3000 Dundee Rd
Northbrook, IL 60062
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Reis Observer
Metro Analysis
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Sample Office Asset Advisor

  1. 1. 3000 Dundee Rd Northbrook, IL 60062
  2. 2. Contents 3 Reis Observer Metro Analysis Section 1 - Current Metro Rent Details 14 Section 2 - Rent Growth Comparisons 14 Section 3 - Current Metro Vacancy Details 15 Section 4 - Vacancy Rate Comparisons 15 Section 5 - Metro Inventory Detail 16 Section 6 - Inventory Growth Comparison 16 Section 7 - Construction/Absorption Change 17 Section 8 - Submarket New Construction Project Tally 18 Section 9 - New Construction Listing 19 Section 10 - Market Data by Building Class - Class A Properties 26 Section 11 - Market Data by Building Class - Class B/C Properties 28 Section 12 - Submarket Snapshot 30 Section 13 - Economic and Demographic Trends 31 Section 14 - Submarket Boundaries 32 Section 15 - Metro Data 33 Submarket Analysis Section 16 - Current Submarket Rent Details 35 Section 17 - Rent Growth Comparisons 35 Section 18 - Current Submarket Vacancy Details 36 Section 19 - Vacancy Rate Comparisons 36 Section 20 - Submarket Inventory Detail 37 Section 21 - Inventory Growth Comparison 37 Section 22 - Construction/Absorption Change 38 Section 23 - Market Data by Building Class - Class A Properties 39 Section 24 - Market Data by Building Class - Class B/C Properties 40 Section 25 - Submarket Data 41 Rent Comparables Sale Comparables
  3. 3. Because Reis Observers are narrative reports that present a thoughtful analysis of Reis findings in a given metro, our editorial staff can not begin writing them until the Reis quartely data is released. Therefore the Observers are published on a rolling schedule throughout the quarter and may contain data that predates the rest of this Asset Advisor by one quarter. Reis Observer
  4. 4. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 THE ECONOMY Employment: Broad shoulders. Four successive years of net job losses finally were relieved in 2005 when, according to data provided by the U.S. Department BLS reports a seasonally • of Labor’s Bureau of Labor Statistics (BLS), average nonagricultural unadjusted unemployment rate of employment in the Chicago area Metropolitan Division grew by 1.0%, 4.6% in July for the Chicago adding 36,800 jobs net to the local economy. It is a modest growth rate MSA. by U.S. norms but is not insignificant by Chicago standards (year-over- year increases over the eight-year period preceding the recent recession Average nonagricultural • averaged 1.7%). The pace now has picked up—slightly. Non-farm employment in MSA was up employment as of June 2006 was up 1.2% (44,600 jobs) from 12 months 1.2% year over year in June, according to data provided by the prior. But dramatic improvement is not expected. While the economy is BLS. broad and diverse, there is no dynamic growth engine that will shake it loose from the pattern of slow growth. And the Metropolitan Division’s Economy.com reports a second • large manufacturing sector, accounting for about 400,000 jobs, continues quarter 2006 average household to struggle. While its losses were the smallest of the series, 2005 was the income of $111,833 for seventh year in succession to see net employment losses in this sector. Chicago. By contrast, an And the losses continue. Employment in Manufacturing as of June 2006 average of $108,545 and was down 1.7% (6,900 jobs) from the preceding June. The economy’s $101,810 are reported for the overall growth, accordingly, derives from the greater vitality of other top metros in the nation and sectors (substantial increases are indicated for the professional and Midwestern region, respectively. business services and educational and health services segments, for example). Stability, thus, is a chief attribute. The economy is expected to gain additional leverage over time from the multi-year, $15 billion expansion underway at O’Hare International Airport, which Marcus & Millichap Real Estate Investment Brokerage Company expects will generate 90,000 to 195,000 jobs by completion. The unemployment rate as of July was 4.6%, down from 6.4% twelve months earlier. Population growth, another factor in the economy’s typically slow growth, remains sluggish: the 0.6% annual average increase indicated by Chicago Employment by Sector Economy.com for the past five years leaves just enough room for modest Manufacturing Education & net in-migration. Still, the average annual numerical gain, at about 46,000, 10% Health Svc. Constr, Trans, represents significant demand for goods, services and real estate product. 13% Util, Nat. Rsrce Thus, while Chicagoland growth overall is slow, there are pockets of 9% Government vitality. Residential development, accordingly, continues, expanding ever Wholesale 13% 5% farther into increasingly remote suburban areas, particularly those in the Leisure & Information far west and far southwest, and downtown Chicago has seen a remarkable Hospitality 2% 9% surge in condominium development and conversion over the past few Finance 8% years. That said, home prices, holding to the Midwestern model, have Prof. & Retail Trade & shown only moderate increases in the recent term; the local market has Business Svc. Consumer Svc. 16% 15% not participated in the huge run-ups that have captured many of the Source: BLS 1 Copyright 2006 Reis, Inc. Page 3
