Overall, the suburban office market continues to be defined by the strength of industry sectors residing in each submarket. Quarterly Market Trends Suburban Office Overview December 24 The suburban office market continued its slow recovery in the first quarter of 25. rates measured 21.9 percent, virtually flat over the 21.8 percent shown at year-end 24. The Oak Brook East and Northwest submarkets were the only two markets to post positive absorption levels. The strength of the Northwest market (positive absorption of 25,428 SF) was not enough to buoy the overall market to a positive figure. Net absorption for all of the suburban market totaled -77,545 square feet at the end of the first quarter. Million Square Feet Delivered/Absorbed 1 8,, 6,, 4,, 2,, -2,, -4,, Supply and Demand 2 21 22 New construction continues to be minimal with only 78,26 square feet delivered in the entire suburban market in the first quarter. However, exciting developments are on the horizon, as the suburban market begins embracing green building initiatives. Several developers are investigating LEED (Leadership in Energy and Environmental Design) projects, and The Alter Group recently announced plans to begin construction on the first LEED-certified speculative office building in the suburbs. The proposed project will be a two-building, 47,-square-foot complex in Downers Grove. 23 24 25Q1 Delivered Net Abso rption 2 1 Rate Rents are holding steady, in most cases unchanged from levels shown over the past few years. Overall average Class A asking rents (gross) measured $24.28 at quarter s end. Kemper Lakes Corporate Center Lake Zurich, IL Investment sale activity is thriving, and the first quarter saw many notable transactions including the four-building, 1.1 million square foot Kemper Lakes Corporate Office Complex in Lake Zurich, IL to BPG Properties, Ltd; the 5,-SF Meadows Corporate Center, Rolling Meadows, to Golub & Company; the 31,-SF Northwest Plaza and two-building O Hare Plaza complex totaling nearly 7, SF to Fulcrum Asset Advisors.
Northwest 26,6, SF The Northwest market continues to show strength through steady absorption and tenants consistently seeking large blocks of space. 2 1,, 5, -5, -1,, -1,5, Historical and 2 21 22 23 24 25Q1 2 1 Rate & Leasing Activity The vacancy rate in the Northwest market decreased from 21.8 percent at year-end 24 to 2.9 percent at the end of the first quarter. Large leases included Argent Mortgage s 58,586-SF lease expansion at Continental Towers, Rolling Meadows; Freescale s 4,-SF lease at Kemper Lakes Corporate Center, Long Grove; and Assurance Agency Ltd. s new 38,18-SF lease at 175 E. Golf Road, Schaumburg. PepsiAmerica, Inc. announced plans to relocate later this year to the top five floors of Schaumburg Corporate Center (12,232 square feet). Leasing activity will remain high with several tenants expected to secure large (5, SF or higher) blocks of space this year. Class A absorption in the Northwest market was healthy in the first quarter, totaling a positive 316,233 SF. Overall absorption totaled positive 25,428 SF. The market is expected to experience strong absorption through the remainder of the year, with many large tenants seeking space. While Schaumburg and Hoffman Estates have broken ground on a large hotel/convention center and sports arena, new office construction remains meager, with only 4, SF delivered in the first quarter. There is no speculative or build-to-suit construction planned in the Northwest market for the next several quarters. Current asking Class A rental rates measured $24.28 per square foot gross. Northwest rental rates have not moved significantly since 1997. Commensurate with demand, Class A rents should start to rise throughout the remainder of the 25. 521 Tollview Drive Rolling Meadows, IL
O Hare 14,, SF After an eventful 24, the O Hare market is experiencing a downturn in activity but should see positive absorption by year-end. 3 5, 4, 3, 2, 1, -1, -2, -3, -4, -5, Historical and 2 21 22 23 24 25Q1 3 2 1 Rate A bsorption Vacanc y & Leasing Activity The overall vacancy rate in the O Hare market increased from 24.4 percent at year-end 24 to 25.4 percent at the end of first quarter 25. It appears that much of the leasing velocity experienced in this market at the same time last year has dissipated. Large leases included Schnadig s 14,-SF, five-year lease at 1111 E. Touhy Avenue in Des Plaines. O Hare continues to see no new construction, with the last buildings delivered to the area in 21. No new speculative or build-to-suit construction is expected in the O Hare market this year Class A asking rents increased insignificantly from $26.39 at the end of 24 to $26.7 gross at the end of the first quarter 25. Asking rents should remain flat over the remainder of the year. in the O Hare market measured a disappointing -142,456 square feet year to date. O Hare s Class C property segment was the only one to experience positive absorption in the first quarter. O Hare s Class A properties should achieve positive net absorption over the next 12 months while Class B and C properties should experience negative absorption. Northwest Plaza 971-981 W. Higgins Road Rosemont, IL
