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Vacancy Rate Continues To Drop
Research & Forecast Report
CHICAGO | BIG BOXThird Quarter 2015
Diana Perez Research Services | Chicago
Vacancy And Supply
The Chicago big box vacancy rate fell 64 basis points from the second quarter rate of 9.31 percent to 8.67 percent in the third quarter. The completion of a 1.7-million-square-foot build-to-suit lease for Michelin Tire was the primary cause for the improvement.
The available industrial supply measured 13.2 million square feet in the third quarter, which was a small decline from the second quarter mark of 13.9 million square feet. Steady leasing activity assisted in bringing down Chicago’s third quarter big box vacant supply.
There is one vacant block of space over 750,000 square feet in the Chicago Metropolitan market. The largest vacancy currently available is a 767,000-square-foot building at 1100 115th Street/112 Remington Boulevard in Romeoville.
The Chicago big box inventory base consists of 271 facilities totaling 152.0 million square feet. The highest concentration of the inventory continues to be located in the I-55 and I-80/Joliet Corridors, which have 39.0 million square feet and 37.8 million square feet of big box facilities, respectively.
Leasing And Sale Activity
Leasing volume in the third quarter totaled a disappointing 2.4 million square feet. This was a drop of 53.6 percent from the prior quarter level of 5.1 million square feet. The weaker results were caused by the lack of interest of large users, as the largest third quarter transaction was 490,000 square feet compared to three significant second quarter transactions totaling 2.35 million square feet.
The I-55 Corridor captured 44.0 percent of all third quarter big box leasing volume with a total of 1.3 million square feet. The largest third quarter transaction occurred when The Central American Group signed a 490,000-square-foot lease at 815 Bluff Road in Romeoville.
No user and investment sales were completed in big box facilities in the second consecutive quarter.
Building Criteria*• Located within the Chicago Metropolitan Area
• 300,000 square feet or larger
• Clear ceiling heights of 28’ or higher
• Precast construction
Market Indicators Q2 2015 Q3 2015
VACANCY 9.31% 8.67%
ABSORPTION 4,877,780 3,207,458
Current Big Box Vacancies
13
4
10
2
4
6
8
10
12
14
16
18
300 - 500K 500 - 750K 750K+
Current Big Box Vacancies
Source: Colliers International Research
Source: Colliers International Research
Historical Construction Deliveries300,000 sq. ft. & Above
$3.51$3.23
$2.95 $2.97$2.78
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2008 2009 2010 2011 2012 2013 2014
Historical Taking Net Effective Rents
$4.00 $3.76
$3.27
Source: Colliers International Research
2008 2009 2010 2011 2012 2013 2014BTS 3.02 3.09 1.48 2.66 1.26 2.58Spec 8.36 0.46 0.00 0.00 0.60 1.83
3.623.30
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Squa
re F
eet M
illio
ns
Q3 2015
Q3 20156.002.06
$4.50 $4.33
Chicago’s Big Box Profile• The Chicago big box inventory base consists of 271 facilities
totaling 152 million square feet.
• 72 percent of this inventory is institutionally owned while the remaining 28 percent is owner occupied.
• The highest concentration of inventory is located in the I-55 and I-80/Joliet Corridors, which have 39.0 million square feet and 37.8 million square feet of big box facilities, respectively. Conversely, the Chicago North, North Suburbs and McHenry County submarkets have no such facilities.
2 Research & Forecast Report | Third Quarter 2015 | Chicago / Big Box | Colliers International
Absorption
Weaker big box tenant demand caused the third quarter net absorption to decline 34.2 percent to 3.2 million square feet. Net absoprtion reached positive 4.8 million square feet in the second quarter.
Construction Activity
Three build-to-suit new big box construction projects were completed in the third quarter which added 2.46 million square feet to Chicago’s big box inventory base. This is a 39.02 percent decline compared to the 4.0 million square feet completed in the second quarter.
The largest build-to-suit project was by Michelin Tire which took occupancy of a 1.7 million-square-foot facility at 29900 S. Graaskamp Boulevard in Wilmington.
Rents
The weighted average net effective rent for big box facilities reached $4.33 per square foot net in the third quarter of 2015, which was almost $1.00 per square foot higher than the second quarter rate of $3.58 per square foot net. This was due to the lack of big box deals completed in the third quarter, as the largest signed lease was only 490,000 square feet.