  5. 5. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 markets on the nation’s east and west coasts. The National Association of Realtors reports a second quarter metro area single-family home resale price (preliminary) of $278,500, up 4.9% over 12 months. OUTLOOK Chicago Non-Farm Employment Growth 100 3% The broad shoulders of the local economy, its lack 2% Jobs Added (000's) 50 of high-growth drivers, and the good health of its Rate of Growth 1% service sectors suggest that the recently regained 0% 0 stability will continue, as long as the national -1% economy can lend support. In the meantime, -50 -2% expanding employment and ongoing population -100 -3% growth, particularly in selected suburban areas and 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 downtown, should fuel demand for real estate of all Jobs Added Rate of Growth types. Source: BLS Population Trends 1.8% Population Growth (% change) 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Chicago Midwestern US US Source: Economy.com Office Employment Trends Office Employment (% change) 5% 4% 3% 2% 1% 0% -1% -2% -3% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Chicago Midwestern US US Source: Economy.com 2 Copyright 2006 Reis, Inc. Page 4
  6. 6. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 THE REAL ESTATE MARKET Special Real Estate Factors:: In the space of three years, from year-end 2000 to the end of 2003, the Chicago office market, undermined by the collision of robust Grubb & Ellis Company recently • development with precipitous negative absorption, added 1,000 basis reported that landlords marketing points to its vacancy rate and 23.4 million square feet to its stock of metro Chicago’s abundant stock of Class B space soon will be faced vacant space. High vacancy and other symptoms of softness lingered for with a decision. “If they are a while thereafter, and only last year did the market begin to show signs of willing to spend some money on recovery, which now are multiplying. While development remains active, tenant improvements and offer demand volumes have soared to their highest level in years, finally generous lease packages,” explains surpassing new supply. Vacancy, while still elevated, is moving downward the firm, “they will be able to decisively, and growth has returned to rents. The local economy, creating attract tenants.” Those reluctant jobs in the business services and financial sectors, provides the to make such decisions will see foundation. That said, however, large volumes of vacant space still damp their vacancies linger, that source this market, even as a new development cycle is rearing its head. cautions. Marking Los Angeles-based OCCUPANCY • BentleyForbes’s entry into the Chicago market—as well as its The latest dramatic Office Vacancy Trends largest acquisition to date—that cycle of development privately held investment company 25% and the simultaneous spent approximately $470 descent of absorption 20% Average Vacancy million, or about $214 psf, to into negative territory 15% acquire the two-building (41 and resulted in vacant 64 stories, respectively), 2.2- 10% above 19.0% in million-square-foot Prudential 5% 2004—as in turn the Plaza office campus in downtown volume of vacant 0% Chicago’s East Loop adjacent to 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 stock rose above 43.5 Millennium Park. The site Chicago Midwestern US US million square feet (an includes the original Prudential Source: Reis, Inc. entire city’s worth of Building, located at 130 E. Randolph Street and completed in empty office space). But the combination of revived absorption and the 1995, and Two Prudential Plaza removal of stock (mainly lower-tier) from the market for conversion to at 180 N. Stetson Ave., other uses reversed the trend in 2005. By the end of that year the vacancy completed in 1990. San rate had slipped to 18.7%. Improvement now has become more earnest. Francisco-based Shorenstein With demand running strong, the rate had declined to 17.9% by mid-year Properties was the seller, which (representing 40.8 million square feet, 17.7 million of which are Class A). according to Crain’s Chicago A decline to 17.4% is anticipated by year-end after which substantial year- Business paid about $182 a over-year decreases will drop the number to 12.6% by the end of 2010, square foot for the property in according to our latest forecast. Occupancy’s recovery has begun: its 2000. According to that source, effects, as detailed below, now extend into the rental and development the complex is about 85% leased. sectors. In July, Jackson, MS-based • Parkway Properties closed its fee simple purchase of the 1.0 million- 3 Copyright 2006 Reis, Inc. Page 5
