Q3 SUBURBAN OFFICE CHICAGO OFFICE MARKET OVERVIEW Back in the Game After taking a hit earlier in the year, the suburban Chicago office market improved in the third quarter of. While the suburban Chicago office market continued to recover from its loss of large corporate users earlier in the year, momentum picked up as tenants began occupying space that was signed earlier in the year and more tenants began to tour the market. MARKET INDICATORS Suburban Office Q2-14 Q3-14 VACANCY 21.7% 21.5% YTD ABSORPTION (672,796) (384,781) RENTS $19.85 $19.95 INVENTORY 116,467,212 116,467,212 - TRENDS Although rents are slowly rising, primarily in high quality Class A pockets throughout the suburban market, it remains a tenant s market with landlords continuing to offer aggressive incentive packages. Tenants are taking advantage of recently sold and recapitalized Class A and B+ properties and are finding that they can move into higher-end space without significantly increasing their total cost. However, as rental rates in Class A assets continue to rise, this flight to quality will become more challenging as less space will be available. Mid- and large-sized tenants continue to look for opportunities to create more efficient work environments though an increase in space density. As new space requirements become more dense, 4.00/1,000 parking ratios that were once standard are no longer able to accommodate these users. In turn, they are requiring higher parking ratios, causing landlords to rethink their parking infrastructure and making properties that are accessible to public transportation more desirable. VACANCY Leasing volume in the suburban office market improved in the third quarter of. This caused overall vacancy to drop to 21.5 percent, down from 21.7 percent in the second quarter. While the O Hare, Northwest and North markets witnessed improvement in the third quarter, the Lisle/ Naperville market reported the lowest overall vacancy rate, ending the third quarter at 18.4 percent. Overall sublease vacancy remained flat in the third quarter at 2.0 percent. While the O Hare market has minimal sublease vacancy at 0.3 percent, the Lisle/Naperville market reported the highest sublease vacancy at 4.4 percent. LEASE AND SALE ACTIVITY The largest transactions of the third quarter include Houghton Mifflin s 106,000-square-foot lease at One Pierce place in Itasca; Glanbia s 67,000-square-foot lease at Esplanade II in Downers Grove, Eby Brown s 49,000-square-foot lease at One Tellabs Center in Naperville; Paychex North America s 47,000-square-foot lease extension at Naperville Woods Office Center in Naperville; Cyber Workplace Recovery s 43,000-square-foot renewal at Kensington Business Center in Mount Prospect and Epsilon s 42,500-square-foot lease at One Pierce Place in Itasca. www.colliers.com/chicago
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE Top investment transactions of the third quarter include BECO Management Inc. s purchase of Motorola s 1,121,186-square-foot campus in Libertyville for $9.5 million ($8.47 per square foot); James Campbell Company s $62.0 million purchase of Highland Landmark II, a 284,278-square-foot asset in Downers Grove; a joint venture, including David Stein s $6.2 million purchase of 1350 E. Touhy Avenue, a 244,049-square-foot property in Des Plaines; and the Hearn Company s $13.6 million purchase of Arlington Place III, a 147,048-square-foot property in Arlington Heights. ABSORPTION Overall net absorption in the third quarter ended with positive 288,015 square feet, up from negative 92,890 square feet reported in the second quarter. However, with the tenant vacancies that occurred earlier in the year, yearto-date absorption totaled negative 384,781 square feet. While the North market continued to suffer from year-to-date negative net absorption, all other suburban markets achieved positive year-to-date net absorption. CONSTRUCTION While there hasn t been any speculative construction delivered since in suburban Chicago and none is expected in the remainder of, a number of build-to-suit projects are underway. AAOS s 180,000-square-foot buildto-suit