JLL Chicago Suburbs Office Market Update - Q3 2016
1. Absorption by submarket (sf)
Source: JLL Research
Rent growth (%) by submarket
Source: JLL Research
2016 YTD sales activity
Source: JLL Research *50,000 s.f. and higher
Strong leasing activity drives positive absorption
Suburban tenants continue to strike while the anvil is hot, contributing to drive
positive absorption in all submarkets, excepting the Western East/West and
North Cook County. While at first glance it appears that both of these markets
had relatively large negative absorption, those changes can be attributed to a
single large move out in each submarket. In the Western East/West, ConAgra
vacated 134,000 square feet at 215 W. Diehl Road, while Aon formally moved
out of 289,613 square feet at 1000 Milwaukee Avenue, in North Cook County.
Without these two large outliers, which have been expected for quite some time,
all suburban submarkets would have shown positive net absorption this quarter.
Average rental rates eclipse $24 /sf for the first time since 2008
As a result of the positive leasing momentum across the suburbs, rising rents
were observed in all submarkets this quarter. The average rent growth across
the region was on the order of 2.62 percent, with certain submarkets exceeding
that rate. The new Aon vacancy comes to the market at an asking rate of $31.00
per square foot, a 10.0 percent premium over the Q2 2016 average Class A
asking rent in the vicinity, and lifting the submarket average by 5.8 percent. In
the Northwest submarket, several smaller but important lease signings have
proven the increased demand for space around Schaumburg. Pearson, Wistron,
and DSV Air & Sea have recently executed leases and confirmed the resurgence
of local office demand. Their combined leases drove the average rental rate in
the Northwest submarket to jump by 4.5 percent.
Capital markets activity heating up
Suburban transaction volume skyrocketed in Q3 after a slow start to 2016. Zeller
Realty led the way with their $117M purchase of Commerce Plaza from
Blackstone, which boasted the highest suburban sticker price of the year. They
coupled it with an approximately $73M acquisition of Woodfield Preserve from
KBS Realty Advisors to further display investor confidence in the suburbs.
Zeller was not the only active player as Northwestern Mutual completed a $60M
sale of Three Overlook Point to Griffin Capital. Other, smaller deals contributed
as well and concluded the roughly $402M worth of transactions in Q3.
Suburban rental rates continue slow, steady climb
2,257
Office Insight
Chicago suburbs | Q3 2016
101,224,916
Total inventory (s.f.)
144,653
Q3 2016 net absorption (s.f.)
$24.06
Direct average asking rent
1,111,000
Total under construction (s.f.)
18.6%
Total vacancy
513,103
YTD net absorption (s.f.)
2.1%
12-month rent growth
100%
Total preleased
-$150,000,000
$50,000,000
$250,000,000
$450,000,000
Q1 Q2 Q3
0.0% 2.0% 4.0% 6.0% 8.0%
North (Lake County)
Eastern East-West
O'Hare
Western East-West
Northwest
North (Cook County)
156,358 153,604
117,205
71,272
(113,269)
(240,517)
(250,000)
(200,000)
(150,000)
(100,000)
(50,000)
-
50,000
100,000
150,000
200,000
NW EEW N(L) ORD WEW N(C)
3. Office Statistics
Chicago | Q3 2016
Class Inventory (s.f.)
Total net
absorption (s.f.)
YTD total net
absorption (s.f.)