  7. 7. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 Grubb & Ellis sees a similar trend, although its descent timetable lags Reis’s a bit—or according to this source, a vacancy peak of 19.3% was Special Real Estate Factors: reached as recently as third quarter 2005. Since then, the rate has dropped Continued to 17.2%. Julien J. Studley Inc. reports second quarter overall and Class A square-foot, 32-story One Illinois vacancies at 18.3% and 18.4%, each down 50 basis points from a quarter Center office tower at 111 E. prior and each down 130 points year over year. Reis, for its part, puts the Wacker Drive in downtown quarter-end Class A rate at 16.7%, down 220 points over 12 months, as Chicago’s East Loop, Grubb & the volume of vacant stock in this class decreased by about 950,000 square Ellis reported in its second quarter feet. Capital market Updates. Parkway Properties Inc. already SUPPLY AND DEMAND owns Two Illinois Center. The selling price, excluding closing costs Net absorption, after and transfer taxes, was $198 Chicago Office Supply and Demand Trends turning in its first million, or $215 psf (RSF). substantial total last year 10,000 25% According to a company press (1.1 million square feet) is release, “The purchase price 5,000 20% Square Feet (000's) Vacancy Rate represents an estimated 23% expected to soar to 3.4 0 15% discount to current estimated million in 2006, 2 million -5,000 10% replacement cost of $280 RSF. of which had been The property is expected to -10,000 5% accomplished by mid-year. produce an initial unleveraged -15,000 0% While construction, yield or going-in cash 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 dominated by the capitalization rate of Completed Absorbed Vacancy Rate downtown markets, Source: Reis, Inc. approximately 6.3% in the first remains active, the 1.5 million square feet projected to deliver in 2006, twelve months of operations, nearly all of which have already, will amount to only 43% of same-term calculated using first year absorption. Significantly, 2006 will be the first year since 2000 in which estimated net operating income of net absorption exceeds same-year deliveries. That trend should continue. $13.5 million and the total purchase price of $215.4 million.” Reis is forecasting respective net absorption and construction completion The sellers in the deal were totals of 16.6 million and 6.5 million square feet for the four-year span Lincoln Property Co. and Carlyle 2007 through 2010. Also aiding in the recovery of the market is an actual Group. reduction of non-Class A supply due to the conversion of space to other uses. By the firm’s count, Class B-C inventory decreased by 1.8 million Other significant sales include the • square feet last year, with 622,000 additional square feet of such space $300 million purchase by leaving the market during first half 2006. With Class A inventory growing Fremont Realty Capital and by similar amounts, the supply of total existing inventory, now reported at Shorenstein Properties of the 227.8 million square feet, has held roughly steady. Now, however, with 70%-occupied 311 S. Wacker over-supply concerns in the residential condominium market, the Drive building, GlobeSt.com attractiveness of older office buildings to residential developers appears to reported in August 2006 Walton Capital was the seller be on the wane. “Vacancy rates in the Chicago Downtown office market are Further, Grubb & Ellis Company warns of the potential danger of a new decreasing,” stated an executive round of development in the downtown markets: nearly 3 million square with Carlton Advisory. feet, this source notes, are expected to arrive on line in the CBD over the “Currently in tower space—26 4 Copyright 2006 Reis, Inc. Page 6
  8. 8. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 next few years (Reis’s research, as referenced in the Submarkets section, also show a heating up of activity downtown). “As tenants leave current Special Real Estate Factors: locations in favor of new construction,” Grubb & Ellis notes, “anticipated Continued future vacancies will temper the pace of recovery.” CB Richard Ellis floors and up—on Wacker Drive, reports current construction at 1.8 million square feet, 1.35 million of rates are at about 7%. That which are downtown and all of which are Class A. Net absorption for the remains true with the 311 latest quarter, meanwhile, is counted by this source at 1.5 million square building; its vacancy remains in feet, about 43% of which is attributed to the CBD markets. Grubb & the top floors.” According to Ellis reports net absorption year-to-date at 3.3 million square feet, GlobeSt.com, “The property, one including 2.2 million downtown. According to Studley, the