Research & Forecast Report CHICAGO BIG BOX First Quarter 018 Big Box Vacancy Decreases for First Time in Two Years Craig Hurvitz Vice President Chicago The vacancy rate for the Chicago market s big box product, defined as modern distribution buildings 00,000 square feet and larger with ceiling clear heights of at least 8 feet, decreased by 1 basis points to 9. percent during the first quarter of 018. This represents the first improvement to the vacancy rate in two years, during which vacant speculative construction deliveries resulted in a steadily increasing vacancy rate, even while net absorption remained positive. Twenty new leases were signed in big box buildings during the first quarter of 018, totaling.7 million square feet, the greatest quarterly new leasing volume since the fourth quarter of 016. This activity, combined with two build-to-suit completions and.8 million square feet of new vacancies being introduced during the quarter, resulted in a net absorption total of. million square feet. Market Indicators CHICAGO BIG BOX MARKET Q1 018 Q 017 Q1 017 VACANCY RATE 9.% 9.6% 7.6% NET ABSORPTION,10,96,60,870 1,6,78 NEW SUPPLY,770,90,1,19,191,0 UNDER CONSTRUCTION,71,0 7,0,698 16,969,0 NEW LEASING ACTIVITY,77,,1,669,79,1 AVG NET EFFECTIVE RATE $. $. $. Big Box New Supply and Vacancy 1% Only four big box buildings totaling.8 million square feet of new supply were completed during the first quarter of 018, the least amount of deliveries since the first quarter of 016. Fifteen big box projects are currently under construction, totaling.7 million square feet, about onethird of the 17.0 million square feet under construction one year ago. Vacancy & Absorption The big box vacancy rate decreased by 1 basis points to 9. percent during the first quarter of 018, but remains well above the 6.67 percent vacancy rate for the overall market. New Supply (millions of SF) 0 1 10 0 01 01 01 016 017 018 YTD Active Spec,8,7,80,0 8,009,6 10,8,601 10,68,19 1,07,960,,9 BTS,76,1,8,06 8,069,9 7,18,00 9,71,68 1,6,970,188, Vacancy 8.0% 7.0% 7.10% 7.0% 9.6% 9.% 9% 6% % 0% Vacancy Big box vacancy had been increasing steadily since the first quarter of 016 due to the delivery of vacant big box speculative construction projects. Fewer speculative big box deliveries and increased new leasing activity resulted in the decrease recorded during the first quarter of 018, the first improvement in two years. The vacancy rate is the highest among big box buildings 00,000 to 99,999 square feet, at 11.8 percent, while the vacancy rate is 7. percent for buildings 00,000 to 79,999 square feet, and 6.77 percent for buildings greater than 70,000 square feet. The greatest amount of big box product and the most big box development has occurred in the I- Corridor and I-80 Joliet Corridor submarkets, where the vacancy rate is 11.7 percent and 10.8 percent, respectively - well above the overall big box vacancy >What constitutes a big box building? Precast construction Located within the Chicago Metropolitan Area 00,000 square feet or larger Ceiling heights of 8 clear or higher Chicago s big box market consists of facilities totaling. million square feet, 79 percent of which are institutionally-owned, while the remaining 1 percent is owner-occupied. Colliers International s definition for a big box building was adjusted to 00,000 square feet and larger from 00,000 square feet and larger during the second quarter of 017 to better represent the market. 1 Research & Forecast Report First Quarter 018 Chicago/Big Box Colliers International
rate of 9. percent. Net absorption for the first quarter of 018 totaled. million square feet, slightly below the.6-million-square-foot total last quarter, but more than double the 1.7-million-square-foot total recorded one year ago during the first quarter of 017. Net absorption was strongest in the I-80 Joliet Corridor, where a 1.-million-square-foot build-to-suit for IKEA was completed during the quarter, resulting in positive net absorption. New Construction Four big box construction projects totaling.8 million square feet were completed during the first quarter of 018, the least amount to be delivered since the first quarter of 016. Big Box Statistics by Size Range 00,000-99,999 SF 00,000-79,999 SF 70,000+ SF Existing Inventory 16,996,181,06,98 68,187,67 Number of Buildings 0 86 67 Vacancy Rate 11.8% 7.% 6.77% Under Construction,96,06 8,0 1,0,10 Projects Under Construction 1 1 1 Q1 018 Net Absorption,08,677-87, 1,79,711 Avg Net Effective Rent $. $.0 $.9 Two of the projects completed were greater than one million square feet, including a 1.