CPR Training Makes a Difference at MBRE During Heart Health Month

In recognition of American Heart Month in February, MB Real Estate employees were offered an on-site CPR/AED certification program.  CPR is a simple, yet effective way to empower individuals to save lives in emergencies, and MBRE was proud to offer this important training during the month of February.

Vickie Onesti (pictured left) instructs Darlene Rodriguez (pictured right) on performing CPR.

MB Real Estate’s Darlene Rodriguez (pictured above) knows all too well the importance of CPR in the workplace. Several years ago, Rodriguez suffered from sudden cardiac arrest at her desk. Another employee at the firm saw Rodriguez and immediately administered CPR while the ambulance was en route.

“CPR likely saved my life,” said Rodriguez. “I think it’s great that MB Real Estate offered training to its team. You just never know when you may need these skills and I can tell you personally, it made a world of difference for me!”  

The CPR/AED training was conducted by Vickie Onesti (pictured above), MBRE VP of Corporate Services, who is a certified instructor and the owner of One Stitch Training Company.  Please see below for some important heart health facts.

 

Lucky Number '13: Predictions from the 2013 Forecast Conference

Over 1,000 real estate professionals attended the 11^th 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.

Silicon Prairie at Work

A commonly referenced bright light amid the troubled economy is our city’s growing entrepreneurial spirit.  Our involvement in the local startup community tells us entrepreneurs, developers, marketers, venture capitalists, and consultants are joining forces to create, collaborate and thrive.  This talented group is actively generating opportunity and reinvigorating our economy; in fact, Mayor Rahm Emanuel recently announced that 21 Chicago-based technology companies have committed to creating more than 2,000 jobs for the city by 2015.

 Tools for Talent

Growing nearly as fast as our startup community is the infrastructure to foster it:

·      1871- Located in Merchandise Mart, 1871 is a co-working center for digital startups providing affordable workspaces, mentorship, potential investors, and a community of like-minded entrepreneurs.

·      Lightbank- A venture capital firm focusing on tech startups, Lightbank was founded by Eric Lefkofsky, the co-founder of Groupon.  Lightbank has raised over $1.5 billion in capital and created over $10 billion in equity value.

·      Startup Weekend- This 54-hour event is dedicated to bringing together entrepreneurs, developers, and marketers to share ideas, form teams, build products and launch startups over the course of a weekend. MB Real Estate is proud to be a Gold Sponsor of Startup Weekend.

·      Dev Bootcamp- This tech training program offers a nine-week intensive training program in web development and is coming to Chicago this spring (read more).  Originating in San Francisco, Dev Bootcamp boasts a 95 percent placement rate with average starting salaries of $85,000.

·      World Business Chicago- Assuring that Chicago is the ultimate global business destination; World Business Chicago is a not-for-profit that helps companies navigate the relocation and expansion process. 

·      Tech Infrastructure- Chicago has the third largest fiber optic capacity of any metro area in the country and is home to three of the world’s largest data centers (read more).  Combined with the city’s free public wireless internet initiatives, Chicago has become one of the most digital cities in the world.

·      Talent Attraction- With several of the nation’s top-ranked universities located in Chicago as well as additional initiatives to draw tech-talent to Chicago, such as the ChicagoNEXT Council and Mayor Emanuel’s recruiting mission at the University of Illinois, Chicago is becoming more and more enticing to talented recent grads.

Start-Up Hotspots

So, where is all the magic happening?  Here is our list of the top five startup office spaces according to the criteria below (ranked 1-5, 5 being the highest):

 

Criteria

1.    Affordability- Can a newly established company afford the space?

2.    Community- Are there other creative tenants in the building that can form a support network?

3.    Growth- Does the building have enough vacancy or flexible options to allow for growth?

4.    Landlord- Is the landlord too risk averse for a startup? Will they be friendly to the unique needs of a startup?

For more information about Chicago as an emerging tech hub, click here.

For real estate tips for startups, read here.

For questions/comments or more information about office spaces for startups, please contact Craig McCaw at cmcaw@mbres.com or 312.558.3830.

The Triple Bottom Line: People, Planet, Profit

“I am the Lorax. I speak for the trees. I speak
for the trees, for the trees have no tongues.” 
-Dr. Suess

While “speaking for the trees” may suggest only genuine altruism, it is not inconsistent with the idea of the triple bottom line: people, planet, profit. Sustainability initiatives have a positive impact on all three of these things and small changes can mean a big impact for more than just the environment.