project continues at the northwest corner of River and Higgins Roads in Rosemont, with completion scheduled for fourth quarter, and construction on the 735,000-square-foot Zurich North America headquarters at Meacham Road and Interstate 90 in Schaumburg is progressing. In addition, Chamberlain Group, a division of Duchossois Group, plans to build an office development of at least 200,000 square feet on the asset it acquired from Follett Corporation in Oak Brook. Construction is expected to begin sometime in 2015. NET ABSORPTION AND VACANCY SUBURBAN OFFICE MARKET Square Footage 1,000,000 21.8% 21.8% 573,053 314,669 372,743 500,000 21.7% 21.7% 0 21.6% (239,615) (500,000) 21.5% (384,781) 21.5% 21.4% 21.5% (1,000,000) 21.4% (1,500,000) 21.3% (2,000,000) 21.2% 21.1% (2,500,000) 21.1% (3,000,000) (2,735,522) 21.0% Source: Costar; Colliers International Research Absorption Vacancy SUBMARKET VACANCY RATES - 30.0% 25.0% 24.3% 23.8% 23.6% 22.4% 22.9% 22.9% 22.6% 21.7% 22.3% 20.8% 20.0% 19.0% 19.0% 18.2% 18.7% 18.4% 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 44 properties in the suburban office market that can accommodate large (100,000 square feet and above) users, 28 of which are Class A buildings. While the O Hare and Oak Brook markets have very limited large blocks of space available, the Northwest market continues to offer the majority of large block options. RENTS The average Class A asking rent ended the third quarter at $27.39 per square foot gross, up from $27.33 per square foot gross at the end of the second quarter. A continued rise in Class A rates is expected as the market continues to tighten. The average asking rent for all classes in suburban Chicago also increased to $19.95 per square foot gross at the end of third quarter compared to $19.85 at the end of second quarter. COLLIERS INTERNATIONAL P. 2
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE O Hare O Hare Map or Quote MARKET INDICATORS Class C 545,520 SF 57.7% Vacant Q2-14 Q3-14 VACANCY 23.6% 22.4% YTD ABSORPTION 22,513 185,161 RENTS $20.80 $20.98 INVENTORY 13,616,331 13,616,331 - VACANT SPACE BY PROPERTY TYPE Class A 8,135,296 SF 16.7% Vacant Class B 4,935,515 SF 28.0% Vacant Although vacancy in O Hare remains the second-highest of all Chicago area submarkets, it has reached a seven-year low in the third quarter of. VACANCY The O Hare market continued to improve, ending the third quarter of with the most significant drop in vacancy of all of the suburban office submarkets. Overall vacancy dropped to 22.4 percent from 23.6 percent recorded at the end of the second quarter. While all classes showed improvement, As several tenants began occupying space for leases signed earlier in the year, Class A properties reported the most noteworthy decrease, dropping to 16.7 percent from the prior quarter s total of 18.2 percent. O Hare sublease vacancy remains low at 0.5 percent, down slightly from 0.6 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. LEASE AND SALE ACTIVITY While there were no sizable lease transactions signed during the third quarter in the O Hare market, it has been active with small- to mid-sized tenants. In addition, there are larger tenants currently out in the market with deals expected to close by year-end. Significant investment sales in the O Hare market during the third quarter include 1350 E. Touhy Avenue, a 244,049-square-foot property in Des Plaines which sold for $6.2 million ($25.40 per square foot) to a joint venture, including David Stein. In addition, Columbia Centre, a 620,210-squarefoot, three-property portfolio in Rosemont, is currently under contract to Adventus Realty Trust. Properties recently added to the market include 10 W. Algonquin Road, a 136,856-square-foot asset in Des Plaines, currently owned by the Salvation Army. In addition, International Tower, a 302,088-square-foot property in Chicago, is expected to be put on the market for sale in the fourth quarter. LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE 9401 W Grand Avenue 269,014 5450 N Cumberland Avenue 2350-2400 E Devon Avenue 8420 W Bryn Mawr Avenue 10255 W Higgins Road 8725 W Higgins Road 1350 E Touhy Avenue 5100 River Road 9801 W Higgins Road 999 E Touhy Avenue 143,525 142,596 119,228 88,227 78,060 78,010 74,988 62,063 59,710 COLLIERS INTERNATIONAL P. 3