-million-square-foot build-to-suit for IKEA in Joliet and a 1.0-million-square-foot speculative facility developed by Venture One Real Estate in Channahon. Fifteen big box construction projects totaling.7 million square feet are under construction, about one-third of the 17.0 million square feet under construction one year ago. Big Box Available For Lease Profile 00,000-99,999 SF 00,000-99,999 SF 17 19 00,000-79,999 SF 1 70,000+ SF 1 6 Leasing and Sale Activity New leasing activity totaled.7 million square feet during the first quarter of 017, the greatest quarterly new leasing volume recorded since the fourth quarter of 016. Twenty new leases or lease expansions in big box buildings were signed during the quarter, the largest involving shipping supplies distributor Uline leasing a recently-completed 17,8-squarefoot speculative building in Pleasant Prairie, Wisconsin. The largest big box sale involved Blackstone Real Estate Income Trust purchasing a portfolio of three fully-leased buildings in Aurora totaling 1.7 million square feet. 0 10 1 0 0 Vacant Occupied Under Construction Largest Big Box Available Spaces for Lease MAP # SIZE ADDRESS 1 1,0,10 Rock Creek Logistics Center, Joliet 1,06,000 Core Logistics Center I-80, Joliet 1,000,110 Crossroads, Channahon 99,60 100 E Millsdale Road, Joliet 810,0 060 Graaskamp Boulevard, Wilmington Chicago Big Box Market Q1 018 Significant Lease Transactions MAP # TENANT SIZE ADDRESS TYPE 1 Whirlpool Corporation 1,001,18 81 Youngs Road, Joliet Lease expansion/renewal Uline, Inc. 17,8 119 80th Avenue, Pleasant Prairie New lease Clorox 0,09 70 Commerce Center Drive, University Park New lease RJW Transport, Inc. 6,61 601 Internationale Parkway, Woodridge New lease Royal Box, 11 S th Avenue, Cicero New lease Chicago Big Box Market Q1 018 Significant Sale Transactions MAP # BUYER SIZE ADDRESS TYPE 1 Blackstone Real Estate Income Trust 1,69,6 1700 N Edgelawn Drive, 0 W Indian Trail Road, & 180-80 Sullivan Road, Aurora -property investment portfolio sale DS Containers Inc 0,09 00 Enterprise Circle, West Chicago User sale/tenant exercised purchase option Blackstone Real Estate Income Trust 7,060 880 S Rohlwing Road, Addison Part of a 11-property national investment portfolio sale Rich Uncles Real Estate Investment Trust 10,00 111 Fairview Drive, DeKalb Investment sale
Chicago Industrial Market Map JOHN H BATTEN MEMORIAL AIRPORT BURLINGTON MUNICIPAL AIRPORT SYLVANIA AIRPORT Southeast Wisconsin Kenosha Regional Westosha WISCONSIN ILLINOIS Waukegan Regional Rockford Area McHenry County Lake County Elgin I- Northwest Suburbs Chicago Executive North Suburbs 9 O Hare Ohare Int'l I-9 Corridor 88 DeKalb Taylor Municipal DeKalb County Fox Valley 1 1 1 Dupage I-88 Corridor Central DuPage 88 I- North I- South Chicago North Chicago Midway Chicago South I- Corridor South Suburbs 7 9 Gary/Chicago 80 Big Box Activity # Lease transaction # Sale transaction # Large available block of space Active construction project 80 1 1 I-80 Joliet Corridor 80 7 Far South Suburbs ILLINOIS I NDIA N A 80 6 Northwest Indiana Research & Forecast Report First Quarter 018 Chicago/Big Box Colliers International
Chicago at a Glance Economic News The Chicago region has one of the most diverse economies on the globe. According to World Business Chicago, it is the third-largest area in the country and has a population base of 9.7 million employing over.6 million people with a gross metropolitan product (GMP) of more than $60 billion. The U.S. economy expanded at an annualized.6 percent rate during the first quarter of 018, slightly below the.9 percent growth revised rate during the fourth quarter of 017, but well above the 1. percent growth rate recorded during the first quarter of 017 and the 0.6 percent rate recorded during the first quarter of 016. Over the past four quarters, the average GDP growth rate measured.0 percent per quarter, signalling a steadily expanding economy. The country is very near full employment and as a result the pace at which the local and U.S. unemployment rate is declining has slowed. The U.S. unemployment rate has held steady at.1 percent for the past six months, the lowest the rate has been since bottoming out at.8 percent in 000. The Chicago unemployment rate decreased to. percent in March, its lowest rate since dipping to.7 percent in 006. This rate is now on par with the. percent rate in the New York metropolitan area, but remains above many other metropolitan areas including Los Angeles (.8 percent), Dallas (.7 percent), Boston (. percent), and San Francisco (.7 percent). While several economic indicators continue to point towards robust economic growth in 018, increased volatility in the stock market, uncertainty regarding implications of the new tax bill, and continued drama in Washington D.C. may temper that growth over the coming months. Despite largely good news, the economy will eventually experience another cyclical downturn. Over the near-term the Chicago Metropolitan Area economy looks to benefit as companies locate and expand within the Chicago region due to the area s central location, significant population, and labor force advantages. US GDP Growth by Quarter 6% % % 0% -% -% -6% -8% -10% 008 009 010 011 01 01 01 01 016 017 018 Source: Bureau of Economic Analysis Historical Unemployment Rate 1% 10% 8% 6% % % 01 01 01 01 016 017 018 Chicago Metropolitan Area United States Source: Bureau of Labor Statistics Transportation Chicago is home to seven Class I railroads which travel over 7,000 miles of track in the state. Intermodal railcar loadings have increased nationwide for the past seven consecutive years and represents the largest commodity moved by rail in Illinois. The Illinois highway system contains three coast-to-coast interstates (I-70, I-80 and I-). Also included within Illinois are three north-south interstate systems (I-9, I- and I-7) and five east-west interstate systems (I-, I-6, I-7, I-88, I-). O Hare International is the sixth busiest airport in the world. More than 1.8 million tons of cargo passed through O Hare International in 016, while 78.0 million passengers passed through the airport.