YTD total net
absorption (%
of stock)
Direct vacancy
(%)
Total vacancy
(%)
Average direct
asking rent ($
p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
West Loop Totals 46,310,916 -58,700 176,206 0.4% 10.0% 11.0% $39.65 0 3,559,664
Central Loop Totals 37,160,358 25,653 406,748 1.1% 9.3% 10.5% $36.46 0 0
East Loop Totals 24,346,395 65,682 684,387 2.8% 11.7% 12.1% $35.29 0 0
South Loop Totals 1,264,787 2,812 8,652 0.7% 12.9% 12.9% $25.29 0 2,450,000
North Michigan Avenue Totals 11,392,541 130,642 309,870 2.7% 11.2% 11.7% $36.87 0 0
River North Totals 16,243,258 165,385 525,953 3.2% 4.7% 5.1% $41.81 0 80,000
Kennedy West Totals 5,227,866 3,838 -10,521 -0.2% 9.4% 10.6% $32.15 0 1,176,000
Far West Loop Totals 1,709,818 -6,706 14,551 0.9% 11.4% 11.5% $29.95 0 0
Fulton Market Totals 2,871,567 5,985 -37,013 -1.3% 8.6% 10.6% $33.55 0 1,176,000
River West Totals 646,481 4,559 11,941 1.8% 7.7% 7.7% $31.75 0 0
CBD Totals 141,946,121 332,500 2,092,643 1.5% 9.6% 10.4% $37.55 0 7,265,664
Eastern East-West Totals 22,771,680 153,604 362,761 1.6% 14.6% 16.8% $24.58 0 0
Western East-West Totals 14,456,314 -113,269 -75,232 -0.5% 17.2% 19.4% $23.74 0 0
North (Cook County) Totals 9,716,234 -240,517 -175,582 -1.8% 16.2% 16.7% $27.88 0 0
North (Lake County) Totals 15,798,901 117,205 136,637 0.9% 20.7% 21.8% $24.51 0 0
O'Hare Totals 12,458,927 71,272 187,562 1.5% 16.5% 16.9% $24.64 0 0
Northwest Totals 26,022,860 156,358 76,957 0.3% 18.5% 19.6% $22.34 0 1,111,000
Suburbs Totals 101,224,916 144,653 513,103 0.6% 17.3% 18.6% $24.06 0 1,111,000
Chicago Totals 243,171,037 477,153 2,605,746 1.1% 12.8% 13.9% $29.96 0 8,376,664
West Loop A 29,661,434 346,198 553,378 1.9% 8.3% 9.4% $42.46 0 3,559,664
Central Loop A 10,191,682 -145,613 -49,309 -0.5% 9.1% 11.4% $40.71 0 0
East Loop A 5,511,381 14,782 305,957 5.6% 5.9% 6.0% $43.48 0 0
North Michigan Avenue A 2,871,938 4,276 84,120 2.9% 8.0% 8.0% $38.09 0 0
River North A 8,519,690 182,694 475,338 5.6% 2.8% 2.9% $48.64 0 50,000
Kennedy West A 1,072,473 -5,612 -1,802 -0.2% 2.8% 7.5% $32.03 0 0
Far West Loop A 35,462 0 21,959 61.9% 0.0% 0.0% $32.00 0 0
Fulton Market A 852,011 -5,000 -29,457 -3.5% 1.9% 7.8% $36.00 0 1,176,000
River West A 185,000 -612 5,696 3.1% 7.6% 7.6% $30.00 0 0
CBD A 57,828,598 396,725 1,367,682 2.4% 7.3% 8.3% $42.25 0 4,785,664
Eastern East-West A 9,728,397 55,283 2,920 0.0% 12.2% 15.1% $28.03 0 0
Western East-West A 5,534,716 1,012 24,036 0.4% 17.2% 20.4% $27.02 0 0
North (Cook County) A 5,446,551 -260,439 -211,346 -3.9% 20.1% 20.5% $29.39 0 0
North (Lake County) A 11,105,659 107,235 -107,640 -1.0% 21.2% 22.3% $25.14 0 0
O'Hare A 6,732,939 -13,242 11,403 0.2% 13.2% 14.0% $28.60 0 0
Northwest A 15,208,180 22,300 175,463 1.2% 9.1% 10.1% $24.47 0 1,111,000
Suburbs A 53,756,442 -87,851 -105,164 -0.2% 14.6% 16.1% $26.47 0 1,111,000
Chicago A 111,585,040 308,874 1,262,518 1.1% 10.8% 12.1% $31.98 0 5,896,664
West Loop B 14,142,482 -416,148 -432,531 -3.1% 14.5% 15.4% $34.80 0 0
Central Loop B 22,670,390 194,356 465,126 2.1% 9.3% 10.0% $34.94 0 0