North 25,7, SF The negative absorption experienced in the North is not a true indicator of the market s strength. 4 1,2, 1,, 8, 6, 4, 2, Historical and -2, -4, -6, -8, 2 21 22 23 24 25Q1 2 1 Rate Vac anc y & Leasing Activity The overall vacancy rate in the North suburban market is holding steady at 18.7 percent. The Class B property segment is experiencing a 24 percent vacancy as a result of tenants taking advantage of a soft market to upgrade space. Large leases included International Travel Service s 27,822-SF early renewal at Hyatt Deerfield Campus, Deerfield; Solo Cup s 2,-SF lease at Tri-State International Office Center, Lincolnshire; and Elite Business 19,-SF lease at 5 Lake Cook Road, Deerfield. in the North market measured a disappointing -131,433 square feet year to date. The negative absorption is due in part to the recent availability 22, SF at 4 Commercial Drive in Northbrook. is expected to slowly improve throughout 25. All first quarter construction was build-to-suit for a total of 38,16 square feet. Triangle Corporate Park, a 211,-square-foot office/flex development at Milwaukee Avenue and Route 12, Gurnee, was announced and is expected to have 7, square feet delivered by the fourth quarter of 25. Takeda Pharmaceuticals was awarded $15 million in grants and tax relief by Governor Blagojevich to build a 1.2 million-square-foot headquarters campus on 7 acres at I-94 and Lake Cook Road in Deerfield. The first phase of construction will be complete in 26. Class A asking rents remain nearly unchanged at $23.73 gross. Rents are not expected to experience a significant move at any time in 25. One Northbrook Place 5 Revere Drive Northbrook, IL
Lisle-Naperville 14,5, SF Although experiencing some encouraging leasing activity, the Lisle-Naperville market has a long road to recovery ahead. 5 8, 6, 4, 2, -2, -4, -6, -8, -1,, Historical and 2 21 22 A bso rptio n 23 24 25Q1 3 3 2 1 Rate & Leasing Activity The overall vacancy rate in the Lisle-Naperville market increased to 29.2 percent from 28.8 percent at year-end 24. Class A vacancies totaled more than 34 percent and aren t expected to recover this year. Despite the vacancies plaguing the market, Corporetum Office Campus in Lisle saw some significant activity with three recently signed leases including a 41,289-SF new lease to United Health Group. McDonald s signed a long-term lease for 3,777 SF at 432 Winfield Road in Warrenville. No new construction was delivered in the first quarter to the Lisle-Naperville market. New construction in this market has rapidly declined since 2 when nearly 1.2 million square feet were delivered. Class A asking rents remain unchanged at $23.12 per square foot gross. Rents are not expected to fluctuate significantly over the next 12 months. For rents to begin increasing, the Lisle-Naperville market needs to experience significant positive absorption for four to six consecutive quarters. A significant number of available large blocks of space will motivate large users to consider alternatives. in the Lisle-Naperville market, although posting a negative 57,433 SF at quarter s end, is steadily improving after experiencing devastating absorption figures in 22 and 23. The Class A property segment experienced positive absorption of 2,37 SF and should continue to experience small gains over the next 12 months. Tallgrass Corporate Center 1 Remington Road Bolingbrook, IL
Oak Brook East 23,8, SF 6 1,5, Historical and 2 The Oak Brook East market continues to show its stability with healthy leasing activity and positive absorption. 1,, 5, -5, -1,, -1,5, 2 21 22 23 24 25Q1 1 Rate A bsorption & Leasing Activity The overall vacancy rate in the Oak Brook East market held steady at 2. percent. Leasing activity was healthy, with a handful of large leases signed including Waste Management s 82,-SF lease expansion and extension at 72 Butterfield Road, Oak Brook; and Fry Inc. s 16,76-SF lease renewal at Brush Hill Office Court Complex in Westmont. in the Oak Brook East totaled a positive 3,349 square feet, with the healthiest numbers coming from the Class A segment (positive 64,378 SF) In the remainder of the year, Oak Brook East should experience more Class A positive absorption with Class B and Class C expected to show slightly negative absorption. No new construction was delivered in the first quarter to the Oak Brook East market. The Alter Group announced plans to begin construction on the suburb s first LEED-certified (Leadership in Energy and Environmental Design) speculative office building - a two-building, 47,-SF complex in Downers Grove. Delivery is expected sometime in late 26 or early 27. Class A asking rents edged up slightly to $24.25 per square foot gross from $23.98 at year-end 24. Due to positive net absorption in Class A buildings, rents will increase slightly over the next quarter. Class B rents will remain in the $17. to $2. per square foot gross range. Woodland Corporate Center 1333 Butterfield Road Downers Grove, IL