By the end of 2011, the nearly 16,500 ENERGY STAR certified buildings across America helped to save nearly $2.3 billion in annual utility bills and prevented greenhouse gas emissions equal to the emissions from the annual energy use of more than 1.5 million homes. [See Data] In addition to the environmental benefits and cost-savings, ENERGY STAR and LEED certified buildings create more productive and healthy work environments for employees, give the building a competitive advantage in leasing and tenant retention, and create positive press and branding opportunities.

 

What the City is Doing
 

Chicago LEEDs the Way

 

Chicago is ranked as #4 on the list of U.S. cities with the highest number of ENERGYSTAR certified buildings.

• Sustainable Chicago 2015: Chicago has implemented Sustainable Chicago 2015, an initiative that seeks to create green jobs, upgrade infrastructure, and improve transportation, waste, and water programs by 2015.
• Retrofit Chicago: A component of Sustainable Chicago 2015 endorsed by the US Department of Energy’s Better Buildings Challenge, Retrofit Chicago offers energy efficiency approaches for both municipal and commercial buildings:
• Municipal Buildings: Chicago Infrastructure Trust is a public-private partnership which leverages private investment to fund municipal retrofit initiatives that will reduce energy costs by more than $20 million annually.
• Commercial Buildings: Large commercial spaces may voluntarily join the Commercial Buildings Initiative with a goal of reducing energy usage by 20% within 5 years.
  

What You Can Do

Tenant Dependent

In conjunction with macro efforts to make buildings themselves more efficient, building owners and managers can help individual tenants to adopt impactful green habits. See the pictograph below for a snapshot of some of those green habits.  All MB Real Estate managed buildings have access to our Best Environmental Practices guide which offers information and tips on adopting green workplace policies.  To get the comprehensive guide, contact Natalie Stanley at nstanley@mbres.com. 

Simple green practices you can adopt in your office now to save trees and money.

 

What Gets Measured, Gets Managed

Sustainability reporting is a key way to gain support for green programs and to publicize their success. An example of this is the recycling data below, which is sent out to MBRE tenants via building newsletters. The quantified visual representation of tenant efforts keep sustainability top-of-mind for tenants of MBRE managed buildings.

Recycling accomplishments are celebrated via “Going Green” announcements.

 

 

What We are Doing
 

Our Commitment to a Greener Workplace

• MBRE employs 16 LEED certified professionals.
• MBRE manages:
• 8 ENERGYSTAR certified buildings totaling 6 million SF
• 5 LEED certified buildings totaling 5.5 million SF
• MBRE managed buildings participate in both the municipal and commercial Retrofit Chicago programs.
• MBRE’s Sustainable Solutions Committee engages a task force of green-minded innovators to develop and implement internal and external eco-solutions.
• Read about our green initiatives in the press:
• Geothermal System Helps Astellas' HQ for the Americas Achieve LEED Gold 
• Michigan Plaza Achieves LEED-EB Gold
• Michigan Plaza Achieves LEED-EB Gold Certification
• MB Real Estate Launches New Sustainability Guides
• MB Real Estate Teams with Wirtz Realty to Join Chicago's Retrofit Chicago: Commercial Buildings Initiative
• The Richard J. Daley Center Earns LEED Certification
• Please contact MB Real Estate Director of Sustainability Natalie Stanley (nstanley@mbres.com or 312.558.3852) for questions or comments.
• Hear her speak about Green Cleaning.

Welcome to Our Team: Jason Kleiman & Anwar Ali

MB Real Estate is pleased to welcome Jason Kleiman and Anwar Ali to our Corporate Services team.  While new to MBRE, Kleiman and Ali are no strangers to the commercial real estate market. We recently sat down with the “dynamic duo” to see what makes them tick.

Jason Kleiman

Senior Vice President | 312.558.3851 | JKleiman@mbres.com

How did you get your start in Commercial Real Estate?

I actually began my career in sales with an office equipment company. Then, during the dot-com era, like many other eager professionals I moved to LA and worked for a tech startup. It was here where I had my first taste of commercial real estate and assisted with an office lease transaction.  As I became more familiar with commercial real estate, I decided to take my new found knowledge back to Chicago and the rest as they say is history.   I’ve now been in commercial real estate for more than 12 years!