inventory of of the most high-profile buildings large blocks of space (minimum size 125,000 square feet) has diminished in the Downtown area, had in both the downtown and suburban markets. For the metro area as a languished for several years under whole, this source reports 37 such blocks on the market as of mid-2006, a series of owners and weak down from 50 a year earlier. This progress aside, it should not be market conditions. The purchasers overlooked that the volume of vacancy in these spaces and in the market feel the Chicago market is entering a period of resurgence, with falling as a whole remains considerable. Grubb & Ellis’s admonition respecting a vacancies and rising rents.” new wave of construction in the downtown area should be given serious GlobeSt. reported earlier that consideration. Behringer Harvard REIT I has spent $27.5 million ($192 psf) to RENTS acquire the 35-story 222 S. Riverside Plaza, as well as the While the average Office Rent Trends adjacent three-story Union Station asking lease rate evinced Multiplex at 444 W. Jackson 15% small increases during Blvd., from Beacon Capital 10% the last three quarters of Strategic Partners III, LP. Rent Change last year, 2006 will be 5% the first year since 2000 0% to record a year-over- -5% year increase, which -10% Reis forecasts at 2.5%. 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Growth returned to the Chicago Midwestern US US average effective rate Source: Reis, Inc. last year, but the small, 0.4% gain was negligible alongside the preceding losses, which also extended back through 2001. But 2006 is expected to grace this rental category with a gain on the order of 3.4%. Rates of year- over-year gain are expected to increase gradually, albeit not steadily, through 2010. Respective asking and effective averages for second quarter 2006 were $25.02 and $20.35 psf, up 0.1% and 0.8% from the preceding quarter. Studley puts second quarter metro area overall and Class A asking averages at $22.87 and $25.15 psf, up 0.6% and 0.3% for the period though down year over year. Reis, for its part, cites a Class A mean of $30.32 psf, down 0.5% for the quarter, up 0.4% over 12 months. According to Grubb & Ellis, the Class A weighted average asking price 5 Copyright 2006 Reis, Inc. Page 7
  9. 9. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 increased by nearly $1.00 psf over the past four quarters, as a result mainly of “higher asking rates in new Class A buildings.” SUBMARKETS Downtown Chicago The window of opportunity for recovery of the downtown market • likely will be brief. Just as a massive wave of development finally is ending, a new one is getting underway. “With the addition of new towers in the Loop, landlords are being • forced to make upgrades, and the space being vacated is leaving a big void,” a real estate economist with Property & Portfolio Research informs GlobeSt.com. Fifield Company’s 479,000-square-foot 550 W. Adams project in the • West Loop delivered in June. USG Corporation and Humana are tenants. Occupancy scheduled for third quarter, and CB Richard Ellis puts leasing in the new building at about 76%. Houston-base developer Hines broke ground in July on a 60-story, • 1.5-million-square-foot tower at 300 N. LaSalle in the River North area (a.k.a. Gold Coast), reports GlobeSt.com. Anchor tenant law firm of Kirkland & Ellis has committed to 600,000 square feet in the new building, leaving their space at 200 E. Randolph Drive. Early 2009 delivery is anticipated. Accordingly, notes this source, “Industry experts agree that the tenant is a boon for Hines, but that the Chicago commercial real estate industry could be creating a void by vacating some older buildings.” The 1.2-million-square-foot, 40-story 351 N. Clark Street building • from Mesirow Financial, also in River North, is scheduled to break ground on September 1, reports CB. The firm reports pre-leasing at 75.0%. Hines, reports this source, has proposed a 1.0-million-square-foot • project for 200 N. Riverside Plaza. Fifield Realty has proposed a 37-story, 894,000-square-foot tower at • 601 W. Monroe on what the developer describes as “one of the last great office sites available in the West Loop.” 6 Copyright 2006 Reis, Inc. Page 8
