Consistency in the Suburbs · 2019. 7. 23. · a y 45 45 41 45 12 20 34 34 12 12 14 83 60 83 22 68...
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1 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Office | Colliers International Market Indicators Current 1-year 3-year 5-year CHICAGO SUBURBAN OFFICE Q2 2019 Q2 2018 Q2 2016 Q2 2014 VACANCY RATE 21.5% 20.7% 18.8% 19.9% NET ABSORPTION (SF) (523,655) 90,324 196,720 (98,800) RENTAL RATES (SF) $21.50 $21.03 $20.41 $19.83 INVENTORY (SF) 108,837,711 108,837,711 108,802,911 108,652,911 UNEMPLOYMENT RATES Q2 2019 Q2 2018 Q2 2016 Q2 2014 CHICAGO 3.8% 3.4% 5.3% 7.0% ILLINOIS 4.4% 4.3% 5.9% 7.8% U.S. 3.6% 4.0% 4.8% 6.3% Submarket Vacancy Rates 5% 10% 15% 20% 25% 30% O'Hare Northwest North Lisle/Naperville Oak Brook 2017 2018 2019 2017 2017 2017 2017 2018 2018 2018 2019 2019 2018 2019 2019 Mid-sized tenants in the suburbs continue to offer the most relocation potential. There are over 100 tenants with needs ranging from 10,000 to 50,000 square feet that are actively seeking space throughout the suburban office market. 40 percent of them are showing interest in the Northwest market. Redevelopment of vacant suburban office properties continues in the suburbs. Bell Works Chicago has begun their mix-use redevelopment of AT&T’s former HQ in Hoffman Estates. Veridian is seeing activity at Motorola’s former HQ campus in Schaumburg with residential and land sales including 18 acres for townhomes that is currently under contract to DR Horton and a Top Golf entertainment complex which is near completion. McDonald’s former HQ in Oak Brook was recently purchased by John DeJoria, co-founder of Paul Mitchell hair products for undisclosed development plans. Vacancy & Absorption » Overall vacancy in the suburbs remained flat at 21.5 percent, exactly where it was two years ago. » Class A vacancy also remained flat at 22.0 percent. However, when considering high quality, trophy assets in the suburban office market, vacancy is considerably lower at 16.5 percent, dropping 150 basis points from the same time period in 2017. » The O’Hare, North and Lisle-Naperville markets all added positive absorption in the second quarter of 2019. Transaction Activity » Leasing activity, including new leases and lease expansions totaled 1.3 million square feet in the second quarter is up slightly from 1.2 million square feet in the first quarter of 2019. Research & Forecast Report CHICAGO | SUBURBAN OFFICE Second Quarter 2019 Consistency in the Suburbs Ronna Larsen Senior Research Manager | Chicago SUBMARKET 20,000+ SF 50,000+ SF 100,000+ SF 200,000+ SF 300,000+ SF O'Hare 15 6 6 0 0 Northwest 34 17 15 5 2 North 37 13 8 2 1 Lisle/ Naperville 22 7 3 1 0 Oak Brook 21 12 1 0 0 Total 129 55 33 8 3 Class A Large Blocks of Space The gap between Class A and B product continues to grow in both quality and price.
Transcript of Consistency in the Suburbs · 2019. 7. 23. · a y 45 45 41 45 12 20 34 34 12 12 14 83 60 83 22 68...
1 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Market Indicators Current 1-year 3-year 5-year
CHICAGO SUBURBAN OFFICE Q2 2019 Q2 2018 Q2 2016 Q2 2014
VACANCY RATE 21.5% 20.7% 18.8% 19.9%
NET ABSORPTION (SF) (523,655) 90,324 196,720 (98,800)
RENTAL RATES (SF) $21.50 $21.03 $20.41 $19.83
INVENTORY (SF) 108,837,711 108,837,711 108,802,911 108,652,911
UNEMPLOYMENT RATES Q2 2019 Q2 2018 Q2 2016 Q2 2014
CHICAGO 3.8% 3.4% 5.3% 7.0%
ILLINOIS 4.4% 4.3% 5.9% 7.8%
U.S. 3.6% 4.0% 4.8% 6.3%
Submarket Vacancy Rates
5%
10%
15%
20%
25%
30%
O'Hare Northwest North Lisle/Naperville Oak Brook
2017
2018
2019
2017
2017
2017
2017
2018
2018
2018
2019
2019
2018
2019
2019
Mid-sized tenants in the suburbs continue to off er the most relocation potential. There are over 100 tenants with needs ranging from 10,000 to 50,000 square feet that are actively seeking space throughout the suburban offi ce market. 40 percent of them are showing interest in the Northwest market.
