• No results found

A Strong Finish. DOWNTOWN CHICAGO OFFICE Fourth Quarter Research & Forecast Report

N/A
N/A
Protected

Academic year: 2021

Share "A Strong Finish. DOWNTOWN CHICAGO OFFICE Fourth Quarter Research & Forecast Report"

Copied!
23
0
0

Loading.... (view fulltext now)

Full text

(1)

A Strong Finish

Research &

Forecast Report

DOWNTOWN CHICAGO | OFFICE

Fourth Quarter 2015

Robert Patterson

Research Analyst | Downtown Chicago

2015 was an extremely strong

year for commercial real estate in

Chicago’s CBD, as the year closed

with vacancy at its lowest rate since

2008, average direct asking rents

pushing towards all-time highs,

and a record year of foreign direct

investment into the market as well

as a record year for investment sales

activity within the CBD.

The fourth quarter was a microcosm of the year as a whole, as the CBD posted positive demand which triggered a decrease in the aggregate vacancy rate and an increase in gross rent per square foot.

Trends

Overall, the CBD remains a landlord’s market as rent continues to increase across all building classes and fewer concessions are granted. Limited availability of quality high-rise space coupled with continued corporate migration into the CBD has solidified an advantageous environment for landlords; however, tenants in a position to open negotiations with landlords in 2017 will be looking at a more tenant favorable market as approximately 2.3 million square feet are delivered in early 2017. As this space is delivered to the market, landlords will seek to avoid losing tenants to the new developments, which will likely increase concessions granted to tenants.

Leasing activity remained strong during the fourth quarter, led by CNA Financial announcing its intent to anchor John Buck’s new West Loop development at 151 N. Franklin Street when construction is completed in 2018. The landlords of the two developments set to deliver in 2017 have secured their anchor tenants and are beginning to compete for mid-sized firms, while the John Buck Company will look to attract at least one more anchor tenant for its development at 151 N. Franklin. Landlords of existing assets continue to adapt their buildings to appeal to the amenity-rich demands of tenants in today’s market.

On the investment sales front, 2015 was a record year for total sales volume within the CBD, with the sale of the Willis Tower for $1.3 billion and the fourth quarter sale of the Aon Center for $712 million leading the way. Investors see value in Chicago’s assets as they offer a significant discount in pricing relative to comparative properties on the coasts and believe Chicago’s diverse economy and talented workforce make for strong investments.

As rental rates within the CBD continue to climb, tenants are becoming more open to looking for nontraditional, repurposed spaces in emerging markets outside of the CBD, such as the Fulton Market area, as they see the opportunity for unique space with reduced rents within these submarkets.

Market Indicators

Q4 2014 Q3 2015 CURRENT

VACANCY 12.6% 12.2% 11.5%

QTR ABSORPTION 695,943 513,345 921,725

YTD ABSORPTION 1,112,083 594,004 1,515,729

(2)

2

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Outlook

Looking ahead to 2016, fundamentals suggest that both tenants and landlords feel confident in the future despite the risks increased local property taxes and recent global economic volatility pose to Chicago’s market. The continued corporate migration into the CBD will be a key factor for the market moving forward as over three million square feet of A-plus product is slated for delivery over the next two years. Many tenants are actively working to downsize their space in order to reduce costs, so the continued migration into the CBD will be vital in order for demand to keep up with available space. Additionally, landlords’ ability to avoid shadow space and backfill spaces of tenants departing for the new developments will illustrate the true strength of the market.

Statistical Highlights

The CBD experienced a strong ending to 2015 as the fourth quarter posted 921,725 square feet of positive net absorption, the most net absorption of any quarter in 2015. All asset classes within the CBD experienced positive net absorption, as Class A led the way with 519,916 square feet, followed by Class B with 286,242 square feet. The average direct asking rental rate in the CBD currently resides at $36.92 per square foot, an increase from $36.16 per square foot in the third quarter. The average overall asking rental rate increased by 5.43 percent from one year prior.

The CBD’s overall vacancy decreased by 70 basis points over the past year, falling from 12.3 percent to 11.5 percent. Vacancy decreased by at least 50 basis points across all assets classes, with Class A leading the way with an 80 basis point decrease during the fourth quarter.

Square Footage

Vacanc

y

Class B Class C Average

Class A 1,515,729 1,112,083 657,200 678,529 1,232,459 45,593 (1,614,937) 11.5% 12.6% 13.6% 13.8% 14.3% 15.2% 15.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% (2,000,000) (1,500,000) (1,000,000) (500,000) 0 500,000 1,000,000 1,500,000 2,000,000 2015 2014 2013 2012 2011 2010 2009 Absorption Vacancy $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008 Square Footage Vacanc y

Class B Class C Average

Class A 1,515,729 1,112,083 657,200 678,529 1,232,459 45,593 (1,614,937) 11.5% 12.6% 13.6% 13.8% 14.3% 15.2% 15.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% (2,000,000) (1,500,000) (1,000,000) (500,000) 0 500,000 1,000,000 1,500,000 2,000,000 2015 2014 2013 2012 2011 2010 2009 Absorption Vacancy $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008

Net Absorption & Vacancy | Chicago CBD Office Market

Source: CoStar, Colliers International Research

Asking Gross Rental Rates | Chicago CBD Office Market

Source: CoStar, Colliers International Research

Source: CoStar, Colliers International Research

Submarket Vacancy Rates | Chicago CBD Office Market

0 5 10 15 20 0 500,000 1,000,000 1,500,000 2,000,000 580,777 13 7 As of 4Q - 2013 As of 3Q - 2014 As of 4Q - 2015 SF of Transactions # of Transactions 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Square Footage Number of Sales 782,400 1,504,364 1,892,460 1,897,981 479,000 0 665,000 3,652,913 933,710 0 0 0 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2013 2014 2015 0.0% 5.0% 10.0% 15.0% 20.0%

Central Loop East Loop North Michigan Ave. River North West Loop

Vacancy (% ) 0 5 10 15 20 25 30 35 15 2008 3 2009 9 2010 19 2011 26 2012 31 2013 26 2014 27 2015 Class A Class B Class C

14.4% 14.9% 15.8% 10.3% 12.6% 13.2% 15.1% 14.6% 8.3% 11.6% 11.0% 13.7% 13.5% 7.6% 11.4% 1,347,669 974,000

(3)

3

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Large Blocks of Availability

After offering 34 large blocks of available space in the fourth quarter of 2014, large block availability has continued to decrease over the past year. Contiguous blocks of space available on a direct basis decreased by three during the fourth quarter of 2015, bringing the total available to 26 such blocks. Large block composition currently resides at 21 Class A blocks and five Class B blocks.

The largest block of available space in the CBD exists at 125 S. Clark Street in the Central Loop. The building previously served as the headquarters for Chicago Public Schools and is now finishing up a massive renovation to make it suitable for tenant use. The next two largest blocks of space available are located at 515 N. State Street and 311 W. Monroe Street. While 515 N. State is undergoing extensive renovations in order to attract new tenants, 311 W. Monroe offers a unique repurposing opportunity as it is a 387,790 square-foot Class B property that is 66.3 percent vacant.

The number of high-rise view spaces that are available in top-tier assets has diminished significantly, leaving tenants in the market for such space with limited options involving extremely costly rental rates.