  10. 10. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 In August, reports GlobeSt.com, Mills sold “a major portion” of 108 N. • State to Golub & Company. “The deal gives Golub control of an office building that will accommodate WBBM-Channel 2 and two residential towers.” A 1.25-million-square-foot tower is planned for 301 S. Wacker in the • West Loop, reports Reis. With the start of retail construction, development of Mills • Corporation’s $295 million 108 N. State Street (formerly Block 37) mixed-use commercial-residential project in the Loop is moving forward. Plans, reports the Chicago Tribune, include 300,000 square feet of office space. The last wave…. Recent major completions include Hines’s spec • 825,000-square-foot One South Dearborn, anchored by law firm Sidley Austin, which delivered to the Central Loop in December 2005. The $275-million, 52-story, 1.0-million-square-foot 111 S. Wacker • Drive tower from John Buck Company, leased to Deloitte & Touche, Lord, Bissell & Brook, and RR Donnelly, completed construction in the West Loop in June 2005. The building has since sold for a record price of $401 psf. Higgins Development Partners’ $225 million, 1.5-million-square-foot • Hyatt Center at 71 S. Wacker Drive finished construction in July. Reis puts second quarter West Loop vacancy and average asking rent • at 15.7% and $30.69 psf. Net absorption year-to-date is 1.1 million square feet. Central Loop vacancy and average asking rent were 18.5% and $28.00 • psf. Next absorption through the first half of 2006 was 704,000 square feet. Quarter-end River North vacancy and average asking rent were 11.1% • and $23.16 psf. Net absorption through mid-year 2006 was 183,000 square feet. For downtown generally, Studley expects the gradual rise in rents to • become a trend. “Concession packages are beginning to tighten and free rent is on the decline.” 7 Copyright 2006 Reis, Inc. Page 9
  11. 11. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 West Suburban Development has slowed markedly in Chicago’s extensive western • suburban areas. But, as in the downtown market, activity is again heating up. In Reis’s suburban West submarket, 6.8 million square feet completed • construction from 1998 through 2004. While only 581,000 square feet delivered during the two-year span • 2003 through 2004, and only 50,000 finished last year, 2007 is expected to produce 1.1 million square feet, (following this year’s 291,000 square feet). In the West, 214,000 square feet completed construction during first • half 2006 in a handful of small projects. The largest (by far) was the 110,000-square-foot installment at Estancia Corporate Center in Burr Ridge, which finished in March. Many projects are on the drawing board in areas including Naperville, • Bolingbrook, Aurora, Burr Ridge, Downers Grove and Lisle. Major proposed projects include new phases totaling 470,000 square • feet for The Corridors complex in Downers Grove. Alter Group is the developer. In the same town, the 250,000-square-foot fifth phase of Highland • Landmark is planned. The second phase of Corporetum Office Tower planned for Lisle • would add 365,000 square feet, while projects planned for Warrenville Road in the same town will, if built, add 581,000 square feet. Studley reports a 105,000-square-foot second quarter lease by Wilson • Sporting Goods at 8770 W. Bryn Mawr Avenue in the O’Hare area. Net absorption year-to-date for the West submarket calculates at • negative 82,000 square feet. The net for the year all told, however, is forecast at positive 336,000 square feet. The average asking rent for the West is given as $21.38 psf, up 0.8% • over the quarter. 8 Copyright 2006 Reis, Inc. Page 10
  12. 12. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 Northwest Suburban / North Suburban From 1998 through 2002, developers added more than 5.6 million • square feet of new multi-tenant space to the suburban Northwest submarket. Thereafter, the pace slowed. In 2005, the annual completion total fell to lower than 100,000 square feet. Multi-tenant construction, however, is picking up. The North’s recent profile is similarly cyclical. Construction dropped • to nearly nothing last year and only 46,000 square feet will deliver in 2006. But the 2007-2008 period is expected to see the completion of 482,000 square feet. In Lake Forest (in Reis’s North submarket), Opus North has • commenced construction of the $35-million, 160,000-square-foot, speculative Class A Landmark II project on S. Sanders Road, reported the Chicago Daily Herald in July. The developer expects completion in July 2007. Also in Lake Forest, Duke Realty Corporation will break ground in • October on its 100,000-square-foot West Lake at Conway, a Class A spec office building. “The announcement,” notes GlobeSt, “follows Duke's lease-up of another speculative building in the same park— Cadence at Conway, a 138,000-square-foot office development,” leased to tenant Hospira Inc. in June. Grubb & Ellis cites the Elgin area in the far northwest as “hot” with • “significant activity along I-90m between Route 31 and Randall Road,” due to “tremendous growth in Kane County.” Komatsu America Corporation has moved its headquarters to Rolling • Meadows in the Northwest, reported GlobeSt. at the end of July. The firm now occupies 105,437 square feet in Prime Group Realty Trust’s 280,000-square-foot Tower 1 at Continental Towers, located at 1701 Golf Road. The 911,000-square-foot Continental Towers complex is now 92% leased, this source reports. In the Schaumburg area, Citigroup moved into 177,000 square feet • during second quarter. Grubb & Ellis characterizes the deal as “the largest suburban office lease year-to-date.” 9 Copyright 2006 Reis, Inc. Page 11
