Suburban Chicago Office Vacancy Rate Drops

22.6% office vacancy rate for suburban Chicago in the 4th quarter is down from 23.4% in the previous quarter.   More locally, the western section of the east west corridor (I88) remains among the highest in the Chicagoland submarket weighing in at 26.1%. While that rate still seems high keep in mind that this is the lowest level in more than 6 years, showing a long overdue recovery from the great recession.   How much office space was leased last year? How about 1,643,439SF which is the
highest amount since 2005.

They say "The trend is your friend" hopefully in 2015 that will prove to be a very cozy relationship.

This is a good summary of the Chicagoland industrial market

Market Trend: Chicago Industrial Deliveries, Construction and Inventory

Dec 10, 2014 - CoStar News

During the third quarter 2014, two buildings totaling 695,600 square feet were completed in the Chicago market area. This compares to seven buildings totaling 1,783,149 square feet that were completed in the second quarter 2014. 

There was 14,716,059 square feet of Industrial space under construction at the end of the third quarter 2014. 

Some of the notable 2014 deliveries include: Pinnacle XV, an 898,560-square-foot facility that delivered in first quarter 2014 and is now 100% occupied, and CenterPoint Intermodal, a 485,476-square-foot building that delivered in second quarter 2014 and is now vacant. 

The largest projects underway at the end of third quarter 2014 were RidgePort Logistics Center - Building 1, a 1,700,000-square-foot building with 100% of its space pre-leased, and Kenosha Enterprise Building 1, a 1,015,740-square-foot facility that is 100% pre-leased. 

Total Industrial inventory in the Chicago market area amounted to 1,147,964,747 square feet in 22,435 buildings as of the end of the third quarter 2014. The Flex sector consisted of 74,760,397 square feet in 2,232 projects. The Warehouse sector consisted of 1,073,204,350 square feet in 20,203 buildings. Within the Industrial market there were 4,012 owner-occupied buildings accounting for 283,830,573 square feet of Industrial space. 

This trend is compared to U.S. National Industrial deliveries and construction, which saw 206 buildings totaling 30.84 million square feet complete construction, with an additional 148.9 million square feet of industrial space still under construction at the end of the third quarter. 6100 Garfield Ave is a 620,000-square-foot facility that delivered this quarter in the Los Angeles market, while the 1.7 million-square-foot RidgePort Logistics Center in the Chicago market is still under way. Total industrial inventory in the U.S. market totaled almost 21.08 billion square feet in more than 621,000 industrial buildings at the end of Q3 2014, including almost 71,200 owner-occupied properties.

1280 Miner St. Des Plaines, Offered for Sale or Lease

The commercial real estate market is always changing.  Earlier this year, we reviewed the CCRB business plan taking a good look at taking listings.  We developed some critical requirements that a listing would have to meet before we accepted it.  The last thing we wanted to do was take a listing just to take a listing.  1280 Miner St. in DesPlaines met all the requirements and we are very excited about helping the owner realize his long term investment is this property. The free standing retail/office building is now listed on on CoStar, LoopNet and other commercial property listing services. We will always remain primarily a tenant and buyer firm but will now augment that service with listings that make sense.

Interesting Statistics

Often people don't realize how local commercial real estate can be.  Residential property, everyone knows can vary from neighborhood to neighborhood.  Here is a quick example of just how much variance there can be in the office leasing market just in the western suburbs.  Looking at North Dupage County vs. the East West Corridor which is adjacent to but covering an area further southwest of north Dupage.  So take a look at the graphs for this perspective. (GOLD=North DuPage Blue=EW Corridor)

VACANCY RATE

ASKING RENTS

MONTHS ON THE MARKET

Despite the wide variance in both the vacancy rate and the months on market, asking rents are very comparable.  Another reason to consult with a commercial broker who knows the market and provide accurate and timely advice.

Pricing Momentum Continues to Build for Commercial Real Estate

According to Sources at CoStar:

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides more evidence of two broad trends in the commercial real estate investment market: the continued strong demand for top quality institutional-grade assets by big investors, and widening investor demand for mid- and lower-quality commercial property as the pricing recovery extended to smaller markets and secondary property types.

Based on an analysis of 1,028 repeat sales in February 2014 and more than 125,000 repeat sales since 1996, the CCRSI found commercial real estate prices registered broad gains during that month. The two broadest measures of aggregate pricing for commercial properties within the CCRSI-the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index-gained 1.1% and 1.7%, both reached double-digit growth over the previous 12-month period.

The value-weighted U.S. Composite Index, which is more heavily influenced by high-value property sales that have seen prices skyrocket over the last two years, has risen to levels not seen since early 2008, reaching to within 5% of its pre-recession peak.