What’s the most interesting deal you have done?

The most interesting deal I worked on was both large scale and challenging. I worked on a national portfolio for a company after a merger.  They had offices in 250 markets and my group was tasked to  consolidate offices in 100 of those markets.  The biggest challenge…the financial terms of the merger required the deals to be completed within 12 months.  It was a process of determining whether to combine offices, sublease spaces, lease a new space, expand, or some combination thereof.  It was like playing Tetris on a national scale...with a time limit!

Why did you choose to join MB Real Estate?

I’ve known the MB Real Estate team for over a decade and it was the professionals that initially attracted me to the company. It’s a very team oriented environment where everyone comes together to  help each other succeed.  I couldn’t wait to join a team like that.

Tell us about yourself.

I’m a wannabe athlete from a family of super athletes.  My first language was French and I lived in Paris until I was 7 years old while my dad studied music composition.  I play the trombone – although not very well.  I love living in the city with my wife.  We are expecting our second child any day now!

What advice would you give to a new broker? How have you been successful?

The brokerage world can be tough.  I have found my success by teaming up with the right people as well as being patient and positive.  The value of relationships should never be undervalued. Building relationships with my clients is the thing I enjoy most about my job and the reason I’m still in the game today.

Anwar Ali

Senior Associate | 312.558.3854 | AAli@mbres.com

How did you get your start in commercial real estate?

I began my career at a boutique tenant rep firm in Chicago in 2008. It was probably about the worst time to enter the business due to the sinking economy and real estate crisis. I’m not afraid of a challenge though,  and in that environment, I learned pretty quickly about the value of hard work and tenacity, so I’m grateful for the experience. It certainly framed my professional philosophies and values.

Tell us about a challenging project you worked on.

I worked on a deal last year for a client that could no longer afford the space they had leased.  The transaction involved a lot of moving parts, some creative negotiation and great timing.  Ultimately I secured them a space in the same building and significantly reduce their costs.  It all goes back to having the drive to work through and around the challenges that come your way.

Any interesting facts about you? What makes you unique?

I’m probably about the only person in this city actually choosing to live in a fourth floor walkup. It is great exercise at least! As for other interesting facts, well, I went to the Czech Republic and Poland to play hockey when I was 12 years old.  The opposing team was about 4 years older than me, so it was another one of those challenging experiences.

Tell us about your outlook on work.

Positivity and persistence are key.  I’ve learned that the outlook you maintain directly affects the outcome, so for me, optimism is a huge factor in success.  I strive to be consistently optimistic and confident…I’m not afraid of a good challenge.

Chicago's Hiring Outlook Sees Improvement; New Risks and Opportunities Shape the Recovery

MB Real Estate has released the 2nd Quarter 2012 Chicago Market Overview, a quarterly report that tracks trends, analyzes data, and provides you with our forecast for the Chicago CBD and Suburban office markets.

CBD Highlights:

• Occupancy increased by 105,000 square feet. Improved demand for Class A and B buildings was muted by weakened demand for Class C.
• Direct vacancy fell 10 basis points to 15.7 percent. Google is in advanced negotiations to bring a 500,000 square foot new requirement to the CBD.
• At the end of this year, Hines plans to break ground on a 45-story, 900,000 square foot tower at 444 West Lake.
• A slow recovery is expected as new job announcements compete against tenants eliminating underutilized space.

Suburban Highlights:

• Occupancy increased by 509,000 square feet as each submarket experienced positive net absorption.
• Direct vacancy fell 50 basis points, but remained at a significantly high 23.0 percent.
• Class A asking rental rates are down 3.1 percent year-over-year, which has likely contributed to positive net absorption.
• Speculative construction is, and will remain, at a standstill.
• Vacancy is expected to remain elevated in the near term as the Suburbs lack the demand drivers seen in the CBD.

In addition to the Chicago Market Overview, please reference our in-depth 2nd Quarter 2012 Submarket Snapshots, which include highlights and analysis of each of the Chicago submarkets that MB Real Estate tracks.

UPDATE: Direct Vacancy Drops as a New Tower is Announced

MB Real Estate has released the June 2012 Marketbeat research report.