East Loop B 12,342,590 27,178 261,151 2.1% 14.2% 14.8% $34.40 0 0
North Michigan Avenue B 5,946,800 106,056 171,463 2.9% 13.0% 14.0% $38.07 0 0
River North B 5,896,409 -6,650 66,792 1.1% 7.5% 8.1% $38.86 0 30,000
Kennedy West B 3,118,569 11,948 -14,627 -0.5% 10.8% 11.1% $32.43 0 0
Far West Loop B 1,230,612 -9,708 -13,616 -1.1% 9.2% 9.2% $29.78 0 0
Fulton Market B 1,517,292 16,485 -7,256 -0.5% 14.5% 15.0% $33.68 0 0
River West B 370,665 5,171 6,245 1.7% 1.1% 1.1% $20.00 0 0
CBD B 64,117,240 -83,260 517,374 0.8% 11.6% 12.4% $35.30 0 30,000
Eastern East-West B 10,550,151 85,537 315,297 3.0% 16.0% 17.9% $20.42 0 0
Western East-West B 7,835,479 -116,714 -108,245 -1.4% 17.6% 19.4% $20.57 0 0
North (Cook County) B 3,455,824 8,566 9,519 0.3% 12.1% 12.1% $23.76 0 0
North (Lake County) B 4,413,995 9,970 244,277 5.5% 20.6% 21.9% $22.86 0 0
O'Hare B 4,218,447 83,786 168,451 4.0% 22.6% 22.7% $21.45 0 0
Northwest B 9,099,934 135,178 -129,751 -1.4% 33.3% 34.4% $21.11 0 0
Suburbs B 39,573,830 206,323 499,548 1.3% 21.1% 22.4% $21.36 0 0
Chicago B 103,691,070 123,063 1,016,922 1.0% 15.3% 16.2% $27.94 0 30,000
200 E Randolph Street Chicago, IL 60601 tel +1 312 228 3189 hailey.harrington@am.jll.com
2016 Jones Lang LaSalle IP, Inc. All rights reserved.
Hailey Harrington Research Manager
4. Chicago | Q3 2016
Class Inventory (s.f.)
Total net
absorption (s.f.)
YTD total net
absorption (s.f.)
YTD total net
absorption (%
of stock)
Direct vacancy
(%)
Total vacancy
(%)
Average direct
asking rent ($
p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
West Loop C 2,507,000 11,250 55,359 2.2% 5.1% 6.0% $32.25 0 0
Central Loop C 4,298,286 -23,090 -9,069 -0.2% 9.5% 10.9% $30.54 0 0
East Loop C 6,492,424 23,722 117,279 1.8% 12.0% 12.2% $30.71 0 0
South Loop C 1,264,787 2,812 8,652 0.7% 12.9% 12.9% $25.29 0 2,450,000
North Michigan Avenue C 2,573,803 20,310 54,287 2.1% 10.5% 10.5% $30.51 0 0
River North C 1,827,159 -10,659 -16,177 -0.9% 4.2% 5.9% $30.61 0 0
Kennedy West C 1,036,824 -2,498 5,908 0.6% 12.0% 12.2% $31.26 0 0
Far West Loop C 443,744 3,002 6,208 1.4% 18.2% 18.6% $28.83 0 0
Fulton Market C 502,264 -5,500 -300 -0.1% 2.3% 2.3% $32.10 0 0
River West C 90,816 0 0 0.0% 35.2% 35.2% $32.42 0 0
CBD C 20,000,283 19,035 207,587 1.0% 9.7% 10.4% $30.07 0 2,450,000
Eastern East-West C 2,493,132 12,784 44,544 1.8% 18.3% 19.0% $15.15 0 0
Western East-West C 1,086,119 2,433 8,977 0.8% 14.9% 14.9% $16.09 0 0
North (Cook County) C 813,859 11,356 26,245 3.2% 8.1% 10.3% $17.63 0 0
North (Lake County) C 279,247 0 0 0.0% 2.4% 2.4% N/A 0 0
O'Hare C 1,507,541 728 7,708 0.5% 13.7% 13.7% $14.61 0 0
Northwest C 1,714,746 -1,120 31,245 1.8% 23.4% 24.6% $17.90 0 0
Suburbs C 7,894,644 26,181 118,719 1.6% 16.4% 17.0% $16.70 0 0
Chicago C 27,894,927 45,216 326,306 1.2% 11.6% 12.3% $24.73 0 2,450,000
Hailey Harrington Research Manager
200 E Randolph Street Chicago, IL 60601 tel +1 312 228 3189 hailey.harrington@am.jll.com
2016 Jones Lang LaSalle IP, Inc. All rights reserved.