Meanwhile, the equal-weighted U.S. Composite Index, which is more heavily influenced by the more-numerous lower-value trades, remained 22.3% below its prior peak. However, pricing for lower-end properties appears to be gaining momentum. The index made its strongest annual gain in February 2014 since the current recovery began, advancing by 15.7% over the last 12 months as investors continued to expand their buying activity in non-prime markets.

The momentum shift to lower quality and smaller properties also appeared in the recent growth of the General Commercial segment, which grew by a similar 15.7% over the previous year, while its counterpart, the Investment Grade Index, advanced by an equally strong 15% over the same period.

In reporting on commercial property pricing trends, CoStar's CCRSI made note of the continued positive net absorption across the three major property types - office, retail and industrial - which totaled 378.2 million square feet, a 15.3% increase from the prior 12-month period. Consistent with recent pricing trends, net absorption within the General Commercial segment rose 48% during the same period, compared with a 5% annual gain for the same period in the Investment Grade segment.

In keeping with the pattern set in previous years, the number of properties trading hands over the first three months of year is typically one-third lower than year-end sale volume. However, despite the slowdown, the CCRSI noted that transaction activity through February 2014 suggests that the year as a whole will be very active for commercial real estate investment. Having racked up a composite pair volume of nearly $10 billion through the first two months of the year, 2014 has already exceeded first quarter 2013

Industrial Space Nearing Record Highs

Demand for Industrial Space Projected to Top 250 Million Sq. Ft. in 2014

NAIOP Report Says Warehouse, Manufacturing Absorption Will Flirt With Record Levels in 2014 as E-Commerce, Housing Construction Expand

As major retailers and e-commerce firms such as Amazon.com continue to ramp up their distribution and fulfillment networks they are expected to be joined by building materials, appliances and furniture companies expanding their capacity as housing construction resumes in a strengthening economy. As a result, demand for warehouse and other industrial properties is expected to spike in 2014, according to a forecast released this week by the NAIOP Research Foundation.

"Demand for all types of industrial space -- warehouse, fulfillment-distribution centers, manufacturing and flex -- is robust," noted Thomas J. Bisacquino, president/CEO of NAIOP. "An intense increase in e-commerce has steepened the demand for distribution and fulfillment centers, and companies are gobbling up space as a result."

New housing starts were up 18% in 2013, and construction growth will likely continue as household formation rises and existing inventory is absorbed.

Meanwhile, the falling U.S. jobless rate and increased spending power for families is fueling gains in retail sales, which reached another record high in December 2013. Historically, rising retail sales has driven demand for retail space in shopping centers and malls. In the current cycle, demand for distribution and fulfillment centers will only increase as consumers purchase items online rather than traditional bricks-and-mortar stores.

"The combined forces of these two trends likely will result in continued growth in demand for warehousing and distribution facilities, specifically from the retail trade and housing construction sectors," Guirguis and Harris said in their report.

Choose DuPage Makes a Point for the Western Suburbs

THE WESTERN ACCESS O’HARE PROJECT

O’Hare International Airport is the nation’s second busiest airport. In 2005, O’Hare transported nearly 77 million passengers and 1.7 million tons of cargo – serving as a vital transportation link between the Chicago region and the rest of the world. However, its existing infrastructure is the cause of heavy delay and congestion. Currently, O’Hare is accessed from the east. The Western Access O’Hare project will give western access to the airport with an addition of a western roadway, allowing the region to meet future transportation needs.

THE PROJECT

The project begins with an addition of nearly 50 expressway lane miles through the conversion of Thorndale Avenue into a limited-access four-lane highway, creating an extension to the Elgin-O’Hare Expressway. With this extension, a bypass or ring road will then be created in order to connect I-90 and I-294.

CONSIDER THE FUTURE

The increased transportation and infrastructure will bring with it a modern and diverse economic base that will transform the region. The area will become a prime location for businesses to locate and future developments.

CONSIDER THE BENEFITS:

▪   Location – At the heartbeat of the Midwest – the center of the nation’s busiest transportation hub

▪   Land – Enough to build big

▪   Workforce – Skilled, educated, competitive labor

▪   Financial Benefits – Savings on fuel, time, recruitment, incentives

▪   Quality of Life – It’s all here – education, entertainment, culture

With unparalleled proximity to the airport, I-90, I-294, and I-290, businesses looking to locate in the newly available developments will be taking advantage of transportation gateways to the rest of the world. In an increasingly global economy, enhanced access to national and global markets, along with a reduction in delay time, will enhance the competitiveness and productivity of local businesses while facilitating economic growth.

ECONOMIC IMPACT

The benefits from this project are not only compelling, but would completely transform the economy of the region. The following is a list of some of the economic benefits of the project, found by the Elgin-O’Hare Western Bypass Advisory Council:

▪   Opportunity exists to create 65,000 jobs by 2040

▪   Local tax revenues are expected to increase by $29 million annually (based on 2010 projection)

▪   13,450 jobs will be created annually in the region during construction

Travel delays will be reduced, saving $145 million annually by 2040