Redevelopment of vacant suburban offi ce properties continues in the suburbs. Bell Works Chicago has begun their mix-use redevelopment of AT&T’s former HQ in Hoff man Estates. Veridian is seeing activity at Motorola’s former HQ campus in Schaumburg with residential and land sales including 18 acres for townhomes that is currently under contract to DR Horton and a Top Golf entertainment complex which is near completion. McDonald’s former HQ in Oak Brook was recently purchased by John DeJoria, co-founder of Paul Mitchell hair products for undisclosed development plans.
Vacancy & Absorption
» Overall vacancy in the suburbs remained fl at at 21.5 percent, exactly where it was two years ago.
» Class A vacancy also remained fl at at 22.0 percent. However, when considering high quality, trophy assets in the suburban offi ce market, vacancy is considerably lower at 16.5 percent, dropping 150 basis points from the same time period in 2017.
» The O’Hare, North and Lisle-Naperville markets all added positive absorption in the second quarter of 2019.
Transaction Activity
» Leasing activity, including new leases and lease expansions totaled 1.3 million square feet in the second quarter is up slightly from 1.2 million square feet in the fi rst quarter of 2019.
Research & Forecast Report
CHICAGO | SUBURBAN OFFICESecond Quarter 2019
Consistency in the SuburbsRonna Larsen Senior Research Manager | Chicago
SUBMARKET 20,000+ SF 50,000+ SF 100,000+ SF 200,000+ SF 300,000+ SF
O'Hare 15 6 6 0 0
Northwest 34 17 15 5 2
North 37 13 8 2 1
Lisle/Naperville 22 7 3 1 0
Oak Brook 21 12 1 0 0
Total 129 55 33 8 3
Class A Large Blocks of Space
The gap between Class A and B product continues to grow in both
quality and price.
2 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Chicago Suburban Offi ce Market | Largest Q2 2019 Lease Transactions
TENANT BUILDING CITY CLASS SIZE (SF) LEASE TYPE
ACCO Brands Kemper Lakes Business Center Long Grove A 189,000 Renewal
Edward-Elmhurst Health 4201 Winfi eld Road Warrenville A 188,000 New
Commonwealth Edison* One Lincoln Centre Oakbrook Terrace A 58,500 Renewal
Culligan Riverway Rosemont A 50,000 Renewal
JLL Oakmont Point Westmont A 50,000 New
Elkay Manufacturing* Woodland Corporate Tower Downers Grove A 35,500 Expansion
Mueller & Co.* 1707 N Randall Road Elgin A 29,500 Expansion
AveXis Three Parkway North Deefi eld A 28,000 Sublease
Transnational Processing, Inc.* Pointe O'Hare Rosement A 26,000 New
Midwest Orthopaedics* MetroWest Naperville A 22,000 New
Lamb Westin* MetroWest Naperville A 18,500 New
Publications Internatonal* North Grove Corporate Park Morton Grove A 17,500 Renewal
Wistron Mobile Solutions Corp. 953 American Lane Schaumburg A 15,000 Sublease
Chicago Suburban Offi ce Market | Largest Q2 2019 Sale Activity
STATUS PROPERTY CITY CLASS SIZE (SF) SALE PRICE PRICE PSF BUYER SELLER
Sold Esplanade II Downers Grove A 583,982 $128,000,000.00 $219.18 Kore Investments Bentall Kennedy
Sold 2715-2915 Jorie Blvd Oak Brook A 462,114 Undisclosed John Paul DeJoria McDonald's Corporation
Sold 2111 McDonald's Drive Oak Brook B 348,951 $1,809,095.00 $41.53 Hines McDonald's Corporation
Sold 2400 Cabot Drive Lisle A 205,633 $2,650,000.00 $12.89 FDG, LLC GlenStar
Sold 700 N Wood Dale Road Wood Dale B 125,523 $22,400,000.00 $178.45 Bridge Development Partners UBS Realty Investors, LLC
Sold 2200 Cabot Drive Lisle A 124,327 $2,677,500.00 $21.54 Friedman Real Estate CW Capital
Sold 1717 Park Street Naperville B 114,016 $10,600,000.00 $92.97 BOBR Dean Investment, LLC
Sold 2600 Forbs Avenue Hoff man Estates A 90,000 $7,385,000.00 $82.06 Planmeca Serta international
Transactions in blue designate Colliers International transactions
» Seventeen new leases or lease expansions of 15,000 square feet or larger were signed throughout the suburbs during the second quarter of 2019.
» Investment and user sale velocity continued in the suburban offi ce market as eight assets traded hands in the second quarter of 2019 and four others currently under contract.
