River North 1Q 2011 Submarket Snapshot: Leasing activity subsides; Groupon HQ under contract

Demand for space in River North increased again as the direct vacancy rate fell to 13.4 percent. The submarket has been the fastest to recover from the recession and currently boasts the lowest vacancy rate in the CBD.

The submarket was home to only one deal larger than 20,000 square feet during the first quarter. Law firm Rakoczy, Molino, Mazzochi & Siwik renewed its lease and expanded to take a total of 24,000 square feet at 6 West Hubbard. Groupon moved into the 57,000 square feet it leased during the fourth quarter at 600 West Chicago. Its expansion was muted by a 61,000 square foot block that became available at 321 North Clark in which Howrey LLP vacated after the firm dissolved in March.

600 West Chicago is under contract to CommonWealth REIT for $390 million, or $249 per square foot. The sellers, a joint venture of David Werner, Jacob Gerstein & Victor Gerstein, paid just $290 million for the building at the height of the real estate bubble in 2007 when the building was 78 percent leased. Today, the building is more than 98 percent leased and has benefitted by attracting rapidly growing technology firms such as Groupon.

Once sustainable job growth spreads among all sectors, MB Real Estate expects continual increases in occupancy. The ability to attract some of Chicago’s fastest-growing tenants due to its new, attractive inventory has elevated the submarket to a more favorable position than its peers.

The borders of the River North submarket are defined as Division Street (North), Racine Avenue (West), State Street (East), and Fulton Street and the Chicago River (South). It has historically been home to small, older buildings catering to art galleries, furniture studios, and small businesses.

For our complete outlook on the Chicago Office market, please reference the MB Real Estate 1st Quarter 2011 Chicago Market Overview and Submarket Snapshots.

MBRE Market Beat - May 2011: After Successful Tests, What is the Outlook for CBD Investment Sales?

After almost no activity in 2009, Chicago's Central Business District (CBD) saw several office buildings trade hands in 2010, highlighted by the marquee sale of the one-year-old 300 North LaSalle. Year-to-date, the CBD investment sales market has fed off of last years momentum as two buildings have traded, four are under contract, and twelve are being marketed for sale.

In this month's Market Beat, MB Real Estate examines the outlook for office investment sales in Chicago's CBD. With several buildings under contract and many more seeking bids, what will investor appetite be? Click the image below to read the May 2011 Market Beat.

Prebuilt Office Space Popular with Tenants

A recent article from The New York Times discusses how landlords have enjoyed recent success by leasing out high-end, prebuilt office space to a variety of tenants. Prebuilt office space typically is leased quicker than raw space and can be reused by future tenants with relatively lower turnover costs.

MB Real Estate has several new, prebuilt spaces across our leasing portfolio. Please click here to view MB Real Estate’s Space Availability website.   

The Chicago Community Trust Relocates to Michigan Plaza

MB Real Estate announced today that The Chicago Community Trust will be moving its headquarters to Michigan Plaza, a 1.9 million square foot, two-tower office complex at 205/225 North Michigan Avenue in Chicago’s East Loop.

The 95-year-old community foundation, which is a tax-exempt public charity that accepts donations and offers grants within the Chicago community, will be relocating from nearby 111 East Wacker Drive to 24,000 square feet at 225 North Michigan. The Chicago Community Trust joins other notable foundations and associations at Michigan Plaza including The McCormick Foundation, Alzheimer’s Association and American Cancer Society.

“Michigan Plaza is pleased to welcome The Chicago Community Trust as a long-term tenant of 225 North Michigan at Michigan Plaza,” said Mark Buth, Senior Vice President and Managing Director of Leasing Services for MB Real Estate. “It is The Chicago Community Trust’s careful stewardship and commitment to our regional community that makes them such an appealing tenant for the building."

Buth and Kathleen Bertrand, vice president of Leasing Services, represented building ownership, and Lisa Davidson and Tiffany Winne of Studley represented The Chicago Community Trust.

MB Real Estate leases and manages Michigan Plaza on behalf of ownership, which is represented by Loeb Partners Realty LLC, known for its long-term investment philosophy

Northwest Submarket: Occupancy losses continue as glut of large blocks remain

The Northwest was the worst-performing submarket in Suburban Chicago as the direct vacancy climbed nearly an entire percentage point since the end of last year. Once again, the direct vacancy rate has risen to its highest level in MB Real Estate’s tracked history.

Distress was evident this quarter through a number of building transactions. The two-building, 712,000 square foot Woodfield Corporate center was foreclosed on, while the three-building, 168,000 square foot Parkway Corporate Center was acquired by Normura Credit & Capital in a deed in-lieu-of foreclosure transaction. Another distressed, but conventional, transaction occurred when Marc Realty purchased 5105 Tollview Drive in Rolling Meadows for $26 per square foot.

Adding to the submarket’s weakness is the glut of large blocks. The Northwest has 16 contiguous blocks of at least 100,000 square feet available for direct lease; more than any other submarket in Suburban Chicago. The 504,000 square foot, former Allstate Insurance campus at 51 West Higgins Road is the largest block available for lease in the Chicago MSA. With numerous options available, large tenants evaluating the Northwest submarket will continue to have the upper hand in lease negotiations for quite some time.

The Northwest submarket is located within the portions of Cook, Kane, Lake, and McHenry Counties, with major cities including Arlington Heights, Itasca, Rolling Meadows, and Schaumburg.

For our complete outlook on the Chicago Office market, please reference the MB Real Estate 1st Quarter 2011 Chicago Market Overview and Submarket Snapshots.