Preview:
Over the past three months, the MB Real Estate (MBRE) Index experienced 128,000 square feet of positive absorption. Demand for Class A space increased in the CBD’s newest buildings for the first time since June 2011. This led the MBRE Index direct vacancy rate to fall to 10.2 percent. While direct vacancy is slightly greater than the 9.9 percent level seen a year ago, the market for premier, Class A space in the CBD remains tight.

The overall CBD, however, experienced negative demand in the first quarter with direct vacancy reaching 15.8 percent. This was largely due to large occupancy losses in Class C buildings. Thus, the spread in vacancy rates between the MBRE Index and overall CBD has risen to 5.6 percent, the second largest disparity in tracked history. In the past, the MBRE Index has been a leading indicator for performance in the overall market, and therefore, we expect direct vacancy in the overall CBD to decline within the next two quarters.


Read the Full PDF Version
Read GlobeSt.com Exclusive-Tight Core Vacancy Proves Chicago Class A Desire; featuring MBRE Research data and Andy Davidson, EVP Corporate Services.

Startup Weekend Chicago: MBRE Entrepreneurship in Action

The MB Real Estate Corporate Services and Tenant Advisory group had the privilege of sponsoring the Chicago Startup Weekend this past weekend and participating as entrepreneurs.  The 54-hour event was held at TechNexus, a “clubhouse” for technology leaders and entrepreneurs.  With a focus on bringing people together with different skillsets- primarily software developers, graphics designers, and business people- the mission of the weekend was to develop a web or mobile application which can form the basis of a credible business. 

MBRE brokers Jay Beadle, Boris Yelyashov, David Burkards, Craig McCaw, and Christine Torres were enthusiastic about bringing their entrepreneurial and innovative real estate background to the start-up arena.  Resulting in a pipeline of innovative new potential ventures, each concept was judged according to business model, customer validation, and execution.  Boris Yelyashov (VP, Corporate Services) contributed to team ExerSocial (pictured above), which was awarded 2^nd Place for their idea.

By merging the expertise of entrepreneurs and real estate professionals, the MBRE Corporate Services group has developed a guide for real estate issues and solutions faced by start-ups:

MBRE Index Vacancy Rates Increase as More Companies Look To Sublet Excess Space

The total amount of direct vacant space in the MB Real Estate (MBRE) Index increased by just 14,000 square feet in the past three months, causing its direct vacancy rate to rise slightly to 10.7 percent. This marks the second consecutive quarter in which occupancy remained virtually unchanged. The direct vacancy rate was 10.5 percent one year ago in MBRE Index buildings, which suggests that demand has leveled off for the CBD’s 30 newest buildings.

MBRE INDEX DIRECT VACANCY STABLE, SPREAD NARROWS

While direct vacancy has stabilized in the MBRE Index, the overall CBD experienced 457,000 square feet of positive net absorption in the fourth quarter of 2011. This caused the CBD’s direct vacancy rate to drop 30 basis points to 15.4 percent. The spread between the MBRE Index and CBD direct vacancy rates fell to 4.7 percent, which is the lowest level seen since September 2010. This was the result of significant positive absorption within Class B and older Class A buildings. The MBRE Index continues to be a leading indicator of the overall market. While the bulk of positive absorption in the CBD was concentrated in MBRE Index buildings from mid-2010 to mid-2011, Class B and older Class A buildings have outperformed the rest of the market from mid-2011 through the beginning of this year.

AMOUNT OF DIRECT AVAILABLE LARGE BLOCKS FALLS, BUT AVAILABLE SUBLEASE SPACE SURGES

In March 2011 there were 15 blocks of direct, available space greater than 50,000 square feet within MBRE Index buildings. Today, only 11 of such blocks are available. Notable transactions removing large blocks from the market include Marsh taking 120,000 square feet at 540 West Madison and McKinsey leasing 105,000 square feet at 300 East Randolph. While the number of direct, large blocks has fallen within the MBRE Index, total direct availability has been relatively constant the past six months.

However, the amount of available sublease space in MBRE Index buildings has risen dramatically, with a net increase of 179,000 square feet over the past three months. Included in this increase are four large blocks among three tenants. Citadel is marketing 128,622 square feet on the 7th and 8th floors and 64,125 square feet on the 10th floor at 131 South Dearborn. Merrill Lynch is seeking a subtenant for 70,765 square feet at 1 North Wacker. Hostway Corporation, whose lease runs through mid-2023, is marketing 52,660 square feet of office and colocation space at 100 North Riverside. The addition of large sublease blocks impacts the market because these spaces are typically rented at a discount and apply downward pressure on all rental rates.