Forecast
» “Trophy” Class A properties with modern design buildouts and new amenities will continue to see strong activity throughout the suburbs.
» Millennials continue to look towards the suburbs for aff ordable housing. As this trend continues, the demand for suburban offi ce locations, especially those with top-quality amenities will increase.
» The announcement of a new Cook County tax system is resulting in widespread uncertainty of how it will impact commercial properties.
Net Absorption & Vacancy
Asking Gross Rental Rates
17%
18%
19%
20%
21%
22%
23%
(2,750,000)
(2,250,000)
(1,750,000)
(1,250,000)
(750,000)
(250,000)
250,000
750,000
2019
2018
2017
2016
2015
2014
Vaca
ncy
Rate
Net
Abs
orpt
ion
$12.00
$16.00
$20.00
$24.00
$28.00
$32.00
2019
2018
2017
2016
2015
2014
Class A
Average
Class B
Class C
3 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
CHICAGO SUBURBAN OFFICE MARKET MAP
Second Quarter 2019
Lake Michigan
0 1 5 10 miles
NORTH
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94
94
94
9457
55
55
355
294
290
290
290
88
88
355
294
90
90
90
90
90
190
41
Elgin-O
'Hare Expy.
East-West Tollway
45
45
41
41
45
12 20
34
34
12
12
14
83 60
83
22
68
7262
21
59
53
58
20
31
20
64 53
64
83
59
43
5043
53
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171
Lake Cook Rd.
WAUCONDALIBERTYVILLE
VERNON HILLS
LINCOLNSHIRE
DEERFIELD
NORTHBROOK
GLENVIEW
BUFFALO GROVEBARRINGTON
SLEEPY
HOLLOW
ELGIN
ROLLING
MEADOWS
ARLINGTON
HEIGHTS
MOUNT
PROSPECTHOFFMAN
ESTATESSCHAUMBURG
ELK GROVE
VILLAGE
SKOKIE
ITASCA
CAROL STREAM
ST. CHARLESADDISON
ELMHURST
OAKBROOK
LOMBARD
OAK PARK
CICERO
AURORA NAPERVILLE LISLE DOWNERS
GROVE HINSDALE
BOLINGBROOK
ORLAND
CHICAGO
LAKE FOREST
HIGHLAND PARK
WINNETKA
WILMETTE
EVANSTON
ROSEMONT
WEST CHICAGOBATAVIA
PLAINFIELD
MCHENRY
CRYSTAL LAKE
HUNTLEY
CARY
GURNEE
WAUKEGAN
NORTH CHICAGOGRAYSLAKE
LAKE ZURICH
HANOVER PARK
FRANKLIN PARK
MELROSE PARK
BROADVIEW
McCOOK
BEDFORD PARKBURR RIDGE
WOODRIDGE
ROMEOVILLE
ALSIP
HAMMOND
KANE CO.
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PALWAUKEEFIELD
O'HAREINTERNATIONAL
AIRPORT
MIDWAYAIRPORT
1
2
3
4
5
SUBURBAN OFFICE
INVENTORY 108,837,711 SF
PROPERTIES 1,041 Buildings
VACANCY 21.5%
ABSORPTION (523,655) SF (YTD)
*Excludes AT&T Center in Hoff man Estates
O'HARE
INVENTORY 12,942,290 SF
PROPERTIES 88 Buildings
VACANCY 13.3%
ABSORPTION 69,971 SF (YTD)
1
NORTHWEST
INVENTORY 30,502,974 SF
PROPERTIES 262 Buildings
VACANCY 29.2%
ABSORPTION (273,529) SF (YTD)
2
NORTH
INVENTORY 27,134,079 SF
PROPERTIES 279 Buildings
VACANCY 21.1%
ABSORPTION (117,507) SF (YTD)
3
LISLE-NAPERVILLE
INVENTORY 15,621,965 SF
PROPERTIES 188 Buildings
VACANCY 20.1%
ABSORPTION (10,597) SF (YTD)
4
OAK BROOK
INVENTORY 22,636,403 SF
PROPERTIES 224 Buildings
VACANCY 17.1%
ABSORPTION (191,993) SF (YTD)
5
4 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
O'Hare
Vacancy & Absorption
» Vacancy in the O’Hare market remains the lowest of all the submarkets, achieving a 19-year low and dropping 490 basis points in the last three years.
» Class A properties continue to show improvement, ending the quarter at 12.3 percent, down 330 basis points in the past three years.
» Class A and B properties both achieved positive absorption in the second quarter, bringing year-to-date absorption to 69,971 square feet.