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE ABSORPTION Third quarter overall net absorption in the O Hare submarket reached positive 162,648 square feet, up from positive 76,666 square feet in the second quarter. This brings O Hare s year-to-date net absorption to positive 185,161 square feet. While Class A assets obtained the most significant increase in absorption, Class B properties remained strong as well. CONSTRUCTION No new construction was completed in the O Hare market during the third quarter of. However, construction on AAOS s 180,000-square-foot build-to-suit project continues at the northwest corner of River and Higgins Roads in Rosemont, with completion scheduled for December. NET ABSORPTION AND VACANCY O HARE OFFICE MARKET Square Footage 500,000 400,000 27.0% 373,887 24.9% 25.2% 24.3% 23.8% 300,000 200,000 117,612 71,224 100,000 0 (40,073) -100,000-200,000 (222,006) -300,000 Source: Costar; Colliers International Research Absorption Vacancy 185,161 22.4% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Vacancy 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. In addition, Hosts Hotels & Resorts, Inc. is currently seeking a zoning amendment to develop a 750,000-square-foot office building on the land next to its O Hare Marriott property. ASKING GROSS RENTAL RATES O HARE OFFICE MARKET $35.00 $30.00 $25.00 $20.00 RENTS Class A average asking rent for the O Hare market increased to $30.70 per square foot gross in the third quarter of, up from $30.63 in the second quarter. As market conditions in the O Hare market continue to improve, increases in Class A asking rates are expected for the remainder of. $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research Average The average asking rate for all classes also increased, ending the third quarter at $20.98 per square foot gross compared to $20.80 in the second quarter. US CELLULAR PLAZA CHICAGO, IL COLLIERS INTERNATIONAL P. 4
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE Northwest Map or Quote MARKET INDICATORS Northwest Class C 1,183,643 SF 14.6% Vacant Class B 11,217,733 SF 27.1% Vacant Q2-14 Q3-14 VACANCY 21.2% 20.8% YTD ABSORPTION 551,848 663,763 RENTS $17.86 $18.11 INVENTORY 32,397,171 32,397,171 - VACANT SPACE BY PROPERTY TYPE Class A 19,995,795 SF 17.7% Vacant While the Northwest market was hit the hardest during the recession, it reached a six-year low in vacancy during the third quarter. VACANCY Once the weakest of all the suburban submarkets, the Northwest market has gained momentum throughout the year, reporting 20.8 percent in overall vacancy in the third quarter, compared to 21.2 percent in the second quarter of. This is the lowest vacancy this market has witnessed since year-end 2008. While all classes registered deceases in vacancy, Class B properties had the most significant change, ending the third quarter with 27.1 percent vacancy, down from 28.0 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 nineteen properties that can accommodate large (100,000 square feet and above) users. Eight of these properties are Class A. LEASE AND SALE ACTIVITY Notable lease transactions in the third quarter of include Houghton Mifflin s 106,000-squarefoot lease at One Pierce place in Itasca; Cyber Workplace Recovery s 43,000-square-foot renewal at Kensington Business Center in Mount Prospect; Epsilon s 42,500-per-square-foot lease at One Pierce Place in Itasca; and Convergint Technology s 30,500-square-foot lease at 1 E Commerce Drive in Schaumburg. Significant investment sales in the Northwest market during the third quarter include Arlington Place III, a 147,048-square-foot property in Arlington Heights which sold to the Hearn Company for $13.6 million ($92.49 per square foot); Four Woodfield Lake, a 106,382-square-foot property in Schaumburg that sold to American Realty Advisors for $12.8 million ($120.28 per square foot) and 111 E. Busse Avenue, a 97,191-square-foot property in Mount Prospect that