The MBRE Index total vacancy rate, which includes available sublease space, is currently 12.5 percent, which is up from 12.0 percent one year ago. On the other hand, the total vacancy rate of the entire CBD has fallen 120 basis points to 17.6 percent since last year. This further demonstrates that the flight-to-quality trend has continued to filter down throughout the overall market.

Click here for the PDF version of this document

West Loop: Most desired submarket adds to occupancy

The West Loop continues to lead the rest of the CBD, gaining 732,000 square feet of occupancy in 2011. Its strong performance has been expected as its location is the most desirable for executives. With the inclusion of the two largest commuter train stations and relatively easy access from the CTA lines, it is the most convenient submarket for the majority of commuters. Class A performance was especially solid during the quarter, as the space Wells Fargo has leased at 10 & 30 South Wacker has been removed from direct availability. With this, the Class B segment has suffered as it will be vacating space at several Class B buildings, but the net result is positive.

While not the most active submarket in terms of leasing activity, the West Loop is likely to see more benefits to occupancy as a result of this quarter's deals. DeVry signed a 77,000 square foot lease at 300 South Riverside and will be moving employees from Suburban Chicago. West Monroe Partners' 43,000 square foot lease also represents new demand for the submarket. GE Capital is expanding by 79,000 square feet in its renewal at 500 West Monroe.

Investment sales that closed during the quarter were on both ends of the spectrum. 250 South Wacker was purchased by Credit Suisse for $91 million ($371 per square foot) while 400 South Jefferson was purchased by Sterling Bay for $15 million ($49 per square foot). Sterling Bay will upgrade 400 South Jefferson to accommodate Sara Lee's new CBD headquarters by 2013. Sara Lee will be vacating its East-West Suburban Chicago headquarters to take advantage of the young labor pool in the CBD.

The West Loop’s borders are defined as the Chicago River (North), I-94/I-90 (West), Wells Street (East), and Van Buren Street (South).

For more information on the Chicago office market, please reference our 4th Quarter 2011 Chicago Market Overview and Submarket Snapshots.

TIF: Promoting Property Redevelopment and Employment Growth in Chicago

What is Tax Increment Financing (TIF)?

The City of Chicago is one of many cities that utilizes a public and private fundraising program called Tax Increment Financing (TIF) to subsidize redevelopment and infrastructure improvements across designated areas. Funds are normally allocated in union with a private development project, such as a company relocating its headquarters to the city. In order for projects to receive funding, minimum requirements (e.g. timelines for redevelopment, jobs created, and jobs retained) must be fulfilled. Each district is formed with specific goals to help improve real estate values. Currently, there are 163 TIF districts covering 30% of the City’s physical area and 10% of its property tax base. The overarching goal of the program is to attract new businesses and expand current companies to create more employment opportunities for residents.

How are funds raised?

Once a certain area is classified as a TIF district, a base amount is set by aggregating the amount of property tax generated. The City of Chicago uses a method of Equalized Assessed Valuation (EAV) over a period of 23 years. The growth in property tax over the base amount results in funds that can be used for each district’s redevelopment efforts.  These funds can be applied for approved projects as they are accumulated  or to pay back bonds issued for upfront costs. At the end of 23 years, the increase over the base amount is distributed among Chicago’s taxing bodies based on property values.

Recently Approved TIF Legislation

Three firms recently received significant TIF funding as each committed to moving its corporate headquarters to Chicago. The retail and food service divisions of Sara Lee Corporation was approved to receive $5.0 to $6.5 million when they relocate its offices from Downers Grove to a redeveloped building at 400 South Jefferson. Although not finalized, Sara Lee is in discussions to occupy between 200,000 and 220,000 square feet. The company will relocate 500 full-time positions from Downers Grove and plans to add 150 new full-time over the next four years. Essentially, Sara Lee receives $10,000 per job created in Chicago and must retain at least 500 positions over the next 10 years in order to keep its TIF funding. The reimbursement will help offset the approximately $30 million cost of redeveloping and building out the space.