Transaction Activity
» Leasing highlights include Culligan’s 50,000-square-foot renewal at Riverway in Rosemont and Transnational Processing Inc,’s 26,000-square-foot new lease at Pointe O’Hare in Rosemont.
» There were no signifi cant investment sales in the fi rst quarter in the O’Hare market. However, 5100 River Road, a 151,104-square-foot property in Schiller Park was recently added to the market.
Forecast
» "True" Class A rental rates will continue to reach record highs, with the current gross asking rate of $33.71 per square foot is up $4.00 in the past three years.
» Tenants will begin veering to Class B space looking for value add.
» Fifth Third Bank is expected to bring back 75,000 square feet of direct vacancy in October.
Net Absorption & Vacancy
Asking Gross Rental Rates
Large Blocks of Available Space
9%
12%
15%
18%
21%
(200,000)
0
200,000
400,000
600,000
2019
2018
2017
2016
2015
2014
Vaca
ncy
Rate
Net
Abs
orpt
ion
18%
20%
22%
24%
26%
28%
30%
(2,400,000)
(1,900,000)
(1,400,000)
(900,000)
(400,000)
100,000
600,000
2019
2018
2017
2016
2015
2014
Net
Abs
orpt
ion
$8.00
$12.00
$16.00
$20.00
$24.00
$28.00
$32.00
$36.00
2019
2018
2017
2016
2015
2014
Class A
Class B
Average
Class C
139,685
127,035
122,653
120,042
112,105
102,564
9377 W Higgins Road
6300 N River Road
5450 N Cumberland Avenue
5500 Pearl Street
9600 W Bryn Mawr Avenue
9550 W Higgins Road
CLASS A CLASS B
Submarket Indicators Current 1-year 3-year 5-year
O'Hare Q2 2019 Q2 2018 Q2 2016 Q2 2014
VACANCY RATE 13.3% 15.0% 18.2% 20.5%
NET ABSORPTION (SF) 69,971 20,817 (38,149) 19,028
RENTAL RATES (SF) $22.21 $21.14 $21.19 $20.59
INVENTORY (SF) 12,942,290 12,942,290 12,942,290 12,942,290
The O’Hare market is expected to outperform the other suburban submarkets driven by its unmatched access
to public transportation, diverse labor pool, and the high-quality amenity programs off ered by the Class A
competitive set.
One O’Hare Centre
5 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Northwest
Vacancy & Absorption
» Although the Northwest market has the most vacancy of all the suburban markets, it also has the most tenant interest. There are currently over 45 large and mid-size tenants actively seeking space in the area.
» The Northwest market reported 273,529 square feet of negative absorption in the fi rst half of the year coming from both Class A and B product.
Transaction Activity
» Leasing highlights include ACCO Brands’ 189,000-square-foot renewal at Kemper Lakes Business Center in Long Grove, Mueller & Company’s 29,500-square-foot expansion at 1707 North Randall Road in Elgin and Wistron Mobile Solutions Corporation’s 15,000-square-foot sublease at 953 American Lane in Schaumburg.
» Sales highlights include Bridge Development Partners’ $22,400,000 purchase of 700 N Wood Dale Rd in Wood Dale for a redevelopment and Planmeca’s purchase of 2600 Forbes Avenue, a 90,000-square-foot property in Hoff man Estates for $7,385,000,000.
Forecast
» Properties undergoing signifi cant renovations, such as Chatham Centre and Schaumburg Towers continue to dominate attention from tenants and increase occupancy.
» Redevelopment of existing properties will cause the gap between Class A and B pricing to widen.
Net Absorption & Vacancy
Asking Gross Rental Rates
Large Blocks of Available Space
18%
20%
22%
24%
26%
28%
30%
(2,400,000)
(1,900,000)
(1,400,000)
(900,000)
(400,000)
100,000
600,000
2019
2018
2017
2016
2015
2014
Vaca
ncy
Rate
Net
Abs
orpt
ion
16%
17%
18%
19%
20%
21%
22%
(600,000)
(400,000)
(200,000)
0
200,000
400,000
600,000
2019
2018
2017
2016
2015
2014
Net
Abs
orpt
ion
$10.00
$14.00
$18.00
$22.00
$26.00
$30.00
2019
2018
2017
2016
2015
2014
Class A
Average
Class B
Class C
1,622,213436,342
360,206289,974267,516253,000
205,771187,147
158,732152,555150,000145,020130,652114,345113,396108,197105,437103,870103,062
2000 W AT&T Center Drive1400 & 1450 American Lane
1301 E Algonquin Road2 Pierce Place
2550 W Golf Road540 W Northwest Highway
1707 N Randall Road1000 E Woodfield Road
1000 Plaza Drive150 N Martingale Road
3890 Salem Lake Drive21440 Lake Cook Road
3800 Golf Road1 Pierce Place
3333 Beverly Road1250 N Arlington Heights Road
1701 Golf Road1500 W Shure Drive
1500 McConnor Parkway
CLASS A CLASS B
Submarket Indicators Current 1-year 3-year 5-year
Northwest Q2 2019 Q2 2018 Q2 2016 Q2 2014
VACANCY RATE 29.2% 27.4% 18.4% 19.5%
NET ABSORPTION (SF) (273,529) (209,396) 328,035 339,757
RENTAL RATES (SF) $19.87 $19.55 $18.55 $17.86
INVENTORY (SF) 30,502,974 30,502,974 30,502,974 30,502,974
Space in high-quality assets with modern amenities will continue to be absorbed.