sold to SJI Partners for $3.4 million ($34.47 per square foot). Additionally, Commerce Point, a two-building, 187,638-square-foot property in Arlington Heights and 150 Pierce Road, a 185,020-square-foot property in Itasca, were recently added to the market for sale. LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE *2000 W AT&T Drive 1,300,000 *2001 Lakewood Boulevard 2550 W Golf Road 1707 N Randall Road 1421 W Shure Drive 200 N Martingale Road 1000 E Woodfield Road 1701 Golf Road 1415 S Roselle Road 3890 Salem Lake Drive 287,000 216,592 205,504 200,681 197,631 182,600 159,824 154,706 150,000 *Sublease COLLIERS INTERNATIONAL P. 5
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE ABSORPTION The Northwest market ended the third quarter of with 111,915 square feet of positive absorption. This brings the Northwest s yearto-date absorption total to positive 663,763 square feet, the highest of all the suburban markets. Class A product was responsible for the bulk of positive absorption, contributing 482,417 square feet, year-to-date. CONSTRUCTION No new construction was completed in Northwest market during the third quarter of. However, Zurich North America continues construction on its 735,000-square-foot headquarters at Meacham Road and Interstate 90. Zurich Insurance will move from its current Schaumburg location in 2016, when the development is completed. NET ABSORPTION AND VACANCY NORTHWEST OFFICE MARKET Square Footage 800,000 600,000 400,000 200,000 0-200,000-400,000-600,000-800,000 22.9% 305,526 22.0% 105,550 218,863 ASKING GROSS RENTAL RATES NORTHWEST OFFICE MARKET 23.9% 663,763 (588,632) (616,597) 20.8% Source: Costar; Colliers International Research Absorption 23.6% Vacancy 22.9% 24.5% 24.0% 23.5% 23.0% 22.5% 22.0% 21.5% 21.0% 20.5% Vacancy RENTS The Northwest suburban Class A average asking rate measured $23.88 per square foot gross, up slightly from the second quarter rate of $23.86. The average asking rate for all classes measured $18.11 per square foot gross, up from $17.86 during the second quarter of. As market conditions in the Northwest market continue to improve, modest increases in asking rates are anticipated throughout the fourth quarter of. $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research Average ONE EAST COMMERCE SCHAUMBURG, IL COLLIERS INTERNATIONAL P. 6
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE Map or Quote MARKET INDICATORS North Q2-14 Q3-14 VACANCY 23.5% 22.9% YTD ABSORPTION (1,534,256) (1,366,365) RENTS $21.13 $21.35 INVENTORY 28,645,560 28,645,560 - VACANT SPACE BY PROPERTY TYPE North After suffering a loss of corporate users in the beginning of the year, the North market has begun to rebound. VACANCY The North market ended the third quarter of with 22.9 percent overall vacancy. While this is a far cry from pre-recession days when the North market had its reign as suburban market leader, it is a significant improvement over second quarter s 23.5 percent vacancy rate. Class A product is responsible for the majority of the decrease in vacancy as it fell to 26.6 percent in the third quarter compared to 27.6 percent in the previous quarter. Overall sublease vacancy also reported a decrease in the third quarter, dropping to 3.2 percent, down from 3.6 percent in the second quarter of. There are currently ten blocks of space available for large-sized tenants (100,000 square feet and above), with all of which are Class A. LEASE AND SALE ACTIVITY Top North market lease transactions in the third quarter of include GCG Financial Services, LLC. s 30,000-square-foot lease at Three Parkway North in Deerfield; Fresenius Kabi USA s 25,000-square-foot lease at Kemper Lakes Business Center in Long Grove; and Horizon Pharma s 16,000-square-foot expansion at Corporate 500 Centre in Deerfield. Significant investment sales in the third quarter of include BECO Management Inc. s purchase of Motorola s 1,121,186-square-foot Campus in Libertyville for $9.5 million ($8.47 per square foot). BECO is planning significant renovations to the campus and has re-branded the property as Innovation Park Lake County. Class C 1,328,988 SF 18.1% Vacant