  13. 13. Reis Observer Office - Asset Advisor Reis Observer CHICAGO OFFICE MARKET Q2 2006 Metro: Chicago Q2 2006 Vacancies in the North and Northwest remain elevated at 17.0% and • 19.7%. Respective North and Northwest average asking lease rates are given as $22.28 and $21.00 psf. Year-to-date net absorption totals through mid-year are reported at • negative 238,000 square feet for the North and positive 426,000 for the Northwest. OUTLOOK The market has been staging a convincing recovery from the severe imbalance of supply to demand that fell upon it post-2000. Although that recovery is not complete, a new cycle of development, while not as energetic as the previous one, now poses material concern. Much will depend on the local economy, which at the moment is doing well. Reis expects demand to maintain its recently regained lead over new supply, and barring an unexpected shake-up, vacancy should continue to decrease over the next several years while landlords enjoy higher rates of rental growth and relaxation of concessions. • For additional metro and submarket level information on the top 80 markets for the four principal property types, visit www.reis.com or call Reis at: (800) 366-REIS. Unless otherwise indicated, economic and demographic data provided by Economy. com 10 Copyright 2006 Reis, Inc. Page 12 Publication Date: September 2006 © 2006 Reis, Inc.
  14. 14. Metro Analysis
  15. 15. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Section 1 - Current Metro Rent Details Asking Rent by Age Asking Rent Distribution Asking Rent Growth Rate Distribution Low 25% Mean Median 75% High Low 25% Mean Median 75% High Year Built Rent Before 1970 $23.05 $14.03 $20.08 $25.24 $24.86 $29.73 $39.74 - 5.0% - 0.1% 0.9% 0.9% 2.5% 8.1% 1970-1979 $24.79 511 633 510 1980-1989 $25.48 Number of Properties Number of Properties 1990-1999 $28.59 354 After 1999 $30.10 All $25.24 313 308 As of 09/30/06 184 178 103 113 107 53 52 48 22 15 Under $17.25 $20.46 $23.67 $26.88 $30.09 $33.30 $36.51 Under - 4.8% - 3.2% - 1.6% 0.0% 1.6% 3.2% 4.8% $17.24 $20.45 $23.66 $26.87 $30.08 $33.29 $36.50 Over - 4.9% - 3.3% - 1.7% - 0.1% 1.5% 3.1% 4.7% Over Negative Growth 515 Positive Growth1237 As of 09/30/06 Qtr Ending 09/30/06 Section 2 - Rent Growth Comparisons Asking Rent Growth Quarterly Annualized 3Q06 2Q06 YTD Avg 1 Year 3 Year 5 Year 5 Yr Forecast Chicago 0.9% 0.1% 0.6% - 0.1% - 1.4% - 1.3% 2.7% Midwest 0.4% 0.1% 0.4% - 0.0% - 1.0% - 1.0% 2.2% United States 1.8% 1.6% 1.6% 2.6% - 0.6% - 2.1% 3.9% Average over period ending: 09/30/06 06/30/06 09/30/06 12/31/05 12/31/05 12/31/05 12/31/10 Metro Ranks Metro Rank Total Compared to: Metros 3Q06 2Q06 YTD 1 Year 3 Year 5 Year 5 Yr Forecast Midwest 13 6 9 5 9 12 12 2 United States 75 50 67 55 68 65 65 50 Asking Rent Growth Rate Trends and Forecast % 6.0 4.0 Chicago 2.0 Midwest 0.0 US -2.0 -4.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Period ending 12/31/10 Copyright 2006 Reis, Inc. Page 14
  16. 16. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Section 3 - Current Metro Vacancy Details Vacancy Rate By Age Vacancy Rate Distribution Low 25% Mean Median 75% High Year Built Vac. Rate Before 1970 16.0% 0.0% 5.3% 17.6% 13.4% 23.0% 59.4% 1970-1979 19.1% 582 1980-1989 18.8% Number of Properties 1990-1999 17.0% After 1999 15.9% All 17.6% 260 257 As of 09/30/06 201 164 122 93 73 Under 5.1% 10.1% 15.1% 20.1% 25.1% 30.1% 35.1% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Over As of 09/30/06 Section 4 - Vacancy Rate Comparisons Vacancy Rates Quarterly Annualized 3Q06 2Q06 YTD Avg 1 Year 3 Year 5 Year 5 Yr Forecast Chicago 17.6% 18.0% 18.0% 18.9% 18.8% 16.6% 15.5% Midwest 17.7% 17.9% 17.9% 18.5% 18.3% 16.4% 15.4% United States 13.5% 13.8% 13.8% 15.5% 16.0% 14.3% 12.1% Average over period ending: 09/30/06 06/30/06 09/30/06 12/31/05 12/31/05 12/31/05 12/31/10 Metro Ranks Metro Rank Total Compared to: Metros 3Q06 2Q06 YTD 1 Year 3 Year 5 Year 5 Yr Forecast Midwest 13 8 8 9 9 10 10 7 United States 75 64 62 64 63 60 54 62 Vacancy Rate Trends and Forecast % 18.0 Chicago 16.0 Midwest 14.0 US 12.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Period ending 12/31/10 Copyright 2006 Reis, Inc. Page 15