Schaumburg Towers
6 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Net Absorption & Vacancy
Asking Gross Rental Rates
Large Blocks of Available Space
16%
17%
18%
19%
20%
21%
22%
(600,000)
(400,000)
(200,000)
0
200,000
400,000
600,000
2019
2018
2017
2016
2015
2014
Vaca
ncy
Rate
Net
Abs
orpt
ion
15%
16%
17%
18%
19%
20%
21%
22%
(500,000)
(400,000)
(300,000)
(200,000)
(100,000)
0
100,000
200,000
2019
2018
2017
2016
2015
2014
Net
Abs
orpt
ion
$14.00
$18.00
$22.00
$26.00
$30.00
$34.00
2019
2018
2017
2016
2015
2014
Class A
Average
Class BClass C
302,678
266,886
205,724
175,545
168,167
139,927
139,915
120,463
104,516
2 Overlook Point
600 N US Highway 45
4000 Commercial Ave
300 Tower Parkway
3100 Sanders Road
333-455 Knightsbridge Pky
300 N Field Drive
5202 Old Orchard Road
2333 Waukegan Road
CLASS A CLASS B
Submarket Indicators Current 1-year 3-year 5-year
North Q2 2019 Q2 2018 Q2 2016 Q2 2014
VACANCY RATE 21.1% 20.2% 20.1% 21.1%
NET ABSORPTION (SF) (117,507) 197,882 (335,412) (713,877)
RENTAL RATES (SF) $22.46 $22.32 $22.05 $21.24
INVENTORY (SF) 27,134,079 27,134,079 27,134,079 27,134,079
North
Vacancy & Absorption
» Class A vacancy decreased 80 basis points, down for the fi rst time in seven quarters. A large portion of this was due to Baxter Credit Union moving into their expansion space in Vernon Hills.
» When considering high quality “trophy” assets in the North market, vacancy is even lower, ending the quarter at 11.7 percent.
» Despite 86,288 square feet of positive absorption in the second quarter, overall year-to-date absorption remains negative due to move outs earlier this year.
Transaction Activity
» Leasing highlights include AveXis’ 28,000 square foot sublease at Three Parkway North in Deerfi eld and Publications International’s 17,500-square-foot renewal at North Grove Corporate Park in Morton Grove.
» While no investment sales were completed in the second quarter, two Deerfi eld properties are currently under contract: Three Parkway North, a 257,555-square-foot property and 1717 Deerfi eld Road, a 147,096-square-foot property.
Forecast
» There will be increased opportunities for large users as Takeda Pharmaceuticals plans to move out of its 750,000-square-foot headquarters by year-end.
» Quality Class A space will come at a premium.
Continued rent growth and absorption is projected for well located “trophy “assets in the North market.
Large blocks of space returning to the market will off er uncertainty, and Class B/C commodity product in
secondary locations will continue to struggle.
One Parkway Boulevard North
7 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Net Absorption & Vacancy
Asking Gross Rental Rates
Large Blocks of Available Space
15%
16%
17%
18%
19%
20%
21%
22%
(500,000)
(400,000)
(300,000)
(200,000)
(100,000)
0
100,000
200,000
2019
2018
2017
2016
2015
2014
Vaca
ncy
Rate
Net
Abs
orpt
ion
$14.00
$18.00
$22.00
$26.00
$30.00
2019
2018
2017
2016
2015
2014
Class A
Average
Class B
Class C
299,572
216,063
162,000
136,000
111,563
263 Shuman Boulevard
750 N Commons Boulevard
215 W Diehl Road
28301 Ferry Road
2441 Warrenville Road
CLASS A CLASS B
Submarket Indicators Current 1-year 3-year 5-year
Lisle/Naperville Q2 2019 Q2 2018 Q2 2016 Q2 2014
VACANCY RATE 20.1% 20.7% 19.0% 15.4%
NET ABSORPTION (SF) (10,597) (195,462) 57,193 166,800
RENTAL RATES (SF) $21.31 $21.27 $20.40 $19.95
INVENTORY (SF) 15,621,965 15,621,965 15,621,965 15,497,965
Lisle-Naperville
Vacancy & Absorption
» Class A vacancy decreased in the fi rst quarter, down 50 basis points from the same time period a year ago.