Coyote Logistics, one of the fastest growing companies in the nation, is in the process of securing TIF funding for relocating its headquarters from Lake Forest to the Green Exchange building on Chicago’s near northwest side.  The approved funds would partially reimburse the cost to build its new state-of-the-art office space. In return, Coyote Logistics agreed to relocate all full time jobs as well as create hundreds of new jobs in the first two years of the lease. Last month the company announced plans to create at least 400 new positions in 2012. MB Real Estate represented Coyote Logistics in lease negotiations and managed the construction of its new offices.

A steel company was recently approved for TIF funding for their corporate relocation from Ohio. The company leased 29,000 square feet at 227 West Monroe and was approved for TIF funds to help offset buildout costs, pay off its existing lease in Ohio, and help aid in the higher real estate cost of doubling the size of its headquarters. To receive TIF funding, the company must retain the number of full-time employees currently at two production facilities in Chicago. Of the employees currently based in Chicago, 50 high-level executives would be moved to the new corporate headquarters. An additional 50 positions must be added, either from Ohio or as new hires, within the next four years. MB Real Estate represented the company in their lease negotiations.

Recent Projects Returning TIF Funds

While beneficial, some firms have not been able to capitalize on TIF funding. Three large companies recently returned or rejected a combined $34 million in previously approved TIF funds. CME Group chose not to accept $15 million for headquarter construction work after settling tax issues with the state. CNA group was approved to receive $13.7 million to renovate its headquarters. However in 2010, the group fell short of the 2,700 employees needed to receive TIF funding, prompting the group to return funds to the local taxing districts. Similarly, Bank of America returned $5.4 million dollars last November to the River West TIF District after failing to retain 2,700 employees. The company had been awarded funding for ABN Amro and the redevelopment of 540 West Madison.

Outlook

With the initiatives put in place by Mayor Emanuel, Chicago’s TIF program is poised to become more efficient and effective in creating and retaining jobs for Chicago. In the past few years the economy had kept firms such as CNA and Bank of America from capitalizing. But in less than a year in office, Emanuel has shown a commitment to bringing more jobs to the city, with more than 5,500 new jobs announced among 11 companies.  Companies approved for TIF funding will be more closely monitored to make sure they are in full compliance with their obligations. Companies considering expanding within or relocating to Chicago should be cognizant of the TIF program and the benefits it can provide in retaining and attracting a talented workforce.

East-West Submarket Snapshot: Rebound continues, but direct vacancy is still more than 20 percent of inventory

The East-West submarket led demand within Suburban Chicago through 2011. As the most central of the submarkets, with executive housing stretching from Hinsdale to Naperville and direct interstate access to the entire MSA, the submarket has mounted a rebound.

The “flight-to-quality” trend is most apparent in the East-West submarket. This has created an increase in occupancy of nearly 300,000 square feet in Class A, while Class B lost more than 150,000 square feet of occupancy. Class A direct gross asking rates rose by 4 percent this year, indicative of landlords’ increased pricing power with improved conditions.

Arboretum Lakes West, located at 1011 Warrenville Road in Lisle, has been particularly active. Last quarter, Sun Coke Energy occupied 40,000 square feet. This quarter, three lease transactions increased occupancy by nearly 64,000 square feet.

Only two large transactions occurred during the quarter. While one company contracted, another expanded. CA Technologies will be downsizing by 17,000 square feet and relocating within Lisle, moving from 2400 Cabot Drive to 83,000 square feet at the Central Park of Lisle II at 3333 Warrenville Road. On the other hand, Comcast renewed for eight years and expanded by 39,000 square feet at 2001 York Road. The building, which was hit with a foreclosure suit in October 2011, will be 90 percent leased. However, Comcast’s likely reduced rents under the new lease may still force owner John Buck to give the building back to its lender.

The East-West submarket encompasses Cook, DuPage, Kane, Kendall, and Will Counties, with major cities including Downers Grove, Lisle, Naperville, and Oak Brook.

For more information on the Chicago office market, please reference our 4th Quarter 2011 Chicago Market Overview and Submarket Snapshots.

Central Loop Snapshot: Pricing power returns to Class A landlords

The Central Loop continues to add occupancy as the recovery spreads eastward from the West Loop. Positive absorption of 215,000 square feet during the quarter led to a yearly occupancy increase. Direct vacancy now stands at 13.8 percent, while Class A vacancy is 9.6 percent. By surpassing the crucial 10 percent equilibrium threshold, Class A Central Loop landlords will be able to be more demanding with lease economics.