Class A Large Blocks | Chicago CBD Office Market

21

large direct blocks of

CBD Class A space consisting of 3,380,731 square feet

10

large blocks of West Loop Class A space consisting of 1,511,856 square feet

4

large blocks of West Loop High Rise Class A space consisting of 581,229 square feet

100,000+ square feet

BUILDING CLASS SIZE (SF) FLOOR TYPE

C E N T R A L L O O P

125 S. Clark Street B 450,000 2-20 New/Direct

203 N. LaSalle Street A 292,777 14-20 Direct

10 S. Dearborn Street A 166,346 26-31 Direct

222 N. LaSalle Street A 165,866 3-6 Direct

131 S. Dearborn Street A 128,622 7-8 Direct

1 S. Dearborn Street A 106,624 14-17 Direct

131 S. Dearborn Street A 104,376 29-31 Direct

E A S T L O O P

233 N. Michigan Avenue A 144,006 8-12 Direct

200 E. Randolph Street A 131,274 68-71 Direct

200 E. Randolph Street A 119,672 32-35 Direct

303 E. Wacker Street A 113,039 15-20 Direct

401 S. State Street B 110,898 4-6 Direct

N O R T H M I C H I G A N A V E N U E

515 N. State Street A 396,273 2-18 Direct/Sublet

R I V E R N O R T H

350 N. Orleans Street B 218,964 3-6 Direct

600 W. Chicago Avenue B 117,101 2nd Direct

W E S T L O O P

311 W. Monroe Street B 387,705 1-14 Direct

300 S. Riverside Plaza A 265,093 2-6 Direct

227 W. Monroe Street A 167,408 52-60 Direct

300 S. Riverside Plaza A 158,197 9-11 Direct

500 W. Madison Street A 155,610 4-7 Direct

222 W. Adams Street A 154,605 28-34 Direct

550 W. Jackson Boulevard A 130,413 2-6 Direct

444 W. Lake Street A 130,000 31-35 New/Direct

30 S. Wacker Drive A 129,216 31-35 Direct

111 S. Wacker Drive A 112,171 14-17 Direct

150 N. Riverside Plaza A 109,143 17-20 New/Direct

(4)

4

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Lease and Sale Highlights

2015 ended with another strong quarter of leasing activity, as the CBD posted 11 lease transactions of 40,000 square feet or greater. Additionally, the fourth quarter included the largest leasing transaction of the year as CNA Financial announced that it will leave its longtime headquarters at 333 S. Wabash Avenue for 275,000 square feet in the new development at 151 N. Franklin Street upon its completion in 2018. The new developments at 150 N. Riverside Plaza and 444 W. Lake Street continued to attract quality tenants as Navigant Consulting signed a lease to occupy 110,000 square feet at 150 N. Riverside and Harrison Street Real Estate Capital leased 40,254 square feet at 444 W. Lake Street.

Amidst the flurry of leasing activity at the new developments during the fourth quarter, the Central Loop’s ability to retain desirable technology companies did not go unnoticed as Sprout Social renewed its lease for 64,000 square feet at 131 S. Dearborn Street and GrubHub expanded by 57,000 square feet at 111 W. Washington Street.

Investment sales activity remained extremely active during the fourth quarter as five properties closed and two more were placed under contract. The largest closed sales transaction during the quarter was the sale of 200 E. Randolph for $712 million ($264.00 per square foot) to New York based 601W Cos. The market remains incredibly hot for sellers, and there is little reason to suspect investment sales activity will slow during the first quarter of 2016 as new sellers look to take advantage of current market conditions.

Construction

Several high-profile projects are underway in Chicago’s CBD. The Hines development located at 444 W. Lake Street is currently under construction and has recently secured tenancy from Harrison Street Real Estate Capital and Balyasny Asset Management in addition to its anchor tenants McDermott Will & Emery, DLA Piper, Servcorp, Morton Salt, and Mead Johnson Nutrition. The building, which will amount to 1,073,100 square feet, will be delivered in early 2017. Another office project set to deliver in a similar time frame is John O’Donnell’s tower at 150 N. Riverside Plaza which has recently secured tenancy from Navigant Consulting, in addition to anchor tenants William Blair & Co., Hyatt Corporation, The Pritzker Group, and Polsinelli P.C. Mr. O’Donnell has also secured Wanxiang America Real Estate Group, a Chinese investor, to help finance the project, which will total approximately 1,229,064 square feet. During the fourth quarter, a third new development made a massive step towards breaking ground as developer John Buck Company landed CNA Financial Corporation to join law firm Hinshaw & Culbertson as anchor tenants in its new development at 151 N. Franklin Street. The development’s timeline took an unexpected hit earlier in 2015 when law firm Freeborn & Peters decided to renew its current lease at 311 S. Wacker Drive after previously signing a letter of intent to occupy space at the new development. However, CNA’s lease to occupy 275,000 square feet in the building gives the property enough preleased space to begin construction in early 2016. The building is expected to deliver 807,130 square feet to the market in 2018 and will look to land another large anchor tenant in 2016.

Large Deal Activity | Chicago CBD Office Market

(Transactions 50,000 SF+)

Sales Activity | Chicago CBD Office Market

New Construction | Chicago CBD Office Market

Source: CoStar, Colliers International Research

Source: CoStar, Colliers International Research

Source: CoStar, Colliers International Research 0 5 10 15 20 0 500,000 1,000,000 1,500,000 2,000,000 580,777 13 7 As of 4Q - 2013 As of 3Q - 2014 As of 4Q - 2015 SF of Transactions # of Transactions 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Square Footage Number of Sales 782,400 1,504,364 1,892,460 1,897,981 479,000 0 665,000 3,652,913 933,710 0 0 0 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2013 2014 2015 0.0% 5.0% 10.0% 15.0% 20.0%

Central Loop East Loop North Michigan Ave. River North West Loop

Vacancy (% ) 0 5 10 15 20 25 30 35 15 2008 3 2009 9 2010 19 2011 26 2012 31 2013 26 2014 27 2015 Class A Class B Class C

14.4% 14.9% 15.8% 10.3% 12.6% 13.2% 15.1% 14.6% 8.3% 11.6% 11.0% 13.7% 13.5% 7.6% 11.4% 1,347,669 974,000 0 5 10 15 20 0 500,000 1,000,000 1,500,000 2,000,000 580,777 13 7 As of 4Q - 2013 As of 3Q - 2014 As of 4Q - 2015 SF of Transactions # of Transactions 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Square Footage Number of Sales 782,400 1,504,364 1,892,460 1,897,981 479,000 0 665,000 3,652,913 933,710 0 0 0 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2013 2014 2015 0.0% 5.0% 10.0% 15.0% 20.0%

Central Loop East Loop North Michigan Ave. River North West Loop

Vacancy (% ) 0 5 10 15 20 25 30 35 15 2008 3 2009 9 2010 19 2011 26 2012 31 2013 26 2014 27 2015 Class A Class B Class C

14.4% 14.9% 15.8% 10.3% 12.6% 13.2% 15.1% 14.6% 8.3% 11.6% 11.0% 13.7% 13.5% 7.6% 11.4% 1,347,669 974,000 0 5 10 15 20 0 500,000 1,000,000 1,500,000 2,000,000 580,777 13 7 As of 4Q - 2013 As of 3Q - 2014 As of 4Q - 2015 SF of Transactions # of Transactions 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Square Footage Number of Sales 782,400 1,504,364 1,892,460 1,897,981 479,000 0 665,000 3,652,913 933,710 0 0 0 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2013 2014 2015 0.0% 5.0% 10.0% 15.0% 20.0%

Central Loop East Loop North Michigan Ave. River North West Loop

Vacancy (% ) 0 5 10 15 20 25 30 35 15 2008 3 2009 9 2010 19 2011 26 2012 31 2013 26 2014 27 2015

Class A Class B Class C

14.4% 14.9% 15.8% 10.3% 12.6% 13.2% 15.1% 14.6% 8.3% 11.6% 11.0% 13.7% 13.5% 7.6% 11.4% 1,347,669 974,000

(5)

5

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Significant Lease and Sale Activity

Chicago CBD Office Leasing Activity – 4Q 2015

TENANT BUILDING SUBMKT CLASS SIZE (SF) DEAL TYPE

CNA Financial 151 N. Franklin Street A WL 275,000 New

Mayer Brown 71 S. Wacker Drive A WL 265,000 Renewal/ Contraction

WeWork 125 S. Clark Street B CL 112,000 New

Navigant Consulting 150 N. Riverside Plaza A WL 110,000 New

MSDSonline 222 W. Merchandise Mart B RN 91,000 Sublease/ New

Sprout Social 131 S. Dearborn Street A CL 64,000 Renewal

GrubHub 111 W. Washington Street B CL 57,000 Expansion

1871 222 W. Merchandise Mart B RN 42,000 Expansion

Harrison Street Real Estate Capital 444 W. Lake Street A WL 40,254 New

Avant 222 N. Lasalle Street A CL 40,000 Expansion

Balyasny Asset Management 444 W. Lake Street A WL 40,000 New

Clark Hill 130 E. Randolph Street A EL 34,965 Expansion

FS = For Sale

CL = Central Loop EL = East Loop NMA = North Michigan Avenue RN = River North WL = West Loop UC = Under Contract

