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Monthly Archives: July 2014

Second Quarter 2014 Chicago Downtown Office Market Report

Downtown Office Market Recovery Speeds Up As Multiple Tenants Sign Expansions

Chicago’s office market and the economy improved again this quarter. Despite a surprise contraction in 1Q GDP growth, the unemployment rate hit a low this June. National and statewide unemployment rates dropped to 6.1% and 7.9%, respectively. Both of these rates haven’t been this low since 2008. The improving economy correlated into vacancy and availability rates decreasing YOY from 14.1% and 18.4% to 13.4% and 16.6%, respectively.

Read Full Market Report Here

 

Chicago Commercial Real Estate – In the News

Tom’s Recommended Reading for the Week

Check out the top news in Chicago commercial real estate before heading into the weekend!

  1. KBS Closes $850 Sale of 300 N LaSalle – Officials from KBS Real Estate Investment Trust II said yesterday that they had closed on the sale, first announced in May, of the 300 N. LaSalle building to the Newport Beach, CA-based Irvine Company for $850 million, the most ever paid for a Chicago office building. The deal was also the third-largest office building transaction in the US this year, according to CoStar. KBS paid $655 million for the 60-story, 1.3-million-square-foot tower on the Chicago River back in 2010… Globe St.
  2. LaSalle Investment Management to buy 101 N Wacker – LaSalle Investment Management has agreed to pay $210 million for a 24-story office tower on Wacker Drive, another sign of the frothy downtown office sales market.The deal for 101 N. Wacker Drive continues the flow of foreign money into downtown office properties, including recent acquisitions by Japanese and Chinese ventures. LaSalle is buying the building from Hines Interests L.P. on behalf of German investors, according to people familiar with the transaction… Crain’s Chicago
  3. More New York Companies Experiment With Innovative Office Space – Alexander Saint-Amand admits he used his old desk to store his stuff: extra neckties, books and water bottles. As of last week, that became impossible because Mr. Saint-Amand no longer has a permanent desk at Gerson Lehrman Group Inc., the company he leads as chief executive. Like everyone else in the 250-person office, Mr. Saint-Amand is now assigned only a laptop, a headset and a locker. GLG’s new office design offers an array of workspaces—from comfortable couches to high stools at a barista-staffed coffee bar to single-occupancy glass booths… Wall Street Journal
  4. Office Lags Outside Energy, Tech Markets – For office markets with strong concentrations of energy or tech tenants, the recovery in demand has been equally strong. Outside of those markets, however, it’s considerably less robust, Albert Lindeman, SVP with Sperry Van Ness, tells GlobeSt.com. “The coasts are doing very well,” says Lindeman, citing New York City and San Francisco. “When you get into the energy sector, Denver and the Texas markets are growing dramatically.” In secondary markets such as Charlotte as well as Lindeman’s home base of Chicago, the expansion of tech tenants is contributing to growth… Globe St.
  5. Sterling Bay Companies and IPDNA Companies to revamp Chicago’s historic old Main Post Office – The rumors have been put to rest about Chicago’s old Main Post Office building. Officials from Sterling Bay Companies came forth recently announcing a partnership with Chair of International Property Developers North America (IPDNA), owner Bill Davies, to redevelop the property. Andy Gloor, managing principal of Sterling, told Illinois Real Estate Journal, that IPDNA has done an enormous amount of due diligence on the property in the last five years… RE Journals
 

Chicago Commercial Real Estate – In the News

Tom’s Recommended Reading for the Week

Check out the top news in Chicago commercial real estate before heading into the weekend!

  1. DRW scraps plan for 17-story hotel on Fulton Market – Trader Don Wilson filed plans with the city for a Brooklyn Bowl bowling alley and nightclub on West Fulton Market, with one major omission: a 17-story hotel. The development arm of Mr. Wilson’s Chicago-based DRW Holdings LLC filed an application with the city June 25 to change the zoning for the property at 832-856 W. Fulton Market, where DRW plans the bowling alley from New York-based Brooklyn Bowl. But the application limits the development to three stories and makes no mention of the hotel that had been included in previous plans. The building would have stood 17 stories with many as 200 rooms. In the plan filed with the city, maximum height would be 50 feet… Crain’s Chicago
  2. Engagement Is Open Space’s Driving Force – Different degrees of open space in an office environment are acceptable to different firms, and it’s the design team’s job to determine the which degree matches the clients’ needs best, Heidi Hendy, founding principal of H. Hendy Associates, tells GlobeSt.com. But a uniting force behind all degrees of open-space work environments is the need for engagement among staff members. As GlobeSt.com reported in May, the locally based interior architecture firm has completed the construction of Monster Energy’s new headquarters building at 1010 Railroad St. in Corona, CA… Globe St.
  3. GE spinoff moving to Loop office complex – The owner of a 60-story Loop office complex brought in a General Electric Capital Corp. subsidiary to help offset the future loss of its two largest tenants. Retail Finance International Holdings Inc., a consumer finance unit of Norwalk, Connecticut-based GE Capital, signed a 76,000-square-foot lease at 227 W. Monroe St. in Franklin Center, according to a person familiar with the deal. The lease closed in the second quarter, and the GE unit is moving from office space the company occupies at nearby 500 W. Monroe St., the person said… Crain’s Chicago
  4. The Roll of the Office Cycle – In many ways, the office sector’s position along the real estate cycle resembles that of the 2005/2006 period. The market is rising at a steady pace, as it did in 2005 and 2006: average national vacancies, which have fallen for four years straight, are under 12 percent and closely aligned with 2005 levels. Investors are once again underwriting strong income growth, as rents signed at the bottom of the market will receive mark-ups when they roll to market rate—at least at the better-quality assets. Liquidity is strong, with trading volume well above historical averages and nearly back to 2007 peaks (when the assets of the former Equity Office Properties portfolio ping-ponged between investors)… NREI
  5. Office Recovery Spreads Across US – During the second quarter, the US office sector reached a milestone on its road to a true recovery, according to a new research by JLL. Although office users and landlords reported a lot of activity, it was perhaps more significant that increased velocity was seen in markets far beyond the gateway cities and areas like New York, San Francisco and Silicon Valley. “First and foremost, we saw in the second quarter about 14-million-square-feet of net absorption,” John Sikaitis, JLL’s managing director for local markets and office research, tells GlobeSt.com, a boost of about 38% from the second quarter of last year. Overall, tenants leased 61.9-million-square-feet of space during the second quarter… Globe St.