In the Class A segment, U.S. Bank’s move into 65,000 square feet at 190 South LaSalle was counteracted by Claro Group and Sara Lee vacating 70 West Madison to move to other submarkets. Class B occupancy grew by the largest margin driven by move-ins at 120 South LaSalle. Leases commenced for Private Bank and the Legal Assistance Foundation for 57,000 square feet and 56,000 square feet, respectively.

One new large contiguous block of sublease space became available during the quarter. Accenture is listing 61,000 square feet at 180 North LaSalle for sublease. Additionally, a new large block of direct availability was listed during the quarter at 222 North LaSalle. Although not available for occupancy until June 2014, its nearly 200,000 square foot size makes it a viable option for large tenants that have faced limited options.

The sale of the office portion of the Block 37 development at 22 West Washington represented the highest per square foot transaction of the CBD during the quarter, reaching $418 per square foot. Additionally, the sale of 35 West Wacker by Piedmont to UBS Realty equated to $346 per square foot. These types of sales demonstrate the robust investment activity for Chicago’s CBD.

The Central Loop’s boundaries are the Chicago River (North), Wells Street (West), State Street (East), and Van Buren Street (South).

For more information on the Chicago office market, please reference our 4th Quarter 2011 Chicago Market Overview and Submarket Snapshots.

MB Real Estate Releases 4th Quarter 2011 Chicago Market Overview

MB Real Estate has released our 4th Quarter 2011 Chicago Market Overview, a quarterly report that tracks trends, analyzes data, and provides you with our forecast for the Chicago CBD and Suburban office markets.

Despite sluggish job growth, the CBD experienced over 456,000 square feet of positive absorption during the quarter. Demand was bolstered by tenants taking advantage of attractive lease terms earlier in the year and are now occupying new space. However, previous employment losses have yet to fully materialize and may still work their way through the market.

Suburban Chicago experienced slight positive absorption in Class A buildings with relatively no net change in Class B and C. Vacancy rates continue to hover near historically high levels. The market continues to lack the demand drivers that the CBD has benefitted from and a glut of direct and sublease space is expected to remain.
   
In addition to the Chicago Market Overview, please reference our in-depth 4th Quarter 2011 Submarket Snapshots, which include highlights and analysis of each of the Chicago submarkets that MB Real Estate tracks.

3Q 2011 East Loop Snapshot: Robust Leasing Activity Continues, But Occupancy Remains Unchanged

After a strong second quarter, the East Loop experienced little net change in occupancy. Several tenants within the East Loop have leveraged soft market conditions to upgrade to Class A buildings. However, such tenants are from Class B or C buildings within the East Loop and do not generate new demand for the overall submarket.

The most notable example is energy company Integrys, who will vacate 196,000 square feet at 130 East Randolph and consolidate operations into 150,000 square feet at the Class A, 200 East Randolph. While this move strengthens the Class A segment, the vacancy rate for Class B buildings will rise, and another large block will hit the market. However, Class B will see some relief when OWP&P Cannon Design occupies 61,000 square feet at 205|225 North Michigan Avenue, as it relocates from 111 West Washington in the Central Loop.

CommonWealth REIT, who entered the East Loop by purchasing 233 North Michigan last quarter, has agreed to purchase 111 East Wacker for $151 million. The new owners face with the challenge of leasing 200,000 square feet that will become available next year.

The East Loop continues to have an uphill battle in gaining occupancy levels that match its competitive submarkets. Of the nine available, contiguous blocks greater than 100,000 square feet, five represent space that will be vacated in 2012, totaling nearly 1 million square feet. Also, short-term leases for Groupon and Obama for America are set to expire next year. Considering large block availability across the CBD and speculation regarding a new office development, it remains likely that the East Loop will continue to have a higher vacancy rate compared to the rest of the CBD.

The East Loop is bordered by the Chicago River (North), State Street (West), Lake Shore Drive (East), and Van Buren Street (South). It is inhabited mostly by advertising and media firms and corporate tenants. 

For more information regarding the Chicago office market, please reference MB Real Estate's 3rd Quarter 2011 Chicago Market Overview and Submarket Snapshots.