Chicago CBD Office Investment Sales – 4Q 2015

STATUS ADDRESS SUBMKT CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

Sold 200 E. Randolph Street EL A 2,700,000 712,000,000 $264.00 Piedmont REIT 601W Companies

Sold 111 W. Monroe Street CL B 1,200,000 314,350,000 $262.00 CommonWealth Partners,

CalPERS Samsung Life Insurance

Sold 333 W. Wacker Drive WL A 867,821 320,000,000 $369.00 Sumitomo Life, GM

Investment Management, & Hines US Core Office Fund

PNC Realty Investors

Sold 200 W. Adams Street WL B 677,222 168,250,000 $248.00 Sterling Equities Gerding Edlen

Sold 123 W. Madison Street CL B 89,694 10,062,500 $112.00 Cagan Management GK Development

UC 333 S. Wabash Avenue EL A 1,100,000 TBD TBD CNA Financial Corp John Buck Company

UC 1 N. Dearborn Street CL B 881,679 202,000,000 $229.00 Chetrit Group Beacon Capital Partners

FS 330 N. Wabash Avenue RN A 1,141,760 TBD TBD Riverview Realty Trust TBD

FS 440 S. LaSalle Street CL A 1,019,325 TBD TBD TIER Reit TBD

FS 181 W. Madison Street CL A 936,683 TBD TBD CBRE Global Investors TBD

FS 20 N. Wacker Drive WL B 915,164 TBD TBD Berkley Properties TBD

FS 225 W. Randolph Street WL B 849,252 TBD TBD Kushner Cos. TBD

FS 435 N. Michigan Avenue NMA B 737,375 TBD TBD Tribune Media Company TBD

(6)

Central Loop

The second largest submarket in the Chicago CBD, the Central Loop is best

known for its LaSalle Street corridor and its historic distinction as Chicago’s core

financial district. Although this distinction has dissipated some during the last

decade, the submarket still remains home to several of the city’s largest financial

institutions, banks and professional services firms.

As suggested by its name, the Central Loop resides in the heart of the CBD. The submarket is bordered by the Chicago River on the north, Van Buren Street on the south and Wells Street and State Street on the west and east, respectively.

Submarket Highlights & Forecast

The Central Loop finished 2015 by posting its seventh consecutive quarter of positive net absorption, causing vacancy within the submarket to dip 70 basis points to 11.0 percent, its lowest mark since 2008. The Central Loop’s future success will depend upon its ability to retain tenants attracted to the new developments in competing submarkets, particularly the West Loop, as professional services firms traditionally occupying space in the Central Loop are attracted to the new Class A plus supply that is set to hit the market in 2017.

The Central Loop will remain extremely tight until the new supply is delivered in 2017, at which point the submarket is likely to shift from a landlord favorable market to a tenant favorable market as landlords in the Central Loop will increase concessions in order to retain tenants and backfill space vacated by tenants migrating to new developments.

Market Indicators

Q4 2014 Q3 2015 CURRENT

VACANCY 13.2% 11.7% 11.0% QTR ABSORPTION 242,934 70,695 283,888 YTD ABSORPTION 519,281 494,049 777,937 RENTAL RATE $35.11 $35.98 $36.69 T H E M A G N IF IC E N T M IL E G R A N T P A R K M I L L E N N I U M P A R K ILLINOIS HUBBARD NORTH WATER KINZIE OHIO OHIO FRY MICHIGAN RUS H MICHIGAN MICHIGAN MICHIGAN KING DR

LAKE SHORE DRIVE

LA KE S HO RE D RIVE PRAIRIE INDIANA PRAIRIE CAL UME T STAT E DEARBORN DE WIT T MIE S V AN DER ROHE CL ARK CL ARK LA SA LL E WEL LS WEL LS A STO R RIT CHIE ST ONE WA BASH STAT E STAT E STAT E PRINCE TO N NORMAL NORMAL CLINT ON CANALP ORT LUM BER LUMBER W ALL AC E CO RB ETT GROV E CANAL WENTWO RT H WA BASH WA BASH WA BASH CL ARK CL ARK CL ARK CL ARK FEDERAL PARK TER R PL YMOUTH FEDERAL PLYMOUTH DEARBORN DEARBORN FEDERAL DEARBORN WEL LS WEL LS LA SA LL E LA SA LL E FINANCIAL WA CKER CANAL CLINT ON JEF FERSON DE SPL AINE S HALS TED HALS TED CLINT ON RUBLE JEF FERSON JEF FERSON DE SPL AINE S NEWBER RY NEWBER RY PE ORIA PE ORIA PE ORIA GREEN PE ORIA SANGAMON SANGAMON SHELB Y MOR GAN MOR GAN MOR GAN MOR GAN MIL LER MIL LER CARP ENTER MIL LER CARP ENTER CARP ENTER ABERDEEN ABERDEEN RA CINE PE ORIA GREEN SANGAMON LE SSING MOR GAN CARP ENTER MA Y NOR TH BRANCH FRANKLIN FRANKLIN ORLEANS SEDG WICK SEDG WICK ORLEANS NOR TH P ARK WIEL AND HUDSON HUDSON CLEVEL AND MOHA WK DA YT ON FREMONT VINE LA RRABEE KINGSBUR Y ST . CL AIR FAIRBANK S PARK NOR TH CITY FRONT PL

AZA DRIVE NEW

McCL UR G COLUMBUS HARBOR ST ET SON COLUMBUS CHICAGO CHICAGO PEARSON CHESTNUT CHESTNUT INSTITUTE PL. LOCUST DELAWARE WALTON WALTON OAK OAK WENDELL OAK HOBBIE MAPLE

HILL RUSCEDAR

H ELM ELM ELM DIVISION DIVISION DIVISION SCOTT SCOTT SCOTT HIC KO RY CH ERRY GOETHE EVERGREEN EVERGREEN EASTMAN EVER GREE N HAINE S OGDE N BLISS BANKS SCHILLER BURTON BLACKHAWK BLACKHAWK HO OKER NORTH NORTH EUGENIE CONCORD CONCORD CONCORD WEED WILLOW NORTH ONTARIO ERIE ERIE HURON SUPERIOR HURON SUPERIOR GRAND HUBBARD KINZIE GRAND RANDOLPH WACKER WACKER MONROE LA KE SHO RE D RIV E WASHINGTON SOUTH WATER LAKE FULTON MADISON RANDOLPH MONROE WASHINGTON LAKE MADISON MADISON ADAMS CONGRESS CONGRESS JACKSON JACKSON

VAN BUREN VAN BUREN

RANDOLPH MONROE WASHINGTON LAKE MADISON JACKSON VAN BUREN BALBO HARRISON HARRISON RANDOLPH MONROE WASHINGTON LAKE MADISON ADAMS JACKSON VAN BUREN HARRISON VERNON PARK MAXWELL CULLERTON MAXWELL MAXWELL LIBERTY 14TH 8TH POLK POLK CABRINI CABRINI TAYLOR 12TH PL O’BRIEN 13TH 14TH 16TH 17TH 18TH 19TH 17TH PL 19TH PL 14TH PL 15TH PL ROOSEVELT McFETRIDGE ROOSEVELT 9TH 11TH 13TH SOLIDARITY 14TH 18TH 19TH 23RD 24TH 23RD 23RD PL 24TH PL ALEXANDER 22ND PL CERMAK ARCH ER CHINA PL CERMAK 24TH 24TH PL CULLERTON 18TH 14TH PL 17TH 16TH LASALLE BELLEVUE Kenn ed y E xpwy D an R ya n E xp w y Stevenson Expwy Eisenhower Expwy

CENTRAL

LOOP

EAST LOOP

WEST

LOOP

RIVER

NORTH

NORTH

MICHIGAN

AVENUE

90

290

94

55

90

94

41

1000 FEET

300 METERS

NORTH

(7)

7

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Statistical Highlights

Class A vacancy within the Central Loop fell below ten percent for the first time since 2011, landing at 9.9 percent, as Class B vacancy decreased by 40 basis points for total of 11.7 percent.

