Over 1,000 real estate professionals attended the 11th
annual Commercial Real Estate Forecast Conference last month to hear the
predictions for 2013 from the industry’s top real estate pros.
 |
| Panelists (from left to right): Joe Cosenza (The Inland Group Inc.), Andrew Davidson (MB Real Estate), Steve Schnur (Duke), Dan Arends (Colliers), John Picchiotti (NAI Hiffman), and Bruce Miller (Jones Lang LaSalle) |
Beginning with a fireside chat featuring Christopher
Kennedy, attendees learned the history of the Merchandise Mart and the progress
of the Wolf Point development as well as Kennedy’s outlook for the future. Next up was the “Big Picture in Commercial
Real Estate” panel which included MB Real Estate’s Andrew Davidson and several other
commercial and industrial real estate execs.
The panel discussed the 40 percent increase in sales volume from 2011 to
2012, also noting the lack of new construction.
Panelists predicted more spec development taking place in 2013, cap
rates continuing to compress and an increase in rental rates. Speakers presented a generally positive outlook
and predicted growth, albeit slow.
Our own market research team forecasts the following for
2013:
·
Decreasing vacancy
o
Direct vacancy fell 30 basis points to 15.1
percent in Q4 2012 for the second consecutive quarter, and each building class
saw a decline in vacancy.
o
River North, Central Loop, and West Loop
submarkets outperformed the overall market again, with only the South Loop
experiencing negative absorption.
·
Stagnant Supply
o
No new developments were announced this quarter.
o
Hines has delayed its ground breaking on a
45-story, 900,000 square foot tower at 444 West Lake until the first quarter of
2013. Completion is still slated for mid-2016.
·
Continued Downtown Relocations
o
Maximus, Presence Health, and Zones aare three
newly-announced companies that will relocate to at least 20,000 square feet
each in the CBD.
o
The trend is expected to continue as the City of
Chicago works to attract more companies downtown and employers seek talented recent
grads that prefer to work downtown.
·
Rental rates are increasing and concessions are
decreasing
o
Class A rental rates for new transactions
increased by 1 percent in Q4 2012 on a year-over-year basis.
o
Q4 2012 average tenant improvement allowances
fell 8.5 percent while average rent abatement declined by 7.1 percent.
·
Risks to Growth
o
Many offices have underutilized space which
could slightly offset the increased demand resulting from hiring growth.
o
Decreasing Space Requirements:
§
Changing workspace trends such as hoteling,
telecommuting and trading private offices for collaborative space are causing a
shrinking space requirement per employee.
§
Digital archiving and cloud computing is causing
reduced space needs.
o
Increased corporate tax rates in Illinois and
increased national tax rates discourage corporate expansion.
o
Residual effects of the Eurozone crisis create a
cautionary environment.
To read more, please see our Q4 2012 Chicago Market Overview
and February MarketBeat here.
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