First Quarter 018 Big Box Market Statistics SUBMARKET TOTAL INVENTORY #BLDGS NEW SUPPLY UNDER CONSTRUCTION NEW VACANCIES VACANT SPACE VACANCY RATE CURRENT QTR VACANCY RATE PREVIOUS QTR NEW LEASING ACTIVITY USER SALE ACTIVITY Central DuPage 1,06,87 0 0 6,8 998,09 7.10% 7.% 177,0 0 1,081 CURRENT QTR NET ABSORPTION Chicago North,000 1 0 0 0 0 0.00% 0.00% 0 0 0 Chicago South,70,98 11 0 80, 0 09,0.9%.9% 0 0 0 DeKalb County,8,9 7 0 0 0 0,0.0%.0% 0 0 0 Elgin I- Corridor 8,86,9 0 0 0 1,98,81 18.0% 18.% 7,6 0 7,6 Far South Suburbs 1,08,916 16 0 0 0 9,709.% 7.88% 0,09 0 0,09 Fox Valley,77,06 1 0 0 0 0,77 10.6% 1.8% 8,078 0 8,078 I- North,9,98 1 0 1,067,9 19,09 9,6 19.6% 0.9% 09,816 0 60,777 I- South,91,108 17 0, 0 9,918 9.1% 16.01% 67,768 0 70,10 I-9 Corridor,16,6 7 0 0 0 0 0.00% 0.00% 0 0 0 I- Corridor 7,7,689 17 0 8,6 0 6,77,97 11.7% 1.07% 77,99 0 776,0 I-88 Corridor,70,1 0,000 0 1,0,98.%.% 0 0 0 I-80/Joliet Corridor,80,89 8,0,91,11,19 1,88,76,7,6 10.8% 8.9% 67,97 0 1,060,187 Lake County 8,77,67 9 0 8,0 0 6,978 6.% 6.%,77 0,77 McHenry County 86, 0 0 0 0 0.00% 0.00% 0 0 0 North Suburbs 1,17,16 0 6,91 0 0 0.00% 0.00% 0 0 0 Northwest Suburbs,66,77 8 0 6,000 0 6,99.9% 6.7% 87,01 0 89,9 O'Hare,7,967 17 0 0 0 1,.6%.6% 0 0 0 South Suburbs,91,067 16 0 0 70,789 69,96 6.61% 1.76% 0 0-70,789 METRO CHICAGO TOTALS,8, 0,0,91,71,0,,7 1,0, 9.% 9.7%,17,9 0,718,6 Northwest Indiana,1,681 0 0 0 9,9.61%.61% 0 0 0 Rockford Area,8,091 10 0 0 0 0 0.00% 0.00% 0 0 0 Southeast Wisconsin GRAND TOTALS 17,7,06 8 0,9 0 07,80 1,8,6 6.96% 8.7% 80,00 0 79,9 7,9, 8,770,90,71,0,8,60,81,66 9.% 9.6%,77, 0,10,96 Note: Colliers International s definition for a big box building was adjusted to 00,000 square feet and larger from 00,000 square feet and larger during the second quarter of 017 to better represent the market. Research & Forecast Report First Quarter 018 Chicago/Big Box Colliers International
96 offices in 68 countries on 6 continents United States: 1 Canada: 9 Latin America: Asia Pacific: 79 EMEA: 111 MARKET CONTACTS: Craig Hurvitz Vice President Chicago +1 87 698 89 Craig.Hurvitz@colliers.com Jennifer Olsen Senior Research Analyst Chicago +1 87 698 817 Jennifer.Olsen@colliers.com $.6 billion in annual revenue.0 billion square feet under management 1,000 professionals and staff About Colliers International Colliers International Group Inc. (NASDAQ:CIGI; TSX:CIGI) is an industry-leading global real estate services company with 1,000 skilled professionals operating in 68 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 1 consecutive years, more than any other real estate services firm. Colliers also has been ranked the top property manager in the world by Commercial Property Executive for two years in a row. colliers.com Copyright 018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.