The average direct asking rental rate in the submarket currently resides at $36.69 per foot gross, up

considerably from $35.98 per square foot posted in the third quarter. The Central Loop has now experienced eight consecutive quarters of increasing rental rates, as gross rent is up $6.02 per square foot since the first quarter of 2013.

Class A absorption rebounded significantly in the Central Loop during the fourth quarter, rising to 199,357 square feet of positive absorption after experiencing 72,923 square feet of negative net absorption during the third quarter.

Large Blocks of Availability

There are seven large blocks of contiguous and direct space containing at least 100,000 square feet in the submarket.

Construction

No new construction was delivered to the Central Loop during the fourth quarter, and there are no office developments currently planned. 125 S. Clark Street currently has a 450,000-square-foot contiguous block of space available, which is the largest block of available contiguous space in the CBD. The property is currently undergoing a full-scale renovation and recently signed WeWork to occupy 112,000 square feet when the renovation is completed. $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008 Square Footage Vacanc y

Class B Class C Average

Class A Absorption Vacancy 777,937 519,281 35,058 (108,010) 67,570 (111,365) (847,732) 11.0% 13.2% 14.4% 14.5% 14.2% 14.4% 14.1% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% -1,000,000 -800,000 -600,000 -400,000 -200,000 0 200,000 400,000 600,000 800,000 1,000,000 2015 2014 2013 2012 2011 2010 2009 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008 Square Footage Vacanc y

Class B Class C Average

Class A Absorption Vacancy 777,937 519,281 35,058 (108,010) 67,570 (111,365) (847,732) 11.0% 13.2% 14.4% 14.5% 14.2% 14.4% 14.1% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% -1,000,000 -800,000 -600,000 -400,000 -200,000 0 200,000 400,000 600,000 800,000 1,000,000 2015 2014 2013 2012 2011 2010 2009

Net Absorption & Vacancy | Central Loop Office Market

Source: CoStar, Colliers International Research

Asking Gross Rental Rates | Central Loop Office Market

Large Block Availabilities | Central Loop Office Market

Source: CoStar, Colliers International Research

100,000+ square feet

BUILDING CLASS SIZE (SF) FLOOR TYPE

125 S. Clark Street B 450,000 2-20 New/Direct

203 N. Lasalle Street A 292,777 14-20 Direct

10 S. Dearborn Street A 166,346 26-31 Direct

222 N. LaSalle Street A 165,866 3-6 Direct

131 S. Dearborn Street A 128,622 7-8 Direct

1 S. Dearborn Street A 106,624 14-17 Direct

(8)

8

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Lease and Sale Highlights

Large block leasing activity remained lukewarm in the submarket during the fourth quarter with three lease transactions greater than 50,000 square feet completed. The largest lease signing in the Central Loop during the quarter was WeWork’s deal to occupy 112,000 square feet in the recently renovated 125 S. Clark Street. Additionally, the Central Loop illustrated its ability to retain non-traditional tenants as Sprout Social, a Social Media Management company founded in 2010, renewed its lease for 64,000 square feet at the Citadel Center.

Investment sales activity remained active in the submarket with two properties trading as 111 W. Monroe Street sold to Samsung Life Insurance for $315.4 million ($262/SF) and 123 W. Madison Street sold to GK Development for $10.1 million ($112/SF). Additionally, 1 N. Dearborn Street was put under contract to sell for roughly $202.0 million ($229/SF) during the fourth quarter while 181 W. Madison Street and 100 N. LaSalle Street each remained on the market in the hottest investment sales cycle Chicago has seen in recent memory.

FS = For Sale UC = Under Contract

125 S. Clark Street

Significant Lease and Sale Activity

Central Loop Office Leasing Activity – 4Q 2015

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

WeWork 125 S. Clark Street B 112,000 New

Sprout Social 131 S. Dearborn Street A 64,000 Renewal

Grubhub 111 W. Washington Street B 57,000 Expansion

Central Loop Office Investment Sales Activity – 4Q 2015

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

Sold 111 W. Monroe Street B 80,228 SF $314,350,000 $262 Commonwealth Partners, CalPERS Samsung Life Insurance

Sold 123 W. Madison Street C 80,451 SF 10,062,500 $112 Cagan Management GK Development

UC 1 N. Dearborn Street B 881,679 SF $202,000,000 $229 Chetrit Group Beacon Capital Partners

FS 181 W. Madison Street A 936,683 SF TBD TBD CBRE Global Investors TBD

(9)

East Loop

The East Loop possesses a dynamic inventory base that includes office towers

interspersed amongst residential condominium buildings. With Millennium Park,

the city’s largest public space, serving as the submarket’s focal point, the East

Loop offers a unique office environment that is conducive to the work-life balance

often desired by the tenants that office there.

Although the East Loop’s distinct culture continues to remain attractive to more eclectic office tenants such as advertising firms, not-for-profit organizations, and educational institutions, recently, landlords of the submarket have been successful in retaining and attracting traditional office space users by offering more affordable space options relative to those available in the Central and West Loop. The submarket is bordered by the Chicago River on the north, Van Buren Street on the South, Lake Michigan on the east, and State Street on the west.

Submarket Highlights & Forecast

The East Loop showed marked improvement for the second consecutive quarter, posting a decrease in vacancy, an increase in direct asking rent and the most positive net absorption it has experienced since 2008. After lagging behind other submarkets in the CBD for several years after the recession, the East Loop submarket is now showing consistent signs that it’s on the path to recovery despite its peripheral location to public transportation hubs such as Union and Ogilvie Stations. CNA Financial’s fourth quarter deal to move to John Buck’s development in the West Loop poses a serious threat to the health of the East Loop moving forward as CNA will leave 750,000 square feet of vacant space in 333 S. Wabash Avenue when it moves out of the building in 2018. The new landlord’s ability to fill the shadow space created by CNA’s announced departure will prove pivotal for the submarket.

Looking ahead, the East Loop will continue to provide a cheaper alternative to the extremely expensive rental rates seen in the River North, the Central Loop, and the West Loop. The submarket will rely on firms looking to save money on real estate costs while remaining in high-quality office space, such as Kraft-Heinz electing to move to 200 E. Randolph Street.

Market Indicators

Q4 2014 Q3 2015 CURRENT

VACANCY 15.1 14.4% 13.7% QTR ABSORPTION (59,154) 163,364 206,662 YTD ABSORPTION (15,811) 172,299 379,461 RENTAL RATE $31.67 $32.71 $33.37 T H E M A G N IF IC E NT M IL E G R A N T P A R K M I L L E N N I U M P A R K ILLINOIS HUBBARD NORTH WATER KINZIE OHIO OHIO FRY MICHIGAN RUS H MICHIGAN MICHIGAN MICHIGAN KING DR

LAKE SHORE DRIVE

LA KE S HO RE D RIVE PRAIRIE INDIANA PRAIRIE CAL UME T STAT E DEARBORN DE WIT T MIE S V AN DER ROHE CL ARK CL ARK LA SA LL E WEL LS WEL LS A STO R RIT CHIE ST ONE WA BASH STAT E STAT E STAT E PRINCE TO N NORMAL NORMAL CLINT ON CANALP ORT LUM BER LUMBER W ALL AC E CO RB ETT GROV E CANAL WENTWO RT H WA BASH WA BASH WA BASH CL ARK CL ARK CL ARK CL ARK FEDERAL PARK TER R PL YMOUTH FEDERAL PLYMOUTH DEARBORN DEARBORN FEDERAL DEARBORN WEL LS WEL LS LA SA LL E LA SA LL E FINANCIAL WA CKER CANAL CLINT ON JEF FERSON DE SPL AINE S HALS TED HALS TED CLINT ON RUBLE JEF FERSON JEF FERSON DE SPL AINE S NEWBER RY NEWBER RY PE ORIA PE ORIA PE ORIA GREEN PE ORIA SANGAMON SANGAMON SHELB Y MOR GAN MOR GAN MOR GAN MOR GAN MIL LER MIL LER CARP ENTER MIL LER CARP ENTER CARP ENTER ABERDEEN ABERDEEN RA CINE PE ORIA GREEN SANGAMON LE SSING MOR GAN CARP ENTER MA Y NOR TH BRANCH FRANKLIN FRANKLIN ORLEANS SEDG WICK SEDG WICK ORLEANS NOR TH P ARK WIEL AND HUDSON HUDSON CLEVEL AND MOHA WK DA YT ON FREMONT VINE LA RRABEE KINGSBUR Y ST . CL AIR FAIRBANK S PARK NOR TH CITY FRONT PL