Class A 18,313,399 SF 26.6% Vacant LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE 600 N US Highway 45 1,121,186 Class B 9,003,173 SF 16.3% Vacant **1000 Milwaukee Avenue 1 Parkway Boulevard North 25-300 Tri-State International *Sublease **Direct/Sublease Combined 300 Tower Parkway *1200 Lakeside Drive 26125 N Riverwoods Boulevard *150 S Saunders Road 1 Overlook Point 2355 Waukegan Road 405,039 218,169 181,807 175,545 170,165 156,156 133,000 111,327 106,495 ABSORPTION The North market ended the third quarter of with overall net absorption totaling positive 167,891 square feet. However, with the loss of large corporate users earlier this year, year-to-date net absorption remains negative 1,336,365 square feet. COLLIERS INTERNATIONAL P. 7
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE CONSTRUCTION No new construction was completed in the second quarter of in the North market and no new projects are currently underway. There are several sites available for future buildto-suit projects in the North market, including Prologis 400,000-square-foot project in Glenview, Skodun, LLC s 330,000-square-foot project in Northbrook, the John Buck Company s 147,000-square-foot property in Deerfield and Duke Realty Corporation s two proposed developments in Gurnee (400,000 square feet) and Lake Forest (170,000 square feet). RENTS NET ABSORPTION AND VACANCY NORTH OFFICE MARKET Square Footage 400,000 246,275 200,000 75,925 98,677 0 19.6% 19.4% 19.4% 19.0% (360) 18.2% -200,000-400,000-600,000-800,000-1,000,000 (968,357) -1,200,000-1,400,000-1,600,000 Source: Costar; Colliers International Research Absorption Vacancy (1,366,365) 22.9% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Vacancy Average Class A asking rate in the North market increased to $28.75 in the third quarter, up slightly from $28.67 per square foot gross during the second quarter of. ASKING GROSS RENTAL RATES NORTH OFFICE MARKET The average asking rate for all classes increased to $21.35 per square foot gross, up from $21.13 per square foot gross during the second quarter. $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Source: Costar; Colliers International Research Average INNOVATION PARK LAKE COUNTY LIBERTYVILLE, IL COLLIERS INTERNATIONAL P. 8
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE Lisle-Naperville Map or Quote MARKET INDICATORS Lisle/Naperville Q2-14 Q3-14 VACANCY 18.1% 18.4% ABSORPTION (SF) 100,750 49,313 RENTS $19.95 $19.69 INVENTORY 18,166,439 18,166,439 - VACANT SPACE BY PROPERTY TYPE 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. VACANCY The Lisle-Naperville market ended the third quarter of with 18.4 percent overall vacancy, up from 18.1 percent during the second quarter. While Class B and C properties reported an increase in vacancy, Class A properties improved, ending the third quarter with 14.3 percent vacancy, down from 14.5 percent in the second quarter. While direct vacancy in Lisle-Naperville is the healthiest of all of the suburban submarkets, sublease vacancy remains the highest of all the markets. However, it showed improvement in the third quarter as it decreased to 4.4 percent, down from 4.6 percent in the second quarter. Seven buildings in the Lisle-Naperville market can accommodate large (100,000 square feet and above) users, four of which are Class A properties. LEASE AND SALE ACTIVITY Significant lease transactions of the third quarter include Eby Brown s 49,000-square-foot lease at 1415 W. Diehl Road and Paychex North America s 47,000-square-foot extension at Naperville Woods Office Center. Both properties are located in Naperville. While there were not notable investment sales completed in the third quarter of, Naperville Corporate Center, a four-building, 420,391-square-foot property in Naperville and Corporetum Office Campus X, a 63,409-square-foot property in Lisle, were recently added to the market for sale. Class C 950,520 SF 8.5% Vacant Class A 9,590,456 SF 14.3% Vacant LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE *6200 S Route 53 360,000 263 Shuman Boulevard 354,000 Class B 7,625,463 SF 24.9% Vacant *4201 Winfield Road 2600 Lucent Lane 249,996 225,000 2400 Cabot Drive 205,633 2441 Warrenville Road *750 N Commons Boulevard 535 E Diehl Road 1245 Corporate Boulevard 148,423 112,605 83,792 82,000 *Sublease 150 S Lincolnway 77,066 COLLIERS INTERNATIONAL P. 9
