 219,820 $5.00 $62.91 Chicago North 90,043,652-38,800 409,162 6.7 7.1 258,930 (10,100) 194,900 260,154 0 $5.45 $37.50 Chicago South 84,092,474 0 762,505 11.4 11.6 100,389 943,785 119,315 202,081 0 $3.70 $33.50 DeKalb County 19,981,307 0 0 3.8 3.9 12,600 128,480-0 0 $2.60 $49.78 Elgin I-90 Corridor 28,824,328 123,800 785,558 13.0 11.43% (369,542) (576,669) 194,374 177,075 342,000 $4.85 $56.05 Far South Suburbs 45,082,832 0 67,750 5.73% 7.0 574,350 386,938 495,300 0 295,800 $4.32 $37.97 Fox Valley 89,830,760 0 509,405 7.4 8.31% 655,865 1,381,599 973,524 55,613 249,600 $4.20 $56.69 I-290 North 76,175,626 0 494,495 11.17% 11.27% (124,802) (83,515) 179,917 71,439 0 $3.61 $32.92 I-290 South 45,244,723 0 689,244 6.7 5.69% (466,029) 35,070 576,143 0 152,670 $3.95 $36.36 I-39 Corridor 17,592,555 0 74,383 3.49% 3.6 25,617 425,290 100,000 0 518,029 $1.98 $10.16 I-55 Corridor 74,299,389 0 1,204,423 9.13% 9.69% 412,998 540,769 2,306,605 145,126 1,134,704 $4.81 $56.95 I-80/Joliet Corridor 70,001,474 198,800 512,709 10.2 10.73% 473,672 2,749,456 654,477 215,120 990,798 $3.44 $48.24 Lake County 70,518,805 185,777 458,367 1 19% 222,555 340,201 207,182 151,949 218,500 $5.31 $53.57 McHenry County 30,099,848 0 590,573 15.6 14.8 (220,607) (421,717) 87,886 124,730 0 $3.45 $38.56 North Suburbs 57,639,498 0 589,319 8.1 8.09% (19,682) (507,800) 84,162 440,700 0 $5.16 $54.55 Northwest Suburbs 34,151,763 0 113,064 8.1 9.45% 424,764 447,656 395,874 66,084 140,491 $4.69 $62 O Hare 139,205,171-3,994 1,466,483 8.1 8.4 386,613 1,294,836 986,805 834,243 150,520 $4.82 $55.31 South Suburbs 102,175,108 0 871,354 10.2 10.2 (57,784) 301,869 479,476 229,802 0 $4.16 $23.43 Metro Chicago Total 1,159,134,987 465,583 10,748,048 8.9 9.2 3,041,744 9,340,795 9,390,393 3,279,106 4,412,932 $4.23 $45.64 Northwest Indiana 54,330,618 100,000 252,486 8.1 8.5 289,654 (11,506) 48,975 253,800 360,500 $3.14 $34.04 Rockford Area 51,595,970 0 668,482 17% 9.01% (187,780) (456,031) 106,000 146,602 360,000 $2.92 $19.53 Southeastern Wisconsin 47,939,500 0 224,955 5.05% 5.3 139,355 647,865 268,406 10,517 36,000 $4.13 $27.54 GRAND TOTAL 1,313,001,075 565,583 11,893,971 8.8 9.03% 3,282,973 9,521,123 9,813,774 3,690,025 5,169,432 $4.12 $43.10 Ave Asking Sales Price/SF QUARTERLY COMPARISON AND TOTALS Q3-13 1,313,001,075 565,583 11,893,971 8.8 3,282,973 9,521,123 9,813,774 3,690,025 5,169,432 $4.12 $43.10 Q2-13 1,316,302,590 1,379,198 15,995,012 9.03% 9.0 199,188 6,238,150 8,743,513 3,543,270 4,351,811 $4.09 $42.57 Q1-13 1,310,969,792 1,185,176 9,919,483 9.0 1 6,038,962 6,038,962 10,269,328 3,873,952 4,650,660 $4.04 $44 Q4-12 1,310,785,800 900,153 10,154,786 9.51% 1 7,167,827 13,599,141 7,379,171 5,225,393 4,976,149 $4.06 $40.82 Q3-12 1,309,885,647 531,186 13,940,030 1 10.1 524,550 6,431,314 7,811,444 3,894,333 4,502,026 $4.12 $41 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. P. 17 COLLIERS INTERNATIONAL
CHICAGO INDUSTRIAL SUBMARKET MAP SOUTHEAST WISCONSIN 482 offices in 62 countries on 6 continents McHENRY COUNTY LAKE COUNTY United States: 147 Canada: 37 Asia: 36 Australia/New Zealand: 165 Latin Ameria: 19 EMEA: 118 > $2.0 billion in annual revenue > 1.12 billion square feet under management > Over 13,500 professionals 12 45 83 60 ELGIN I-90 72 68 NORTHWEST SUBURBS 14 62 83 12 45 Lake Cook Rd. 22 94 NORTH SUBURBS/COOK 21 41 94 Lake Michigan 59 53 90 O'HARE 58 294 www.twitter.com/collierschicago DeKALB COUNTY 20 31 I-88 / FOX VALLEY Elgin-O'Hare Expy. 20 290 CENTRAL DuPAGE 64 53 355 290 83 190 90 I-290 NORTH 64 I-290 SOUTH 41 CHICAGO NORTH 94 90 www.colliers.com/chicago 59 88 45 290 43 CHICAGO SOUTH 88 East-West Tollway 34 294 90 94 55 34 I-55 CORRIDOR 53 355 55 43 50 12 20 94 90 SOUTH SUBURBS NORTH I-80 / JOLIET CORRIDOR 80 53 7 171 45 80 57 94 50 294 FAR SOUTH SUBURBS NORTH- WEST INDIANA RESEARCHER: George A. Cutro Vice President Research Services Colliers International Chicago 6250 N. River Road, Suite 11-100 Rosemont, IL 60018 TEL +1 847 698 8295 george.cutro@colliers.com 0 1 5 10 miles 55 Accelerating success. www.colliers.com/marketname