  17. 17. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Section 5 - Metro Inventory Detail Inventory By Building Age Office Stock Traits Metro Year Built Percent Low Mean Median High Before 1970 24.0% Size (units) 15,000 129,409 56,000 750,000 1970-1979 18.0% Distance to Highway (miles) 0 0.2 0.2 0.8 1980-1989 36.0% Distance to CBD (miles) 0.2 17.5 19.7 36.2 1990-1999 12.0% Distance to Landmark (miles) 0.4 12.3 11.3 32.3 After 1999 10.0% As of 09/30/06 Landmark =Lake Michigan All 100.0% As of 09/30/06 Current Inventory Level Properties Square Feet 1,828 227,901,000 Average Metro Lease Terms As of 09/30/06 Free Rent Expenses $ Lease Term Leasing Tenant CRD % (mos) (Commercial) (yrs) Commission % Improvements $ - 6.6% 2.4 $10.92 6.1 4.1% $21.32 Section 6 - Inventory Growth Comparison Inventory Growth Rates Quarterly Annualized 3Q06 2Q06 YTD Avg 1 Year 3 Year 5 Year 5 Yr Forecast Chicago - 0.1% 0.3% 0.0% 0.1% 0.1% 0.9% 0.9% Midwest - 0.2% 0.1% - 0.1% - 0.2% 0.1% 0.8% 1.0% United States - 0.1% 0.0% - 0.1% - 0.0% 0.4% 1.1% 1.4% Average over period ending: 09/30/06 06/30/06 09/30/06 12/31/05 12/31/05 12/31/05 12/31/10 Metro Ranks Metro Rank Total Compared to: Metros 3Q06 2Q06 YTD 1 Year 3 Year 5 Year 5 Yr Forecast Midwest 13 7 4 5 5 5 5 8 United States 75 49 17 29 32 43 42 52 Inventory Growth Comparisons and Forecast % 2.5 2.0 Chicago 1.5 Midwest 1.0 US 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Period ending 12/31/10 Copyright 2006 Reis, Inc. Page 16
  18. 18. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Section 7 - Construction/Absorption Change Construction and Absorption Quarterly 3Q06 2Q06 YTD Avg Sq Ft Con/Abs Sq Ft Con/Abs Sq Ft Con/Abs Sq Ft Built Sq Ft Built Sq Ft Built Absorbed Ratio Absorbed Ratio Absorbed Ratio Chicago 0 613,000 0.0 1,031,000 1,436,000 0.7 451,333 877,000 0.5 Midwest 809,000 574,000 1.4 2,594,000 1,484,000 1.7 1,557,667 658,333 2.4 Average over period ending: 09/30/06 09/30/06 09/30/06 06/30/06 06/30/06 06/30/06 09/30/06 09/30/06 09/30/06 Annualized 1 Year History 3 Year History 5 Year History Sq Ft Con/Abs Sq Ft Con/Abs Sq Ft Con/Abs Sq Ft Built Sq Ft Built Sq Ft Built Absorbed Ratio Absorbed Ratio Absorbed Ratio Chicago 2,291,000 1,130,000 2.0 1,720,000 -161,000 -10.7 3,171,800 -2,729,800 -1.2 Midwest 5,859,000 2,468,000 2.4 5,371,333 -637,667 -8.4 9,408,800 -6,316,000 -1.5 Average over period ending: 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 Annualized 5 Year Forecast Sq Ft Con/Abs Sq Ft Built Absorbed Ratio Chicago 2,270,800 4,227,200 0.5 Midwest 7,865,400 12,706,600 0.6 Average over period ending: 12/31/10 12/31/10 12/31/10 Construction/Absorption and Vacancy 20 5,000,000 15 Vacancy Rate (%) 0 Square Feet 10 -5,000,000 5 -10,000,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Vacancy Rate Construction Absorption Period ending 12/31/10 Copyright 2006 Reis, Inc. Page 17
  19. 19. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Section 8 - Submarket New Construction Project Tally Sq Ft Sq Ft Sq Ft Sq Ft 2006 - 2008 Cumulative Rank Submarket 2005 2006 2007 2008 Sq Ft Market Share Market share 1 West 50,000 231,324 1,124,821 1,418,857 2775002 42.6% 42.6% 2 West Loop 1,020,000 479,000 0 400,000 879000 13.5% 56.0% 3 NW Suburbs 98,069 0 312,168 417,700 729868 11.2% 67.2% 4 Southwest 0 189,000 92,500 160,000 441500 6.8% 74.0% 5 99-Balance 0 0 0 440,000 440000 6.7% 80.7% 6 City West 0 430,000 0 0 430000 6.6% 87.3% 7 North 16,400 45,800 363,739 0 409539 6.3% 93.6% 8 Central Loop 820,915 0 0 400,000 400000 6.1% 99.8% 9 O'Hare Area 22,000 16,000 0 0 16000 0.2% 100.0% As of 09/30/06, based on actual projects (totals may differ from Reis Metro/SubTrend Futures) Copyright 2006 Reis, Inc. Page 18
  20. 20. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Section 9 - New Construction Listing Size (Sq Est. No. Property Name and Address Secondary Type County Submarket Status Ft) Completion HSBC NORTH AMERICA HOLDINGS LAKE 1 Office 99-Balance 440,000 1/2008 2.Under Constr. RIVERWOODS RD @ TOWNE LINE RD METTAWA, IL 60045 BLOCK 37 COOK 2 Office Central Loop 400,000 3/2008 2.Under Constr. 108 N STATE ST @ E RANDOLPH ST/WASHINGTON ST CHICAGO, IL 60602 ONE SOUTH DEARBORN COOK 3 Office Central Loop 820,915 12/2005 1.Complete 1 S DEARBORN ST CHICAGO, IL 60603 WATERVIEW TOWER COOK 4 Office Condominiums Central Loop 215,000 3/2009 2.Under Constr. 111 W WACKER DR @ N CLARK ST CHICAGO, IL 60601 2111 W ROOSEVELT RD COOK 5 Office City West 430,000 4/2006 1.Complete 2111 W ROOSEVELT RD @ N DAMEN AVE CHICAGO, IL 60612 CHATHAM OFFICE CENTER PH II COOK 6 Office NW Suburbs 205,000 4.Proposed 1901 N ROSELLE RD @ I-90 SCHAUMBURG, IL 60195 CROSSROADS OF DARIEN PH II DUPAGE 7 Office NW Suburbs 20,700 3/2008 3.Planned LAMONT RD @ HWY 83 ELMHURST, IL 60126 LAKEWOODS CORPORATE CENTER PH II COOK 8 Office NW Suburbs 150,000 3.Planned 680 E ALGONGUIN RD SCHAUMBURG, IL 60173 PROSPECT POINTE DUPAGE 9 Office Condominiums NW Suburbs 48,000 6/2006 1.Complete PROSPECT AVE @ THORNDALE AVE ITASCA, IL 60143 WOODLAND FALLS PH II LAKE 10 26225 N RIVERWOODS BLV @ W EVERETT RD Office NW Suburbs 156,160 12/2007 2.Under Constr. METTAWA, IL 60045 DEER PARK PH II LAKE 11 21850 LAKE COOK RD @ N HOUGH ST DEER Office NW Suburbs 80,000 8/2007 3.Planned PARK, IL 60010 POPLAR CREEK OFFICE PLAZA II COOK 12 MOONLAKE BLVD. @ HIGGINS RD. HOFFMAN Office NW Suburbs 187,000 10/2008 3.Planned ESTATES, IL 60194 SCHAUMBURG OFFICE CENTER COOK 13 1998 N ROSELLE RD & I 90 SCHAUMBURG, IL Office NW Suburbs 115,000 4.Proposed 60043 HE ESPLANADE OF ALGONQUIN OFFICE PH III MCHENRY 14 2300 S RANDALL RD @ CORPORATE BLVD Office NW Suburbs 60,000 12/2008 3.Planned ALGONQUIN, IL 60102 POPLAR CREEK OFFICE PLAZA III COOK 15 MOONLAKE BLVD @ HIGGINS RD HOFFMAN Office NW Suburbs 187,000 6/2010 4.Proposed ESTATES, IL 60194 LAKE ZURICH PROFESSIONAL CENTER LAKE 16 350 SURRYSE RD @ OLD RAND RD LAKE Medical Office NW Suburbs 32,000 12/2006 2.Under Constr. ZURICH, IL 60047 Copyright 2006 Reis, Inc. Page 19
