MB Real Estate Releases Third Quarter 2010 Chicago Market Overview & Submarket Snapshots

MB Real Estate has released our 3rd Quarter 2010 Chicago Market Overview, a quarterly report that tracks trends, analyzes data, and provides you with our forecast for the Chicago CBD and Suburban Markets.

Vacancy increased again, albeit at its continued slow pace. While there are bright spots in the sublease market and in the city’s ability to attract new tenants, the severe and ongoing job losses have not yet fully materialized in tenants’ demand for space. Occupancy will need to decline further to align with employment.

In addition to the Chicago Market Overview, please reference our in-depth 3rd Quarter 2010 Submarket Snapshots, which include highlights and analysis of each of the Chicago submarkets that MB Real Estate tracks.

MBRE Index Update - Vacancy Rates for Newest Buildings Decline

Please click the link below to read this month's Market Beat: a monthly report created by MB Real Estate. This month we re-visit the MBRE Index, which tracks the performance of the 30 newest buildings greater than 300,000 square feet in Chicago's CBD. The MBRE Index continued to outperform the overall CBD by posting a 0.8% decrease in direct vacancy from the previous quarter. Read the report to find out what this signals for the Chicago office market.

A Capital Constrained Environment: Why Have Deal Terms Stayed Steadier Than Expected?

Click the image below to read the newest Market Beat: A monthly report created by MB Real Estate

O'Hare Submarket: Highest vacancy rate in the suburbs, but performer in second quarter

The O’Hare submarket’s vacancy rate has been elevated since 2002 and continues to top the Suburban submarkets at 27.5 percent. Proximity to one of the busiest airports in the nation and excellent highway access make the O’Hare submarket appealing to office tenants, but a surplus of inventory has plagued the area. However recent figures and events suggest that demand may be stabilizing.



With roughly 132,000 square feet in positive absorption, O’Hare was the only suburban submarket that experienced increased demand in the second quarter. Each building class saw a slight increase in occupancy. Tenants who moved into significant amounts of space during the second quarter include Deerfield Capital Management (25,470 square feet at One O’Hare Centre) and U.S. Foodservice (23,841 square feet at 6133 North River Road).

Early in the third quarter, U.S. Cellular renewed their lease at Citicorp Plaza and expanded from 197,506 to 212,000 square feet Retaining large clients such as U.S. Cellular is crucial to the health of the submarket, as tenants with similar space requirements have recently left the suburbs to take advantage of falling rental rates in downtown Chicago.

Adding to the supply of office space during the second quarter was the delivery of the 119,000 square foot Rosemont Corporate Center. Two tenants currently occupy the building: Cisco Systems is leasing 81,000 square feet while Skyline Advanced Technology Services is 7,000 square feet. The entire fourth floor remains available for lease.

Although the general outlook remains bleak the O’Hare submarket will benefit from a lack of new construction. For positive absorption to continue, landlords will need to offer aggressive lease packages to attract new tenants. Unfortunately with more and more businesses staying put, it is unlikely that the submarket can generate enough demand in the short-term to significantly increase occupancy.

For MB Real Estate's Outlook on the O'Hare submarket and the rest of the Chicago Market reference our Submarket Snapshots, our companion piece to the MB Real Estate Chicago Market Overview.

River North: Demand increases, 300 N. LaSalle under contract

The River North Submarket experienced the greatest increase in demand as the direct vacancy rate dropped from 16.4 percent just a quarter ago to 14.6 percent. While last quarter’s positive absorption of nearly 235,000 square feet is a promising sign, the submarket is very volatile.

Tenants moved their offices from other submarkets and into River North reducing vacant office space. The recently constructed properties continued to gain occupancy. Littler Mendelson occupied 36,000 square feet at 321 North Clark after moving from 200 North LaSalle in the Central Loop. Intercontinental Exchange also migrated from the Central Loop and moved into 24,000 square feet at 353 North Clark. Older, but renovated, 350 West Mart also saw significant leasing activity. At a later date, Getco will move into 100,000 square feet there when they relocate from 141 West Jackson.

The biggest story in the River North Submarket last quarter was the pending sale of 300 North LaSalle. KBS Realty Advisors agreed to purchase the one-year-old building from Hines Interests L.P. for approximately $655 million, roughly $503 per square foot, a record. It is Chicago’s first example of high demand for trophy buildings in global cities. With nearby 353 North Clark now on the market, further interest will be tested.

For MB Real Estate's Outlook on the River North submarket and the rest of the Chicago Market reference our Submarket Snapshots, our companion piece to the MB Real Estate Chicago Market Overview.

Up Next: O’Hare Submarket

MB Real Estate releases Second Quarter 2010 Chicago Market Overview & Submarket Snapshots

MB Real Estate is excited to release our Second Quarter 2010 Chicago Market Overview. The report tracks historical data, analyzes trends, and provides a comprehensive outlook for the Chicago Central Business District (CBD) and Suburban markets.

In the second quarter, Chicago’s CBD experienced roughly 130,000 square feet in negative absorption elevating its direct vacancy rate to 16.1 percent. In the Suburban market, the direct vacancy rate rose to 22.4 percent as a result of over 250,000 square feet in negative absorption. The Chicago Market Overview analyzes the job market, how it has impacted office demand, and how it will impact the office forecast. Click on the image below to view the report.

Also be sure to read our Second Quarter 2010 Chicago Submarket Snapshots, an in-depth analysis and review of the major events that took in each of the submarkets the MB Real Estate tracks. As expected, a majority of Chicago’s CBD and Suburban submarkets saw reduced leasing activity and decreases in occupancy. Click on the image below to learn about the performance of each submarket and the respective impact each had on the overall market.

Up Next: Chicago’s River North Submarket

West Loop: High-end space retains demand; UBS cuts space

During the first quarter demand for office space continued to fall in the CBD’s largest submarket as the direct vacancy rate reached 17.0 percent, approaching its historical high. Populated primarily with financial service firms, insurance companies, law firms, and corporate headquarters, the West Loop has been the most desirable submarket due to its proximity to public transportation and stock of some of the city’s largest and newest buildings.

The magnitude of negative absorption surpassed all other submarkets, but since the West Loop is the largest, it was not severe on a percentage basis. While Class A buildings were basically stable, the West Loop’s B and C experienced negative demand.

Five tenants took advantage of the soft market by signing new large deals, leases 20,000 square feet or greater, at Class A properties in the West Loop.

In addition, the 1.34 million square foot 1 N. Wacker renewed the lease of its namesake tenant, UBS, to a 10-year lease for 393,000 square feet. However this involves a 59,000 square foot reduction from their current space.

As companies, such as UBS, look to consolidate their office space after job cuts and slowdowns in hiring, demand will continue its decline.

For MB Real Estate's Outlook on the West Loop and the rest of the Chicago Market reference our Submarket Snapshots, our new companion piece to the MB Real Estate Chicago Market Overview.

Up Next: MB Real Estate releases its second quarter Chicago Market Overview and Submarket Snapshots.