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE ABSORPTION The Lisle-Naperville market ended the third quarter of with 51,437 square feet of negative net absorption, down from positive 66,051 square feet in the second quarter. Yearto-date overall net absorption measured positive 49,313 square feet compared to positive 100,750 square feet at the end of second quarter. Class A properties were the only sector to achieve positive absorption in the third quarter, adding positive 22,359 square feet. CONSTRUCTION No new construction was completed in the Lisle-Naperville market during the third quarter of and no notable construction is planned or underway. RENTS The average Class A asking rent in the Lisle- Naperville market measured $26.42 per square foot gross at the end of third quarter, down slightly from $26.47 per square foot at the end of the second quarter. The average asking rate for all classes also decreased to $19.69 per square foot gross from $19.95 at the end of second quarter. NET ABSORPTION AND VACANCY LISLE-NAPERVILLE OFFICE MARKET Square Footage 300,000 20.5% 20.3% 196,731 200,000 20.0% 59,316 100,000 40,207 49,313 19.5% 0 19.2% (100,000) 19.1% 19.0% 19.0% (200,000) (157,976) 18.7% 18.5% 18.4% (300,000) (347,743) (400,000) 18.0% Source: Costar; Colliers International Research Absorption Vacancy ASKING GROSS RENTAL RATES LISLE-NAPERVILLE OFFICE MARKET $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 Vacancy $5.00 $0.00 Source: Costar; Colliers International Research Average 1415 W. DIEHL ROAD NAPERVILLE, IL COLLIERS INTERNATIONAL P. 10
RESEARCH REPORT Q3 SUBURBAN CHICAGO RESEARCH OFFICE REPORT Q3 SUBURBAN CHICAGO OFFICE Oak Brook Map or Quote MARKET INDICATORS Oak Brook Q2-14 Q3-14 VACANCY 21.8% 22.3% YTD ABSORPTION 186,349 83,347 RENTS $19.53 $19.64 INVENTORY 23,641,711 23,641,711 - VACANT SPACE BY PROPERTY TYPE The Oak Brook market, which typically benefits from steady leasing velocity among tenants smaller than 15,000 square feet, witnessed very little activity in the third quarter of. VACANCY The Oak Brook market reported a slight increase in overall vacancy, rising to 22.3 percent from 21.8 percent in the second quarter. While direct vacancy remained flat at 20.9 percent, sublease vacancy was the primary cause of the increase, rising to 1.4 percent from 0.9 percent in the second quarter. Despite the increase in overall vacancy, Class A properties witnessed a decrease in vacancy, dropping to 20.6 percent, versus 21.1 percent in the second quarter. Five buildings in the Oak Brook market can accommodate large (100,000 square feet and above) users, with four of them being Class A. LEASE AND SALE ACTIVITY Significant lease transactions in the third quarter include Glanbia s 67,000-square-foot lease at Esplanade II and Residential Home Health s 17,000-square-foot lease at Executive Towers West. Both properties are in Downers Grove. Significant investment sales completed in the Oak Brook market during the third quarter include James Campbell Company s purchase of Highland Landmark II, a 284,278-square-foot asset in Downers Grove which sold for $62.0 million ($218.10 per square foot). In addition, Oak Brook Executive Plaza, a four-building, 394,638-square-foot asset in Oak Brook, is currently under contract for sale. Class C 1,048,354 SF 27.8% Vacant Class A 13,223,503 SF 20.6% Vacant LARGE BLOCKS AVAILABLE TOP 10 BY SQUARE FOOTAGE 700 Oakmont Lane 747 E 22nd Street 209,557 256,767 Class B 9,369,854 SF 24.0% Vacant 2655 Warrenville Road *2707 Butterfield Road 3010 Highland Parkway *3333 Finley Road 600-680 Oakmont Lane 2651 Warrenville Road 2000 S Finley Road 3050 Highland Parkway 149,211 120,156 101,487 94,257 89,634 88,107 78,300 74,319 *Sublease ABSORPTION The Oak Brook market ended the third quarter of with 103,002 square feet of negative net absorption, down from positive 395,718 square feet in the second quarter. Year-to-date absorption in the Oak Brook market totaled positive 83,347 square feet, down from the cumulative mid-year total of positive 186,349 square feet. Class B properties were the sole contributor to the negative absorption in the third quarter with negative 160,871 square feet. COLLIERS INTERNATIONAL P. 11