  21. 21. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Size (Sq Est. No. Property Name and Address Secondary Type County Submarket Status Ft) Completion PARCEL 54 LAKE 17 200 LAKEVIEW PKWY @ RTE 60 VERNON Office NW Suburbs 76,008 10/2007 3.Planned HILLS, IL 60061 SUPERIOR AIR GROUND AMBULANCE SERVICE BLDG DUPAGE 18 Office--Owner Occ. NW Suburbs 100,000 10/2006 2.Under Constr. 395 W LAKE ST @ N WALNUT ST ELMHURST, IL 60126 LAKEVIEW BUSINESS CENTER PH II MCHENRY 19 Office NW Suburbs 28,000 10/2005 1.Complete 921 PINGREE RD CRYSTAL LAKE, IL 60014 OAK TRAIL PROFESSIONAL CENTER DUPAGE 20 Office NW Suburbs 17,969 3/2005 1.Complete 260 ARMY TRAIL RD BARTLETT, IL 60103 RANDALL POINT EXECUTIVE CTR KANE 21 Office NW Suburbs 40,100 3/2005 1.Complete 2130 POINT BLVD ELGIN, IL 60123 WILLOW PONDS PROFESSIONAL CENTER LAKE 22 BLDG II Office NW Suburbs 12,000 6/2005 1.Complete 950 S RAND RD LAKE ZURICH, IL 60047 NORTH BARRINGTON OFFICE CONDOS LAKE 23 US HWY 12 @ TIMBER LAKE DR NORTH Office Condominiums NW Suburbs 26,250 7/2005 1.Complete BARRINGTON, IL 60010 BRIARWOOD OFFICE COMPLX BLDG C MCHENRY 24 MERCHANT DR @ HUNTINGTON Office Condominiums NW Suburbs 17,000 5/2006 1.Complete DR/GLENWOOD CT ALGONQUIN, IL 60102 WOODFIELD PRESERVE OFFICE CENTER III COOK 25 Office NW Suburbs 150,000 8/2008 3.Planned 30 N MARTINGALE RD SCHAUMBURG, IL 60173 COMMERCE WOODS BUSINESS CENTER KANE 26 800 COMMERCE PKWY CARPENTERSVILLE, IL Office NW Suburbs 85,544 3.Planned 60110 WESTLAKE AT CONWAY LAKE 27 Office North 100,000 12/2007 3.Planned I-94 @ RTE 60 LAKE FOREST, IL 60045 RIVERWOODS CORPORATE CENTER LAKE 28 LAKE COOK RD @ I-94/SAUNDERS Office North 45,800 5/2006 1.Complete RIVERWOODS, IL 60015 CADENCE AT CONWAY LAKE 29 N FIELD CT @ STATE HWY 60 LAKE FOREST, IL Office North 102,739 5/2007 3.Planned 60045 OPUS LANDMARK OF LAKEFOREST II LAKE 30 Office North 161,000 7/2007 2.Under Constr. 150 SAUNDERS RD LAKE FOREST, IL 60045 LIBERTYVILLE PROFESSIONAL CENTRE LAKE 31 1635 NORTHWIND BLVD @ RTE 45/PETERSON Office North 16,400 11/2005 1.Complete RD LIBERTYVILLE, IL 60048 METROPOLITAN SQUARE COOK 32 S DES PLAINES AVE @ PERRY ST/S RIVER RD Office O'Hare Area 22,000 8/2005 1.Complete DES PLAINES, IL 60016 POINT O'HARE PH II COOK 33 Office O'Hare Area 330,000 2/2009 3.Planned 9550 W HIGGINS RD ROSEMONT, IL 60018 Copyright 2006 Reis, Inc. Page 20
  22. 22. Office - Asset Advisor 3rd Quarter 2006 Metro: Chicago Size (Sq Est. No. Property Name and Address Secondary Type County Submarket Status Ft) Completion TUSCANNY TERRACE COOK 34 6400 N NORTHWEST HWY @ N HARLEM AVE Office O'Hare Area 16,000 12/2006 2.Under Constr. CHICAGO, IL 60631 300 N LASALLE COOK 35 300 N LASALLE BLVD @ KINZIE ST CHICAGO, Office River North 1,300,000 3/2009 2.Under Constr. IL 60610 RIVER NORTH CENTER COOK 36 Office River North 330,000 4.Proposed CLARK ST @ HUBBARD CHICAGO, IL 60610 351 NORTH CLARK BUILDING COOK 37 351 N CLARK ST @ W KINZE ST/DEARBORN ST Office River North 1,300,000 1/2009 3.Planned CHICAGO, IL 60610 WACKER PLAZA COOK 38 401 S WACKER ST @ CONGRESS PKWY Office South Loop 673,000 12/2009 3.Planned CHICAGO, IL 60607 CORPORATE CORRIDORS OF MOKENA PH II WILL 39 Office Southwest 50,000 3/2008 3.Planned W 191ST ST @ S 88TH AVE MOKENA, IL 60488 CORPORATE CORRIDORS OF MOKENA PH III WILL 40 Office Southwest 50,000 8/2007 2.Under Constr. W 191ST ST @ S 88TH AVE MOKENA, IL 60488 BURR RIDGE CORPORATE PARK BLDG II COOK 41 Office Southwest 110,000 3/2008 3.Planned 945 MCCLINTOCK DR LA GRANGE, IL 60527 ORLAND CROSSING COOK 42 W 143RD ST @ S LA GRANGE RD ORLAND Office Southwest 21,000 11/2006 2.Under Constr. PARK, IL 60462 WOODRIDGE COMMERCE CENTER DUPAGE 43 10204-10216 WERCH DR @ WOODWARD AVE Office Southwest 148,000 3/2006 1.Complete WOODRIDGE, IL 60517 CORPORATE CORRIDORS OF MOKENA PH I WILL 44 Office Southwest 22,500 5/2007 3.Planned W 191ST ST @ S 88TH AVE MOKENA, IL 60488 PROVENA MEDICAL BUILDING WILL 45 7000 CATON FARM RD @ COUNTY LINE RD Medical Office Southwest 35,000 5/2006 1.Complete JOLIET, IL 60431 CORPORATE CORRIDORS OF MOKENA PH IV WILL 46 Office Southwest 50,000 7/2009 4.Proposed W 191ST ST @ S 88TH AVE MOKENA, IL 60488 HOMER GLEN PLAZA WILL 47 S BELL RD @ W 159TH ST HOMER GLEN, IL Office Southwest 20,000 9/2007 3.Planned 60491 PRAIRIE CENTER OFFICE COOK 48 450 E ROOSEVELT RD @ S LAKE SHORE DR Office Southwest 20,000 2/2006 1.Complete CHICAGO, IL 60605 CORPORETUM OFFICE TOWER I DUPAGE 49 Office West 189,000 5/2009 3.Planned 1401 CORPORETUM DR LISLE, IL 60532 CORPORETUM OFFICE TOWER II DUPAGE 50 Office West 365,000 3.Planned 1450 CORPORETUM DR LISLE, IL 60532 Copyright 2006 Reis, Inc. Page 21

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