AZA DRIVE NEW

McCL UR G COLUMBUS HARBOR ST ET SON COLUMBUS CHICAGO CHICAGO PEARSON CHESTNUT CHESTNUT INSTITUTE PL. LOCUST DELAWARE WALTON WALTON OAK OAK WENDELL OAK HOBBIE MAPLE

HILL RUSCEDAR

H ELM ELM ELM DIVISION DIVISION DIVISION SCOTT SCOTT SCOTT HICKO RY CH ERRY GOETHE EVERGREEN EVERGREEN EASTMAN EVER GREE N HAINE S OGDE N BLISS BANKS SCHILLER BURTON BLACKHAWK BLACKHAWK HO OKER NORTH NORTH EUGENIE CONCORD CONCORD CONCORD WEED WILLOW NORTH ONTARIO ERIE ERIE HURON SUPERIOR HURON SUPERIOR GRAND HUBBARD KINZIE GRAND RANDOLPH WACKER WACKER MONROE LA KE SHO RE D RIV E WASHINGTON SOUTH WATER LAKE FULTON MADISON RANDOLPH MONROE WASHINGTON LAKE MADISON MADISON ADAMS CONGRESS CONGRESS JACKSON JACKSON

VAN BUREN VAN BUREN

RANDOLPH MONROE WASHINGTON LAKE MADISON JACKSON VAN BUREN BALBO HARRISON HARRISON RANDOLPH MONROE WASHINGTON LAKE MADISON ADAMS JACKSON VAN BUREN HARRISON VERNON PARK MAXWELL CULLERTON MAXWELL MAXWELL LIBERTY 14TH 8TH POLK POLK CABRINI CABRINI TAYLOR 12TH PL O’BRIEN 13TH 14TH 16TH 17TH 18TH 19TH 17TH PL 19TH PL 14TH PL 15TH PL ROOSEVELT McFETRIDGE ROOSEVELT 9TH 11TH 13TH SOLIDARITY 14TH 18TH 19TH 23RD 24TH 23RD 23RD PL 24TH PL ALEXANDER 22ND PL CERMAK ARCH ER CHINA PL CERMAK 24TH 24TH PL CULLERTON 18TH 14TH PL 17TH 16TH LA SALLE BELLEVUE Kenn ed y E xpwy D an R ya n E xp w y Stevenson Expwy Eisenhower Expwy

CENTRAL

LOOP

EAST LOOP

WEST

LOOP

RIVER

NORTH

NORTH

MICHIGAN

AVENUE

90

290

94

55

90

94

41

1000 FEET 300 METERS

NORTH

(10)

10

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Statistical Highlights

Vacancy decreased by 70 basis points during the fourth quarter of 2015, ending at 13.7 percent. Despite its solid fourth quarter absorption figures, the East Loop currently has the highest vacancy rate of any submarket throughout the CBD.

The East Loop experienced a significant rebound over the second half of 2015, posting 370,026 square feet of positive net absorption after reporting merely 9,435 square feet of positive net absorption over the first two quarters of the year.

Large Blocks of Availability

The number of available large, contiguous blocks of space available on a direct basis decreased by one block during the fourth quarter, leaving five such blocks available for large users.

Construction

No new construction was delivered to the East Loop during the fourth quarter. There are no office developments currently planned in the submarket.

100,000+ square feet

BUILDING CLASS SIZE (SF) FLOOR TYPE

233 N. Michigan Avenue A 144,006 8-12 Direct

200 E. Randolph Street A 131,274 68-71 Direct

200 E. Randolph Street A 119,672 32-35 Direct

303 E. Wacker Street A 113,039 15-20 Direct

401 S. State Street B 110,898 4-6 Direct

Absorption Vacancy 379,461 (59,154) 88,900 69,409 146,793 91,170 (1,100,968) 13.7% 15.1% 14.9% 15.2% 15.5% 16.1% 17.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% -1,200,000 -1,000,000 -800,000 -600,000 -400,000 -200,000 0 200,000 400,000 600,000 2015 2014 2013 2012 2011 2010 2009 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008 Square Footage Vacanc y

Class B Class C Average

Class A Absorption Vacancy 379,461 (59,154) 88,900 69,409 146,793 91,170 (1,100,968) 13.7% 15.1% 14.9% 15.2% 15.5% 16.1% 17.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% -1,200,000 -1,000,000 -800,000 -600,000 -400,000 -200,000 0 200,000 400,000 600,000 2015 2014 2013 2012 2011 2010 2009 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008 Square Footage Vacanc y

Class B Class C Average

Class A

Net Absorption & Vacancy | East Loop Office Market

Source: CoStar, Colliers International Research

Asking Gross Rental Rates | East Loop Office Market

Source: CoStar, Colliers International Research

(11)

11

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Lease and Sale Highlights

Clark Hill’s 34,965-square-foot expansion at 130 E. Randolph Street was the largest lease transaction that occurred within the East Loop submarket during the fourth quarter. Leasing activity in the submarket slowed during the fourth quarter after its most active quarter of leasing activity of the year in the third quarter with large transactions including Kraft Heinz’s move to the Aon center and WeWork’s new lease at 332 S. Michigan Avenue. Investment sales activity within the submarket remained extremely active during the fourth quarter with the sale of 200 E. Randolph Street being the second most expensive sale of 2015 in the CBD and the most expensive sale ever recorded in the East Loop.

Significant Lease and Sale Activity

East Loop Office Investment Sales Activity – 4Q 2015

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

Sold 200 E. Randolph Street A 2,700,000 $712,000,000 $264 Piedmont REIT 601W Cos.

UC 333 S. Wabash Avenue A 1,125,708 TBD TBD CNA Financial Corporation John Buck Company

UC = Under Contract

200 E. Randolph Street

East Loop Office Leasing Activity – 4Q 2015

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

(12)

North Michigan Avenue

The North Michigan Avenue submarket possesses a unique building composition

made up of hotels, retail space, office buildings, medical facilities and residential

properties. This, along with its peripheral location, makes it an appealing home for

less traditional office tenants.

The submarket’s small office tenant base is composed of primarily advertising firms, media agencies and a growing number of medical office users that desire close proximity to the large hospitals in the area. The submarket is bordered by Oak Street on the north, the Chicago River on the south, State Street on the west and Lake Michigan on the east.

Submarket Highlights & Forecast

North Michigan Avenue remains one of the lowest performing submarkets in the CBD despite posting a decrease in vacancy, increase in direct asking rates and an increase in positive net absorption during the fourth quarter.

Due to its peripheral location and boutique office user base, the submarket has historically experienced low leasing volume, relative to the other submarkets in the CBD. This presents unique challenges for North Michigan Avenue landlords, as they attempt to backfill the submarket’s existing vacancies.

North Michigan Avenue will continue to recover more slowly than other CBD markets due to an inability to attract more traditional office users because of its distance from key train stations. It is crucial that the submarket’s strong medical presence remains robust to aid in recovery.