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE CONSTRUCTION No new construction was completed in the Oak Brook market during the third quarter of and no notable investment construction is planned or underway. However, Chamberlain Group, a division of Duchossois Group, plans to build an office development of at least 200,000 square feet on the asset it acquired from Follett Corporation in Oak Brook. Construction is not scheduled to begin until sometime in 2015. NET ABSORPTION AND VACANCY OAK BROOK OFFICE MARKET Square Footage 300,000 220,684 200,000 22.6% 100,000 83,347 0 (100,000) (24,309) 22.3% (47,377) 22.3% (200,000) (222,935) (300,000) (400,000) 21.8% 22.8% 22.6% 22.4% 22.2% 22.0% 21.8% Vacancy RENTS The current Class A average asking rent in the Oak Brook market measured $27.22 per square foot gross, increasing from $27.02 in the second quarter of. (500,000) (600,000) (608,784) (700,000) Source: Costar; Colliers International Research 21.5% Absorption 21.7% Vacancy 21.6% 21.4% The average asking rate for all classes also increased, rising to $19.64 per square foot gross, up from $19.53 per square foot gross in second quarter of. 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 Average OAK BROOK EXECUTIVE PLAZA OAK BROOK COLLIERS INTERNATIONAL P. 12
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE TOP TRANSACTIONS THIRD QUARTER SUBURBAN CHICAGO TENANT ADDRESS SUBMARKET SIZE (SF) TYPE Houghton Mifflin One Pierce Place, Itasca Northwest 106,000 New Glanbia Esplanade II, Downers Grove Oak Brook 67,000 New Eby Brown* 1415 W. Diehl Road, Naperville Lisle-Naperville 49,000 New Paychex North America* Naperville Woods Office Center, Naperville Lisle-Naperville 47,000 Extension Cyber Workplace Recovery* Kensington Business Center, Mount Prospect Northwest 43,000 Renewal Epsilon One Pierce Place, Itasca Northwest 42,500 New Convergint* 1 E. Commerce Drive, Schaumburg Northwest 30,500 New CGC Financial Services, LLC. Three Parkway North, Deerfield North 30,000 New Fresenius Kabi USA* Kemper Lakes Business Center, Long Grove North 25,000 New Ridgestone Bank Woodfield Preserve, Schaumburg Northwest 20,000 Extension CBRE Woodfield Preserve, Schaumburg Northwest 20,000 Extension Soarus* Commerce Point Tech Center, Arlington Heights Northwest 18,000 Expansion Residential Home Health Executive Towers West, Downers Grove Oak Brook 17,000 New Genex Services* Embassy Plaza, Schaumburg Northwest 16,500 Renewal Horizon Pharma* Corporate 500 Centre, Deerfield North 16,000 Expansion Fiserv* Embassy Plaza, Schaumburg Northwest 15,500 Renewal *Colliers International Transaction COLLIERS INTERNATIONAL P. 13
RESEARCH REPORT Q3 SUBURBAN CHICAGO OFFICE THIRD QUARTER OFFICE MARKET STATISTICS LOCAL STANDARDS INVENTORY VACANCY ABSORPTION CONSTRUCTION RENTS Class Bldgs Total Inventory SF Direct Vacancy Rate Sublease Vacancy Rate Vacancy Rate Current Qtr Vacancy Rate Prior Qtr Quarterly Net Absorption SF Net Absorption YTD - SF Completions Current Qtr - SF Under Construction - SF O'HARE Class A 37 8,135,296 16.2% 0.5% 16.7% 18.2% 123,875 41,548 0 0 $30.70 Class B 51 4,935,515 27.9% 0.1% 28.0% 28.8% 37,970 153,185 0 0 $18.63 Class C 9 545,520 57.7% 0.0% 57.7% 57.8% 803 (9,572) 0 0 $13.60 Subtotal 97 13,616,331 22.1% 0.3% 22.4% 23.6% 162,648 185,161 0 0 $20.98 Rents NORTHWEST Class A 86 19,995,795 16.8% 0.9% 17.7% 17.7% 6,589 482,417 0 0 $23.88 Class B 177 11,217,733 26.7% 0.4% 27.1% 28.0% 100,906 188,329 0 0 $16.99 Class C 30 1,183,643 13.2% 1.4% 14.6% 15.0% 4,420 (6,983) 0 0 $13.47 Subtotal 293 32,397,171 20.1% 0.7% 20.8% 21.2% 111,915 663,763 0 0 $18.11 NORTH Class A 108 18,313,399 21.8% 4.7% 26.6% 27.6% 184,669 (1,432,196) 0 0 $28.75 Class B 157 9,003,173 16.1% 0.2% 16.3% 16.1% (12,247) 81,794 0 0 $18.15 Class C 34 1,328,988 16.8% 1.3% 18.1% 17.8% (4,531) (15,963) 0 0 $17.14 