13
4
10
2
4
6
8
10
12
14
16
18
300 - 500K 500 - 750K 750K+
Current Big Box Vacancies
Source: Colliers International Research
Source: Colliers International Research
Historical Construction Deliveries300,000 sq. ft. & Above
$3.51$3.23
$2.95 $2.97$2.78
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2008 2009 2010 2011 2012 2013 2014
Historical Taking Net Effective Rents
$4.00 $3.76
$3.27
Source: Colliers International Research
2008 2009 2010 2011 2012 2013 2014BTS 3.02 3.09 1.48 2.66 1.26 2.58Spec 8.36 0.46 0.00 0.00 0.60 1.83
3.623.30
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Squa
re F
eet M
illio
ns
Q3 2015
Q3 20156.002.06
$4.50 $4.33
13
4
10
2
4
6
8
10
12
14
16
18
300 - 500K 500 - 750K 750K+
Current Big Box Vacancies
Source: Colliers International Research
Source: Colliers International Research
Historical Construction Deliveries300,000 sq. ft. & Above
$3.51$3.23
$2.95 $2.97$2.78
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2008 2009 2010 2011 2012 2013 2014
Historical Taking Net Effective Rents
$4.00 $3.76
$3.27
Source: Colliers International Research
2008 2009 2010 2011 2012 2013 2014BTS 3.02 3.09 1.48 2.66 1.26 2.58Spec 8.36 0.46 0.00 0.00 0.60 1.83
3.623.30
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Squa
re F
eet M
illio
ns
Q3 2015
Q3 20156.002.06
$4.50 $4.33
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
2009 2010 2011 2012 2013 2014 Q 3 2015
Source: Colliers International Research
Historical Capitalization Rates
Historical Construction Deliveries(300,000+ square feet)
Historical Taking Net Effective Rents
3 Research & Forecast Report | Third Quarter 2015 | Chicago / Big Box | Colliers International
Chicago at a GlanceEconomic News
The Chicago region has one of the most diverse economies on the globe. According to World Business Chicago, it is the third largest area in the country, has a population base of 9.8 million employing over 3.6 million people with a regional product (GRP) of more than $575 billion.
Chicago’s unemployment rate in August measured 5.6 percent down from the May volume of 6.0 percent. The historical low unemployment rate for Illinois occurred in February 1999 when it fell to 4.2 percent.
The Institute for Supply Management stated that national business barometer “PMI” totaled 50.2 percent in September, down from the 53.5 percent reported in March. In Chicago, the business barometer totaled 48.7 percent in September a decrease from the 49.4 percent secured in June. A reading above 50 indicates expansion to the regional economy.
The Illinois Association of Realtors, report states that home sales in the Chicago PMSA during the month of August totaled 15,088 units up 0.9 percent from one year ago when 14,957 units were sold. Meanwhile median prices grew by 3.4 percent from the same time period in 2014 to $180,900.
Illinois overall exports totaled over $68.2 billion in 2014 up from the $65.8 billion for all of 2013. This volume places Illinois as fifth largest U.S. exporter. Illinois’ largest exporter is Canada followed by Mexico, China, Germany and Japan.
U.S. auto sales of new cars in August measured 619,109 units representing a 6.7 percent increase from sales reported one year ago.
Transportation
Chicago is home to seven Class I railroads which travel over 7,000 miles of track in the state. Total US railcar traffic in 2013 reached 3.0 million cars shipped versus 2.8 million shipped last year. This represents a 4.6 percent increase. Intermodal cars are the largest commodity moved by rail in Illinois.
The Illinois highway system contains three coast-to-coast interstates (I-70, I-90 and I-90). Also included within Illinois are three north-south interstate systems (I-39, I-55 and I-57) and five east-west interstate systems (I-24, I-64, I-74, I-88, I-94).
O’Hare International Airport is the fifth busiest airport in the world. 1,169,831 tons of cargo passed through O’Hare International Airport from January through August of 2015, up 16.23 percent from the same time period last year.
Illinois has more than 1,100 navigational miles of waterways which provide a direct link to The Gulf of Mexico and the Atlantic Ocean.
0
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12
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
2011 2012 2013 2014 2015
Unemployment Data
Chicago Metro USSource: Bureau of Labor Statistics
Historical Unemployment RateAbsorption and Vacancy
Chicago Industrial Submarket Top Transactions Map | 3Q2015MAP TENANT/BUYER SIZE (SF) ADDRESS TYPE
1 The Central American Group 490,420 815 Bluff Road, Romeoville Lease
2 Swap.Com 361,176 850 S Veterans Parkway, Bolingbrook Lease
3 TopLine Furniture 310,916 1321-1375 W. Thorndale Avenue, Itasca Lease
Lake Michigan
0 1 5 10 miles
NORTH
94
94
94
94
94
9457
294
80
80
55
55
55
355
294
290
290
290
88
88
355
294
90
90
90
90
90
190
41
Elgin-O
'Hare Expy.