» When considering high quality “trophy” assets, vacancy is considerably lower at 6.9 percent, down 250 basis points from second quarter 2018.
» Despite 21,832 square feet of positive absorption in the second quarter, overall year-to-date absorption remains negative due to move-outs earlier this year.
Transaction Activity
» Leasing highlights include Edward-Elmhurst Health’s 188,000-square-foot new lease at 4201 Winfi eld Road in Warrenville, National Louis University’ 57,000-square-foot renewal at Corporetum Offi ce Campus in Lisle and Midwest Orthopaedics’ new 22,000-square-foot lease at MetroWest in Naperville.
» Sales highlights include FDG, LLC’s purchase of 2400 Cabot Drive, a 205,633- square- foot property in Lisle for $2,650,000 and Freidman Real Estate’s purchase of Corporate Lakes III, a 124,327-square-foot property in Lisle for $2,677,500. Friedman Real Estate has since put Corporate Lakes III back on the market.
Forecast
» The second half of the year will see steady leasing of larger deals in the 15,000 – 30,000 square foot range as well as those 10,000 square feet and under.
» Renovations of older properties into modern workplaces continue, including 263 Shuman Boulevard in Naperville, which will complete its renovations at the end of July.
» Distressed offi ce buildings will continue be sold and likely repositioned.
Newly repositioned offi ce properties continue to be the most sought after in the Lisle-
Naperville market.
One Tellabs Center
8 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Net Absorption & Vacancy
Asking Gross Rental Rates
Large Blocks of Available Space
15%
16%
17%
18%
19%
20%
21%
22%
(300,000)
(200,000)
(100,000)
0
100,000
200,000
300,000
400,000
500,000
2019
2018
2017
2016
2015
2014
Vaca
ncy
Rate
Net
Abs
orpt
ion
17%
18%
19%
20%
21%
22%
23%
(2,750,000)
(2,250,000)
(1,750,000)
(1,250,000)
(750,000)
(250,000)
250,000
750,000
2019
2018
2017
2016
2015
2014
Net
Abs
orpt
ion
$12.00
$16.00
$20.00
$24.00
$28.00
$32.00
2019
2018
2017
2016
2015
2014
Class A
Average
Class B
Class C
184,524
127,446
120,156
2001 York Road
2122 York Road
*2707 Butterfield Road
CLASS A CLASS B *sublease
Submarket Indicators Current 1-year 3-year 5-year
Oak Brook Q2 2019 Q2 2018 Q2 2016 Q2 2014
VACANCY RATE 17.1% 15.4% 18.0% 21.6%
NET ABSORPTION (SF) (191,993) 276,483 185,053 89,492
RENTAL RATES (SF) $21.66 $20.85 $19.84 $19.53
INVENTORY (SF) 22,636,403 22,636,403 22,601,603 22,575,603
Oak Brook
Vacancy & Absorption
» Vacancy increased 60 basis points in the second quarter with both Class A and Class B product aff ected.
» When considering high Quality, “trophy” assets, vacancy decreased to 15.4 percent compared to 16.8 percent in the fi rst quarter of 2019.
» Absorption was negative in the second quarter as tenants returned space to the market, including Kellan Company who recently put their space up for sublease.
Transaction Activity
» Leasing highlights include Commonwealth Edison’s 58,000-square-foot renewal at One Lincoln Centre in Oakbrook Terrace, JLL’s new 50,000-square-foot lease at Oakmont Point in Westmont and Elkay Manufacturing’s 35,000-square-foot expansion at Woodland Corporate Tower in Downers Grove.
» Sales highlights include KORE Investments' purchase of Esplanade II, a 583,982-square-foot property in Downers Grove for $128,000,000 and John Paul DeJoria’s purchase of McDonald’s Hamburger University with 462,114 square feet of offi ce product in Oak Brook for an undisclosed amount. Additionally, One Lincoln Centre, a 303,098-square-foot property in Oakbrook Terrace, was recently added to the market.
» Hines recently closed on part of McDonald’s corporate HQ in OakBrook and has plans for a mix-use development will host offi ces, multi-family housing, retail and restaurants.
» Hub Group recently broke ground on a second building at its Oak Brook headquarters campus, with completion scheduled for September 2020.