Market Indicators

Q4 2014 Q3 2015 CURRENT

VACANCY 14.6% 13.8% 13.5% QTR ABSORPTION 141,388 (9,925) 41,309 YTD ABSORPTION (148,336) 115,437 156,746 RENTAL RATE $32.72 $34.25 $35.11 T H E M A G N IF IC E N T M ILE G R A N T P A R K M I L L E N N I U M P A R K ILLINOIS HUBBARD NORTH WATER KINZIE OHIO OHIO FRY MICHIGAN RUS H MICHIGAN MICHIGAN MICHIGAN KING DR

LAKE SHORE DRIVE

LA KE S HO RE D RIVE PRAIRIE INDIANA PRAIRIE CAL UME T STAT E DEARBORN DE WIT T MIE S V AN DER ROHE CL ARK CLAR K LA SA LL E WEL LS WEL LS A STO R RIT CHIE ST ONE WA BASH STAT E STAT E STAT E PRINCE TO N NORMAL NORMAL CLINT ON CANALP ORT LUM BER LUMBER W ALL AC E CORB ETT GROV E CANAL WENTWO RT H WA BASH WA BASH WA BASH CL ARK CL ARK CL ARK CL ARK FEDERAL PARK TER R PL YMOUTH FEDERAL PLYMOUTH DEARBORN DEARBORN FEDERAL DEARBORN WEL LS WEL LS LA SA LL E LA SA LL E FINANCIAL WA CKER CANAL CLINT ON JEF FERSON DE SPL AINE S HALS TED HALS TED CLINT ON RUBLE JEF FERSON JEF FERSON DE SPL AINE S NEWBER RY NEWBER RY PE ORIA PE ORIA PE ORIA GREEN PE ORIA SANGAMON SANGAMON SHELB Y MOR GAN MOR GAN MOR GAN MOR GAN MIL LER MIL LER CARP ENTER MIL LER CARP ENTER CARP ENTER ABERDEEN ABERDEEN RA CINE PE ORIA GREEN SANGAMON LE SSING MOR GAN CARP ENTER MA Y NOR TH BRANCH FRANKLIN FRANKLIN ORLEANS SEDG WICK SEDG WICK ORLEANS NOR TH P ARK WIEL AND HUDSON HUDSON CLEVEL AND MOHA WK DA YT ON FREMONT VINE LA RRABEE KINGSBUR Y ST . CL AIR FAIRBANK S PARK NOR TH CITY FRONT PL

AZA DRIVE NEW

McCL UR G COLUMBUS HARBOR ST ET SON COLUMBUS CHICAGO CHICAGO PEARSON CHESTNUT CHESTNUT INSTITUTE PL. LOCUST DELAWARE WALTON WALTON OAK OAK WENDELL OAK HOBBIE MAPLE

HILL RUSCEDAR

H ELM ELM ELM DIVISION DIVISION DIVISION SCOTT SCOTT SCOTT HICKO RY CH ERRY GOETHE EVERGREEN EVERGREEN EASTMAN EVERGR EEN HAINE S OGDE N BLISS BANKS SCHILLER BURTON BLACKHAWK BLACKHAWK HOOK ER NORTH NORTH EUGENIE CONCORD CONCORD CONCORD WEED WILLOW NORTH ONTARIO ERIE ERIE HURON SUPERIOR HURON SUPERIOR GRAND HUBBARD KINZIE GRAND RANDOLPH WACKER WACKER MONROE LA KE SHO RE D RIV E WASHINGTON SOUTH WATER LAKE FULTON MADISON RANDOLPH MONROE WASHINGTON LAKE MADISON MADISON ADAMS CONGRESS CONGRESS JACKSON JACKSON

VAN BUREN VAN BUREN

RANDOLPH MONROE WASHINGTON LAKE MADISON JACKSON VAN BUREN BALBO HARRISON HARRISON RANDOLPH MONROE WASHINGTON LAKE MADISON ADAMS JACKSON VAN BUREN HARRISON VERNON PARK MAXWELL CULLERTON MAXWELL MAXWELL LIBERTY 14TH 8TH POLK POLK CABRINI CABRINI TAYLOR 12TH PL O’BRIEN 13TH 14TH 16TH 17TH 18TH 19TH 17TH PL 19TH PL 14TH PL 15TH PL ROOSEVELT McFETRIDGE ROOSEVELT 9TH 11TH 13TH SOLIDARITY 14TH 18TH 19TH 23RD 24TH 23RD 23RD PL 24TH PL ALEXANDER 22ND PL CERMAK ARCH ER CHINA PL CERMAK 24TH 24TH PL CULLERTON 18TH 14TH PL 17TH 16TH LA SALLE BELLEVUE Kenn ed y E xpwy D an R ya n E xp w y Stevenson Expwy Eisenhower Expwy

CENTRAL

LOOP

EAST LOOP

WEST

LOOP

RIVER

NORTH

NORTH

MICHIGAN

AVENUE

90 290 94 55 90 94

41

1000 FEET 300 METERS

NORTH

(13)

13

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Statistical Highlights

During the fourth quarter, net absorption totaled 41,309 square feet, indicating a solid finish to the year.

Vacancy in the submarket decreased by 30 basis points during the fourth quarter, ending at 13.5 percent. Over the past year, vacancy in North Michigan Avenue has decreased from 14.6 percent to the current rate of 13.5 percent. The average gross asking direct rental rate increased substantially during the fourth quarter, ending at $35.11 per square foot gross, up from $34.25 per square foot in the prior quarter. Class A properties are currently reporting an average rental rate of $39.89 per square foot, up from $35.82 per square foot one year prior. Class B properties reported a slight quarterly increase to $30.69 per square foot gross, up from $30.65 per square foot gross at the end of the third quarter.

Large Blocks of Availability

The number of large, contiguous blocks of space available on a direct basis remained unchanged during the quarter and resides at one such block.

The largest block of available space in the submarket is located 515 N. State Street and totals 396,273 square feet.

Construction

No new construction was delivered to the North Michigan Avenue submarket during the fourth quarter. There are no office developments anticipated in the submarket in the near future.

100,000+ square feet

BUILDING CLASS SIZE (SF) FLOOR TYPE

515 N. State Street A 396,273 2-18 Direct/Sublet

Square Footage

Vacanc

y

Class B Class C Average

Class A 156,746 (148,336) 247,935 3,188 (69,116) (332,974) (396,399) 13.5% 14.6% 15.8% 15.2% 15.3% 14.8% 12.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% -500,000 -400,000 -300,000 -200,000 -100,000 0 100,000 200,000 300,000 2015 2014 2013 2012 2011 2010 2009 Absorption Vacancy $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008 Square Footage Vacanc y

Class B Class C Average

Class A 156,746 (148,336) 247,935 3,188 (69,116) (332,974) (396,399) 13.5% 14.6% 15.8% 15.2% 15.3% 14.8% 12.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% -500,000 -400,000 -300,000 -200,000 -100,000 0 100,000 200,000 300,000 2015 2014 2013 2012 2011 2010 2009 Absorption Vacancy $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008

Net Absorption & Vacancy | N Michigan Ave Office Market

Source: CoStar, Colliers International Research

Asking Gross Rental Rates | N Michigan Ave Office Market

Source: CoStar, Colliers International Research

(14)

14

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Lease and Sale Highlights

There were no significant lease transactions in the North Michigan Avenue submarket during the fourth quarter.

Investment sales activity was also sluggish in the submarket during the quarter with no transactions closed and one property put on the market as the Tribune Media Company announced that the Tribune Tower at 435 N. Michigan Avenue is on the market.

Tribune Tower

Significant Lease and Sale Activity

North Michigan Avenue Office Leasing Activity – 3Q 2015

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

N O S I G N I F I C A N T L E A S E T R A N S A C T I O N S

North Michigan Avenue Office Investment Sales Activity – 4Q 2015

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

FS 435 N. Michigan Avenue B 737,375 TBD TBD Tribune Media Company TBD

(15)

River North

River North continues to be one of the fastest growing submarkets in the CBD.

The result of new office development, a booming residential community and most

recently, an infiltration of technology companies, River North has transformed

from a once fairly undeveloped area consisting of warehouses and loft properties

into a lively and dynamic office environment.

River North now contains a mix of office options ranging from Class B and C loft-style properties to its newest Class A trophy office towers. The range in office space options captures the interest of both traditional and unconventional office users leading to its low vacancy rate. The submarket’s boundaries include Oak Street on the north, the Chicago River on the south and west and State Street on the east.