East-West Tollway
45
45
41
41
45
12 20
45
34
34
12
12
14
83 60
8322
68
7262
21
5953
58
20
3120
64 53
64
83
59
43
504353
53
171
7 50
La� e �oo� �� .
CHICAGONORTH
CHICAGO SOUTH
O'HARE
NORTHSUBURBS/COOK
LAKE COUNTY
CENTRALDuPAGE
NORTHWESTSUBURBS
I-290 NORTH
I-290 SOUTH
SOUTH SUBURBS
ELGIN I-90
I-88 / FOX VALLEY
I-55 CORRIDOR
FAR SOUTH SUBURBS
NORTH-WEST INDIANA
SOUTHEAST WISCONSIN
I-80 / JOLIET CORRIDOR
DeKALB COUNTY
McHENRY COUNTY
2 1
3
4 Research & Forecast Report | Third Quarter 2015 | Chicago / Big Box | Colliers International
5 Research & Forecast Report | Third Quarter 2015 | Chicago / Big Box | Colliers International
Third Quarter 2015 Big Box Market Statistics
MARKET TOTAL INVENTORY # OF BLDGS
NEW SUPPLY SQUARE FEET
UNDER CONSTRUCTION SQUARE FEET
CAME ON MARKET AVAILABLE SQUARE FEET VACANCY RATE LEASED SQUARE
FEET SOLD SQUARE
FEET NET ABSORPTION
Central DuPage County
6,922,774 18 0 0 259,682 672,655 9.72% 504,275 0 519,872
Chicago North 1 0 0 0 0 0 0.00% 0 0 0
Chicago South 2,053,492 4 0 316,680 114,817 303,937 14.80% 0 0 74,303
DeKalb County 3,422,099 4 0 0 0 0 0.00% 0 0 0
Elgin I-90 Corridor 5,173,409 9 757,120 0 72,320 656,566 12.69% 205,028 0 2,561,222
Far South Suburbs 10,803,845 12 0 0 0 953,550 8.83% 0 0 953,550
Fox Valley 16,680,478 34 429,756 1,958,991 900,886 979,624 5.87% 2,189,852 0 2,572,823
I-290 North 1,651,741 4 0 588,233 0 49,763 3.01% 0 0 49,763
I-290 South 2,983,064 8 0 0 100,000 975,864 32.71% 0 0 562,700
I-39 Corridor 1,918,545 3 0 0 0 0 0.00% 0 0 0
I-55 Corridor 39,059,660 78 1,070,989 250,650 2,663,466 4,080,478 10.45% 2,679,679 417,046 5,637,375
I-80/Joliet Corridor 37,852,212 52 2,212,000 1,690,149 860,620 2,822,977 7.46% 3,575,193 0 10,567,196
Lake County 3,146,558 7 454,276 1,027,582 240,530 240,530 7.64% 265,896 0 668,022
McHenry County 1 0 0 0 0 0 0.00% 0 0 0
North Suburbs 306,448 1 306,448 0 0 0 0.00% 0 0 306,448
Northwest Suburbs 700,000 2 0 423,672 0 0 0.00% 0 0 640,530
O'Hare 1,991,424 5 0 0 210,754 231,679 11.63% 406,712 0 1,536,133
South Suburbs 2,849,828 6 0 0 0 468,295 16.43% 408,460 0 1,285,215
METRO CHICAGO TOTALS
137,515,579 247 5,230,589 6,255,957 5,423,075 12,435,918 9.04% 10,235,095 417,046 27,935,152
Northwest Indiana 1,940,749 4 0 0 164,500 738,749 38.07% 0 0 750,749
Rockford Area 2,360,014 3 460,000 0 0 0 0.00% 0 0 920,000
Southeastern Wisconsin
10,093,063 17 2,351,295 783,766 0 0 0.00% 0 354,000 4,702,590
GRAND TOTALS 151,909,405 271 8,041,884 7,039,723 5,587,575 13,174,667 8.67% 10,235,095 771,046 34,308,491
Copyright © 2015 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
About Colliers InternationalColliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,300 professionals operating from 502 offices in 67 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 10 consecutive years, more than any other real estate services firm.
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MARKET CONTACT:Diana Perez Research Analyst | Chicago+1 847 698 8217diana.perez@colliers.com
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