Forecast
» The second half of the year will see steady leasing of larger deals in the 15,000 – 30,000 square feet range as well as those 10,000 square feet and under.
» Blackstone Group will continue to liquidate its assets as it plans to exit the Oak Brook market.
» While high quality, Class A asking rates will continue to rise, rents in other segments will begin to plateau.
Smaller tenants will continue to focus on market ready / spec suites while larger tenants will focus on maximizing
capital that landlords are willing to provide to off set relocation costs.
Oak Brook Gateway
9 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Second Quarter 2019 Offi ce Market Statistics | Local Standards
CLASS BLDGSTOTAL INVENTORY
SF
DIRECT
VACANCY
RATE
SUBLEASE
VACANCY
RATE
VACANCY
RATE
CURRENT
QTR
VACANCY
RATE PRIOR
QTR
QUARTERLY NET
ABSORPTION –SF
NET YTD
ABSORPTION –SF
COMPLETIONS
CURRENT QTR
- SF
UNDER
CONSTRUCTION
- SF
RENTS
O’HARE
Class A 35 7,775,142 11.4% 0.9% 12.3% 12.6% 16,641 43,433 0 0 $33.71
Class B 46 4,917,993 14.7% 0.1% 14.8% 15.9% 57,537 33,651 0 0 $18.85
Class C 7 249,155 14.8% 0.0% 14.8% 13.6% (3,070) (7,113) 0 0 $14.08
Subtotal 88 12,942,290 12.7% 0.6% 13.3% 13.9% 71,108 69,971 0 0 $22.21
NORTHWEST
Class A 81 18,956,054 28.4% 0.8% 29.2% 28.6% (113,896) (115,296) 0 0 $26.17
Class B 156 10,247,800 31.2% 0.5% 31.6% 32.1% 52,574 (146,123) 0 0 $18.02
Class C 25 1,299,120 10.6% 0.0% 10.6% 11.2% 7,276 (12,110) 0 0 $15.43
Subtotal 262 30,502,974 28.6% 0.6% 29.2% 29.0% (54,046) (273,529) 0 0 $19.87
NORTH
Class A 111 17,544,389 21.0% 1.4% 22.4% 23.2% 147,382 87,154 0 0 $32.33
Class B 142 8,550,462 16.4% 2.0% 18.4% 18.1% (22,098) (186,847) 0 0 $18.14
Class C 26 1,039,228 21.5% 0.0% 21.5% 17.7% (38,996) (17,814) 0 0 $16.91
Subtotal 279 27,134,079 19.6% 1.5% 21.1% 21.4% 86,288 (117,507) 0 0 $22.46
LISLE/NAPERVILLE
Class A 49 8,128,634 22.0% 0.7% 22.7% 22.9% 14,081 4,107 0 0 $28.87
Class B 119 6,742,130 17.0% 1.0% 17.9% 18.0% 6,433 (19,173) 0 0 $18.23
Class C 20 751,201 10.8% 0.0% 10.8% 11.0% 1,318 4,469 0 0 $16.83
Subtotal 188 15,621,965 19.3% 0.8% 20.1% 20.2% 21,832 (10,597) 0 0 $21.31
OAK BROOK
Class A 65 12,779,868 14.6% 1.5% 16.1% 15.7% (41,869) (182,400) 0 0 $30.56
Class B 137 8,896,309 17.6% 1.9% 19.5% 18.4% (97,784) (34,843) 0 0 $18.59
Class C 22 960,226 7.6% 0.0% 7.6% 8.4% 7,486 25,250 0 0 $15.83
Subtotal 224 22,636,403 15.5% 1.6% 17.1% 16.5% (132,167) (191,993) 0 0 $21.66
SUBURBAN TOTAL
Class A 341 65,184,087 20.9% 1.1% 22.0% 22.0% 22,339 (163,002) 0 0 $30.33
Class B 600 39,354,694 20.4% 1.2% 21.6% 21.6% (3,338) (353,335) 0 0 $18.37
Class C 100 4,298,930 12.8% 0.0% 12.8% 12.2% (25,986) (7,318) 0 0 $15.82
Subtotal 1,041 108,837,711 20.4% 1.1% 21.5% 21.5% (6,985) (523,655) 0 0 $21.50
QUARTERLY COMPARISON AND TOTALS
Q2-19 1,041 108,837,711 20.4% 1.1% 21.5% 21.5% (6,985) (523,655) 0 0 $21.50
Q1-19 1,041 108,837,711 20.5% 1.0% 21.5% 21.0% (516,670) (516,670) 0 0 $21.39