Submarket Highlights & Forecast

Vacancy decreased across all classes in River North for the third consecutive quarter, falling 70 basis points to 7.6 percent, the lowest vacancy rate the submarket has ever experienced. During the fourth quarter, River North again proved its ability to attract and retain technology firms that were responsible for a significant amount of the positive net absorption seen throughout 2015 as VelocityEHS subleased 91,000 square feet at the Merchandise Mart.

River North is expected to remain the strongest submarket in the CBD through 2016 as space remains extremely limited despite having the highest rents in the city. The most significant challenge to River North’s status as the strongest submarket in the CBD will come from the West Loop submarket as tenants are attracted to the three new properties expected in 2017 and 2018.

Market Indicators

Q4 2014 Q3 2015 CURRENT

VACANCY 8.3% 8.3% 7.6% QTR ABSORPTION 33,265 78,679 111,222 YTD ABSORPTION 307,048 -9,518 101,704 RENTAL RATE $35.28 $35.59 $37.45 T H E M A G N IF IC E N T M ILE G R A N T P A R K M I L L E N N I U M P A R K ILLINOIS HUBBARD NORTH WATER KINZIE OHIO OHIO FRY MICHIGAN RUS H MICHIGAN MICHIGAN MICHIGAN KING DR

LAKE SHORE DRIVE

LA KE S HO RE D RIVE PRAIRIE INDIANA PRAIRIE CAL UME T STAT E DEARBORN DE WIT T MIE S V AN DER ROHE CL ARK CLAR K LA SA LL E WEL LS WEL LS A STO R RIT CHIE ST ONE WA BASH STAT E STAT E STAT E PRINCE TO N NORMAL NORMAL CLINT ON CANALP ORT LUM BER LUMBER W ALL AC E CO RB ETT GROV E CANAL WENTWO RT H WA BASH WA BASH WA BASH CL ARK CL ARK CL ARK CL ARK FEDERAL PARK TER R PL YMOUTH FEDERAL PLYMOUTH DEARBORN DEARBORN FEDERAL DEARBORN WEL LS WEL LS LA SA LL E LA SA LL E FINANCIAL WA CKER CANAL CLINT ON JEF FERSON DE SPL AINE S HALS TED HALS TED CLINT ON RUBLE JEF FERSON JEF FERSON DE SPL AINE S NEWBER RY NEWBER RY PE ORIA PE ORIA PE ORIA GREEN PE ORIA SANGAMON SANGAMON SHELB Y MOR GAN MOR GAN MOR GAN MOR GAN MIL LER MIL LER CARP ENTER MIL LER CARP ENTER CARP ENTER ABERDEEN ABERDEEN RA CINE PE ORIA GREEN SANGAMON LE SSING MOR GAN CARP ENTER MA Y NOR TH BRANCH FRANKLIN FRANKLIN ORLEANS SEDG WICK SEDG WICK ORLEANS NOR TH P ARK WIEL AND HUDSON HUDSON CLEVEL AND MOHA WK DA YT ON FREMONT VINE LA RRABEE KINGSBUR Y ST . CL AIR FAIRBANK S PARK NOR TH CITY FRONT PL

AZA DRIVE NEW

McCL UR G COLUMBUS HARBOR ST ET SON COLUMBUS CHICAGO CHICAGO PEARSON CHESTNUT CHESTNUT INSTITUTE PL. LOCUST DELAWARE WALTON WALTON OAK OAK WENDELL OAK HOBBIE MAPLE

HILL RUSCEDAR

H ELM ELM ELM DIVISION DIVISION DIVISION SCOTT SCOTT SCOTT HICKO RY CH ERRY GOETHE EVERGREEN EVERGREEN EASTMAN EVERGR EEN HAINE S OGDE N BLISS BANKS SCHILLER BURTON BLACKHAWK BLACKHAWK HO OKER NORTH NORTH EUGENIE CONCORD CONCORD CONCORD WEED WILLOW NORTH ONTARIO ERIE ERIE HURON SUPERIOR HURON SUPERIOR GRAND HUBBARD KINZIE GRAND RANDOLPH WACKER WACKER MONROE LA KE SH O RE D RIV E WASHINGTON SOUTH WATER LAKE FULTON MADISON RANDOLPH MONROE WASHINGTON LAKE MADISON MADISON ADAMS CONGRESS CONGRESS JACKSON JACKSON

VAN BUREN VAN BUREN

RANDOLPH MONROE WASHINGTON LAKE MADISON JACKSON VAN BUREN BALBO HARRISON HARRISON RANDOLPH MONROE WASHINGTON LAKE MADISON ADAMS JACKSON VAN BUREN HARRISON VERNON PARK MAXWELL CULLERTON MAXWELL MAXWELL LIBERTY 14TH 8TH POLK POLK CABRINI CABRINI TAYLOR 12TH PL O’BRIEN 13TH 14TH 16TH 17TH 18TH 19TH 17TH PL 19TH PL 14TH PL 15TH PL ROOSEVELT McFETRIDGE ROOSEVELT 9TH 11TH 13TH SOLIDARITY 14TH 18TH 19TH 23RD 24TH 23RD 23RD PL 24TH PL ALEXANDER 22ND PL CERMAK ARCHER CHINA PL CERMAK 24TH 24TH PL CULLERTON 18TH 14TH PL 17TH 16TH LA SALLE BELLEVUE Kenn ed y E xpwy D an R ya n E xp w y Stevenson Expwy Eisenhower Expwy

CENTRAL

LOOP

EAST LOOP

WEST

LOOP

RIVER

NORTH

NORTH

MICHIGAN

AVENUE

90 290 94 55 90 94

41

1000 FEET 300 METERS

NORTH

(16)

16

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Statistical Highlights

River North posted positive net absorption of 111,222 square feet in the fourth quarter after experiencing 78,679 square feet of absorption during the third quarter.

The average asking rental rate in the submarket increased significantly during the fourth quarter, ending at $37.45 per square foot gross, up from $35.59 in the previous quarter. Asking rental rates in River North remain the highest throughout the CBD and have increased by 6.2 percent over the past year.

The average asking rent in River North’s Class A properties increased by $0.55 per square foot gross during the fourth quarter, remaining the most expensive asset class within the CBD at $48.10 per square foot gross. Additionally, Class B rent per square foot gross was up $1.30 to $37.10 and Class C rent increased $0.75 per square foot gross to $27.69.

River North’s Class A vacancy is lowest of any submarket in the city at 4.8 percent, indicating the relentless demand for high-quality office space in the market.

Large Blocks of Availability

The number of available large, contiguous blocks of space available on a direct basis currently resides at two blocks. The largest block of space is located at 600 W. Chicago Avenue and consists of 231,294 square feet.

Due to consistently high demand from traditional office space tenants as well as the emerging tech industry, River North currently has the fewest numbers of large contiguous blocks available within the CBD.

Construction

No new construction was delivered to River North during the fourth quarter. There are no office developments

currently planned in the submarket.

100,000+ square feet

BUILDING CLASS SIZE (SF) FLOOR TYPE

350 N. Orleans Street B 218,964 3-6 Direct

600 W. Chicago Avenue B 117,101 2nd Direct

Square Footage

Vacanc

y

Class B Class C Average

Class A 101,704 307,048 93,949 114,416 153,753 342,989 1,454,615 7.6% 8.3% 10.3% 10.9% 11.6% 12.7% 14.9% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2015 2014 2013 2012 2011 2010 2009 Absorption Vacancy $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008 Square Footage Vacanc y

Class B Class C Average

Class A 101,704 307,048 93,949 114,416 153,753 342,989 1,454,615 7.6% 8.3% 10.3% 10.9% 11.6% 12.7% 14.9% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2015 2014 2013 2012 2011 2010 2009 Absorption Vacancy $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 2015 2014 2013 2012 2011 2010 2009 2008

Net Absorption & Vacancy | River North Office Market

Source: CoStar, Colliers International Research

Asking Gross Rental Rates | River North Office Market

Large Block Availabilities | River North Office Market

(17)

17

Research & Forecast Report | Fourth Quarter 2015 | Downtown Chicago / Office | Colliers International

Lease and Sale Highlights

Leasing activity in the River North submarket slowed during the fourth quarter after experiencing successive quarters with lease transactions of over 105,000 square feet. Investment sales activity slowed within River North during the fourth quarter as no buildings were traded despite the record year for investment sales throughout the CBD.