Subtotal 299 28,645,560 19.8% 3.2% 22.9% 23.5% 167,891 (1,366,365) 0 0 $21.35 LISLE/NAPERVILLE Class A 50 9,590,456 10.6% 3.6% 14.3% 14.5% 22,359 123,037 0 0 $26.42 Class B 127 7,625,463 19.0% 5.8% 24.9% 23.9% (70,047) (75,245) 0 0 $17.31 Class C 25 950,520 8.5% 0.0% 8.5% 8.1% (3,749) 1,521 0 0 $15.35 Subtotal 202 18,166,439 14.0% 4.4% 18.4% 18.1% (51,437) 49,313 0 0 $19.69 OAK BROOK Class A 66 13,223,503 20.3% 0.3% 20.6% 21.1% 56,756 291,686 0 0 $27.22 Class B 149 9,369,854 20.8% 3.1% 24.0% 22.2% (160,871) (139,910) 0 0 $17.83 Class C 21 1,048,354 27.8% 0.0% 27.8% 27.9% 1,113 (68,429) 0 0 $13.86 Subtotal 236 23,641,711 20.9% 1.4% 22.3% 21.8% (103,002) 83,347 0 0 $19.64 SUBURBAN TOTAL Class A 347 69,258,449 17.9% 2.1% 20.0% 20.6% 394,248 (493,508) 0 0 $27.39 Class B 661 42,151,738 21.9% 1.9% 23.8% 23.7% (104,289) 208,153 0 0 $17.78 Class C 119 5,057,025 21.1% 0.7% 21.8% 21.7% (1,944) (99,426) 0 0 $14.68 Subtotal 1,127 116,467,212 19.5% 2.0% 21.5% 21.7% 288,015 (384,781) 0 0 $19.95 QUARTERLY COMPARISON AND TOTALS Q3-14 1,127 116,467,212 19.5% 2.0% 21.5% 21.7% 288,015 (384,781) 0 0 $19.95 Q2-14 1,127 116,467,212 19.7% 2.0% 21.7% 21.6% (92,890) (672,796) 0 0 $19.85 Q1-14 1,127 116,467,212 19.9% 1.7% 21.6% 21.1% (579,906) (579,906) 0 0 $19.86 Q4-13 1,127 116,467,212 19.6% 1.5% 21.1% 21.0% (89,565) 372,743 0 0 $19.98 Q3-13 1,127 116,467,212 19.5% 1.5% 21.0% 21.1% 84,665 462,308 0 0 $19.78 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 OFFICE MARKET STATISTICS INCLUDES OWNER OCCUPIED PROPERTIES Class Bldgs Total Inventory SF 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 O HARE Class A 39 8,326,903 15.9% 0.6% 16.5% 17.8% 108,923 26,596 0 180,000 Class B 63 5,632,155 25.4% 0.2% 25.6% 26.2% 29,598 143,524 0 0 Class C 17 699,617 8.9% 0.0% 8.9% 8.8% (839) (7,514) 0 0 Subtotal 119 14,658,675 19.2% 0.4% 19.6% 20.6% 137,682 162,606 0 180,000 NORTHWEST Class A 96 21,313,196 17.9% 0.8% 18.7% 18.8% 17,131 508,819 0 0 Class B 321 17,170,837 19.0% 0.2% 19.2% 20.0% 135,275 314,447 0 0 Class C 65 2,151,370 12.1% 2.5% 14.6% 15.6% 20,454 (4,694) 0 0 Subtotal 482 40,635,403 18.1% 0.7% 18.7% 19.2% 172,860 818,572 0 0 NORTH Class A 132 23,661,393 17.4% 3.3% 20.7% 21.3% 157,630 (1,363,800) 0 0 Class B 280 21,206,623 7.7% 0.1% 7.8% 7.8% 4,399 104,479 0 0 Class C 63 2,221,528 12.3% 0.8% 13.1% 13.2% 3,653 (9,606) 0 0 Subtotal 475 47,089,544 12.8% 1.7% 14.5% 14.9% 165,682 (1,268,927) 0 0 LISLE/NAPERVILLE Class A 56 10,904,691 9.4% 3.3% 12.7% 12.4% (27,036) 132,253 0 0 Class B 197 11,503,579 15.1% 3.9% 19.0% 18.4% (61,252) (78,050) 0 0 Class C 51 1,688,763 9.9% 0.0% 9.9% 9.3% (8,728) 1,203 0 0 Subtotal 304 24,097,033 12.1% 3.4% 15.5% 15.1% (97,016) 55,406 0 0 OAK BROOK Class A 69 13,906,168 19.3% 0.2% 19.5% 19.9% 57,406 292,178 0 0 Class B 224 12,964,174 16.1% 2.4% 18.5% 18.2% (31,866) (118,614) 0 0 Class C 50 1,959,603 22.4% 0.0% 22.4% 22.8% 8,502 19,624 0 0 Subtotal 343 28,829,945 18.1% 1.2% 19.2% 19.4% 34,042 193,188 0 0 TOTAL SUBURBAN OFFICE Class A 392 78,112,351 16.6% 1.8% 18.4% 18.8% 314,054 (403,954) 0 180,000 Class B 1,085 68,477,368 14.8% 1.2% 16.0% 16.2% 76,154 365,786 0 0 Class C 246 8,720,881 13.8% 0.8% 14.6% 14.9% 23,042 (987) 0 0 Subtotal 1,723 155,310,600 15.7% 1.5% 17.1% 17.4% 413,250 (39,155) 0 180,000 QUARTERLY COMPARISONS Q3-14 1,723 155,310,600 15.7% 1.5% 17.1% 17.4% 413,250 (39,155) 0 180,000 Q2-14 1,723 155,310,600 15.8% 1.6% 17.4% 17.3% 25,494 (535,130) 155,475 180,000 Q1-14 1,721 155,155,125 16.0% 1.3% 17.3% 17.0% (560,624) (560,624) 0 335,475 Q4-13 1,721 155,155,125 15.8% 1.2% 17.0% 17.0% 224,334 1,141,650 175,000 123,475 Q3-13 1,718 154,909,092 15.8% 1.2% 17.0% 17.1% 324,598 917,316 50,800 175,000 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 MARENGO Map or Quote 2 MCHENRY CRYSTAL LAKE 12 WAUCONDA 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 485 offices in 63 countries on 6 continents United States: 146 Canada: 44 Asia: 38 Australia/New Zealand: 148 Latin Ameria: 25 EMEA: 84 > $2.1 billion in annual revenue > 1.46 billion square feet under management > 15,800 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 COLLIERS INTERNATIONAL P. 16