Q4-18 1,041 108,837,711 20.0% 1.0% 21.0% 21.1% 106,113 (231,635) 0 0 $21.32
Q3-18 1,041 108,837,711 20.1% 1.0% 21.1% 20.7% (428,072) (337,748) 0 0 $21.19
Q2-18 1,041 108,837,711 19.5% 1.1% 20.7% 21.2% 584,046 90,324 34,800 0 $21.03
10 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Second Quarter 2019 Offi ce Market Statistics | Includes Owner Occupied Properties
CLASS BLDGSTOTAL INVENTORY
SF
DIRECT
VACANCY RATE
SUBLEASE
VACANCY RATE
TOTAL
VACANCY RATE
CURRENT QTR
TOTAL
VACANCY RATE
PRIOR QTR
QUARTERLY NET
ABSORPTION –SF
NET YTD
ABSORPTION –SF
COMPLETIONS
CURRENT QTR - SF
UNDER
CONSTRUCTION - SF
O’HARE
Class A 41 8,493,226 12.3% 0.8% 13.1% 13.3% 11,922 42,976 0 0
Class B 61 5,566,202 15.4% 0.1% 15.4% 15.8% 19,418 (51,544) 0 0
Class C 15 635,554 8.9% 0.0% 8.9% 6.7% (13,570) (18,581) 0 0
Subtotal 117 14,694,982 13.3% 0.5% 13.8% 13.9% 17,770 (27,149) 0 0
NORTHWEST
Class A 101 22,581,817 25.4% 0.6% 26.0% 26.1% 25,529 24,129 0 0
Class B 319 16,985,541 20.8% 0.3% 21.1% 21.8% 118,690 (112,682) 0 0
Class C 59 2,273,477 8.1% 0.0% 8.1% 8.4% 5,629 9,208 0 0
Subtotal 479 41,840,835 22.6% 0.5% 23.1% 23.4% 149,848 (79,345) 0 0
NORTH
Class A 142 23,817,228 15.8% 1.0% 16.8% 17.9% 259,457 204,427 0 0
Class B 289 22,006,173 7.5% 0.8% 8.3% 8.3% 3,681 (138,723) 0 0
Class C 58 1,935,884 14.6% 0.0% 14.6% 12.3% (43,268) (21,096) 0 0
Subtotal 489 47,759,285 11.9% 0.9% 12.8% 13.3% 219,870 44,608 0 0
LISLE/NAPERVILLE
Class A 64 12,173,801 15.0% 0.5% 15.4% 15.3% (14,169) (36,443) 0 0
Class B 215 12,548,174 10.8% 0.5% 11.3% 11.5% 29,263 (17,627) 0 0
Class C 55 2,435,175 5.0% 0.0% 5.0% 5.3% 6,623 3,964 0 0
Subtotal 334 27,157,150 12.1% 0.5% 12.6% 12.7% 21,717 (50,106) 0 0
OAK BROOK
Class A 78 14,325,367 14.0% 1.3% 15.3% 14.8% (73,414) (217,165) 0 0
Class B 213 11,823,336 14.5% 1.5% 16.0% 15.0% (108,667) (28,922) 0 0
Class C 54 2,092,483 4.6% 0.0% 4.6% 5.0% 7,798 22,710 0 0
Subtotal 345 28,241,186 13.5% 1.3% 14.8% 14.2% (174,283) (223,377) 0 0
SUBURBAN TOTAL
Class A 426 81,391,439 17.6% 0.9% 18.5% 18.8% 209,325 17,924 0 0
Class B 1,097 68,929,426 13.2% 0.7% 13.9% 13.8% 62,385 (349,498) 0 0
Class C 241 9,372,573 7.9% 0.0% 7.9% 7.5% (36,788) (3,795) 0 0
Subtotal 1,764 159,693,438 15.2% 0.7% 15.9% 16.0% 234,922 (335,369) 0 0
QUARTERLY COMPARISON AND TOTALS
Q2-19 1,764 159,693,438 15.2% 0.7% 15.9% 16.0% 234,922 (335,369) 0 0
Q1-19 1,764 159,693,438 15.3% 0.7% 16.0% 15.7% (570,291) (398,100) 0 0
Q4-18 1,764 159,693,438 15.0% 0.7% 15.7% 15.8% 172,191 499,621 29,000 0
Q3-18 1,763 159,664,438 15.0% 0.7% 15.8% 15.7% (87,234) 327,430 55,000 29,000
Q2-18 1,761 159,609,438 14.9% 0.8% 15.7% 16.1% 726,272 414,664 34,800 84,000
11 Research & Forecast Report | Second Quarter 2019 | Chicago/Suburban Offi ce | Colliers International
Copyright © 2019 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable eff ort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
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