Significant Lease and Sale Activity

River North Office Investment Sales Activity – 4Q 2015

STATUS ADDRESS CLASS SIZE (SF) SALE PRICE PRICE/SF SELLER BUYER

FS 330 N. Wabash Avenue A 1,141,760 TBD TBD Riverview Realty Trust TBD

Merchandise Mart

River North Office Leasing Activity – 4Q 2015

TENANT BUILDING CLASS SIZE (SF) DEAL TYPE

VelocityEHS 222 Merchandise Mart Plaza B 91,000 Sublease/New Lease

1871 222 Merchandise Mart Plaza B 42,000 Expansion

(18)

West Loop

The West Loop’s reputation as the CBD’s leading submarket is the result of it

possessing the largest office inventory of any submarket, its proximity to public transit

and tenant desire for the image associated with being located on or near Wacker

Drive, an address that has a long-standing positive reputation for office tenants.

Further contributing to the submarket’s growth was the development boom experienced over the past decade which added several highly-efficient, state-of-the-art trophy towers to building inventory. The West Loop is bordered on the north by Kinzie Street, on the south by Van Buren Street, by Halsted Street on the west and Wells street on the east.

Submarket Highlights & Forecast

The West Loop continued to garner momentum during the fourth quarter as it experienced decreasing vacancy, increasing rental rates, and the two largest leasing transactions of the quarter.

As the new developments at 444 W. Lake Street and 150 N. Riverside continue to rise, so too does the West Loop’s status. The two

developments are both over sixty percent preleased and project to be over ninety percent leased when they are delivered, indicating the incessant demand for high-quality space in the West Loop.

With vacancy rates at pre-recession levels and rental rates at all-time highs, the West Loop submarket remains among the healthiest in the CBD and projects to remain so for the foreseeable future.

Market Indicators

Q4 2014 Q3 2015 CURRENT

VACANCY 12.4% 12.0% 11.4% QTR ABSORPTION 294,267 210,426 278,644 YTD ABSORPTION 493,244 (178,763) 99,881 RENTAL RATE $37.58 $38.83 $39.11 T H E M A G N IF IC E N T M IL E G R A N T P A R K M I L L E N N I U M P A R K ILLINOIS HUBBARD NORTH WATER KINZIE OHIO OHIO FRY MICHIGAN RUS H MICHIGAN MICHIGAN MICHIGAN KING DR

LAKE SHORE DRIVE

LA KE S HO RE D RIVE PRAIRIE INDIANA PRAIRIE CAL UME T STAT E DEARBORN DE WIT T MIE S V AN DER ROHE CL ARK CL ARK LA SA LL E WEL LS WEL LS A STO R RIT CHIE ST ONE WA BASH STAT E STAT E STAT E PRINCE TO N NORMAL NORMAL CLINT ON CANALP ORT LUM BER LUMBER W ALL AC E CO RB ETT GROV E CANAL WENTWO RT H WA BASH WA BASH WA BASH CL ARK CL ARK CL ARK CL ARK FEDERAL PARK TER R PL YMOUTH FEDERAL PLYMOUTH DEARBORN DEARBORN FEDERAL DEARBORN WEL LS WEL LS LA SA LL E LA SA LL E FINANCIAL WA CKER CANAL CLINT ON JEF FERSON DE SPL AINE S HALS TED HALS TED CLINT ON RUBLE JEF FERSON JEF FERSON DE SPL AINE S NEWBER RY NEWBER RY PE ORIA PE ORIA PE ORIA GREEN PE ORIA SANGAMON SANGAMON SHELB Y MOR GAN MOR GAN MOR GAN MOR GAN MIL LER MIL LER CARP ENTER MIL LER CARP ENTER CARP ENTER ABERDEEN ABERDEEN RA CINE PE ORIA GREEN SANGAMON LE SSING MOR GAN CARP ENTER MA Y NOR TH BRANCH FRANKLIN FRANKLIN ORLEANS SEDG WICK SEDG WICK ORLEANS NOR TH P ARK WIEL AND HUDSON HUDSON CLEVEL AND MOHA WK DA YT ON FREMONT VINE LA RRABEE KINGSBUR Y ST . CL AIR FAIRBANK S PARK NOR TH CITY FRONT PL

AZA DRIVE NEW

McCL UR G COLUMBUS HARBOR ST ET SON COLUMBUS CHICAGO CHICAGO PEARSON CHESTNUT CHESTNUT INSTITUTE PL. LOCUST DELAWARE WALTON WALTON OAK OAK WENDELL OAK HOBBIE MAPLE

HILL RUSCEDAR

H ELM ELM ELM DIVISION DIVISION DIVISION SCOTT SCOTT SCOTT HICKO RY CH ERRY GOETHE EVERGREEN EVERGREEN EASTMAN EVERGR EEN HAINE S OGDE N BLISS BANKS SCHILLER BURTON BLACKHAWK BLACKHAWK HO OK ER NORTH NORTH EUGENIE CONCORD CONCORD CONCORD WEED WILLOW NORTH ONTARIO ERIE ERIE HURON SUPERIOR HURON SUPERIOR GRAND HUBBARD KINZIE GRAND RANDOLPH WACKER WACKER MONROE LA KE SH O RE D RIV E WASHINGTON SOUTH WATER LAKE FULTON MADISON RANDOLPH MONROE WASHINGTON LAKE MADISON MADISON ADAMS CONGRESS CONGRESS JACKSON JACKSON

VAN BUREN VAN BUREN

RANDOLPH MONROE WASHINGTON LAKE MADISON JACKSON VAN BUREN BALBO HARRISON HARRISON RANDOLPH MONROE WASHINGTON LAKE MADISON ADAMS JACKSON VAN BUREN HARRISON VERNON PARK MAXWELL CULLERTON MAXWELL MAXWELL LIBERTY 14TH 8TH POLK POLK CABRINI CABRINI TAYLOR 12TH PL O’BRIEN 13TH 14TH 16TH 17TH 18TH 19TH 17TH PL 19TH PL 14TH PL 15TH PL ROOSEVELT McFETRIDGE ROOSEVELT 9TH 11TH 13TH SOLIDARITY 14TH 18TH 19TH 23RD 24TH 23RD 23RD PL 24TH PL ALEXANDER 22ND PL CERMAK ARCHER CHINA PL CERMAK 24TH 24TH PL CULLERTON 18TH 14TH PL 17TH 16TH LA SALLE BELLEVUE Kenn ed y E xpwy D an R ya n E xp w y Stevenson Expwy Eisenhower Expwy

CENTRAL

LOOP

EAST LOOP

WEST

LOOP

RIVER

NORTH

NORTH

MICHIGAN

AVENUE

90

290

94

55

90

94

41

1000 FEET 300 METERS

NORTH

References

Related documents

Your specialist nurse, or hospital patient information centre, may be able to help you get grants for aids, heating costs, holidays and other household expenses related to

300 East Randolph 300 North LaSalle Street 300 South Riverside Plaza 300 South Wacker 300 West Adams Building 303 East Wacker 303 West Madison 311 South Wacker Drive 311 West

O'Carroll, 2008). It was anticipated that the unit would perform approximately 10 donor assessments in the first year of the programme, with 50% proceeding to LDLT. However,

What conclusions can be drawn for the application of collaboration scripts? The learning environments realized in this study show some effective and less effective ways for

the target decisions confidently with minimal crowdsourced labels; (2) selecting and maintaining a reliable pool of agents who can be assigned to analysis tasks and provide

Instrument is the van buren county register deeds search a centralized office of deeds automation fees and maintaining records, and business license, and to act.. Received the van

Building on previous research investigating behaviours essential for the diagnosis of DSM-5 ASD, the current study investigated the sensitivity and specificity of a set of 14

ON C ANAL VAN BUREN JACKSON VAN BUREN JACKSON ADAMS ADAMS MONROE MONROE MADISON MADISON WASHINGTON WASHINGTON RANDOLPH RANDOLPH LAKE FULTON FULTON CARROLL KINZIE KINZIE GRAND