Available Blocks of Space in the Chicago Suburbs Hit Highest Level in a Decade
Story Told In Just Launched Suburban-Focused Studley Report
Chicago, IL (January 21, 2010)
According to the just launched Suburban Chicago Studley Report, available big blocks of space, contiguous space that measures in excess of 50,000 square feet, have hit a decade high with a total of 91 (nearly 11.0 million square feet).
The North Suburbs registered 20 of those blocks (2.6 million square feet) in the central north submarket, while the Northwest Suburbs logged in with 25 (3.5 million square feet), the East-West Corridor contributed 28 blocks (3.2 million square feet) and the O’Hare area added another 18 (1.5 million square feet).
“We expect these numbers to grow before we see them shrink,” shared Studley Senior Managing Director Kevin McLennan. “With businesses continuing to contract, availability could spike in the first half of 2010. Employment in the office-using sector plummeted by 8.3 percent from its most recent peak in 2007 and over the past year, many of the area’s largest employers cut payroll and other expenditures to the bone.”
Overall availability rose 1.0 percentage point from last quarter and 2.9 percentage points from the same time last year, ending 2009 with an overall availability rate of 23.7 percent. Class A availability rose 1.4 percentage points for the quarter and 4.3 percentage points for the year for a year-end availability rate of 26.7 percent.
Though transaction volume increased slightly from last quarter, 728,292 to one million square feet, total net absorption for the year was negative with 2,368,000 square feet of space added back into inventory.
"It is not all bad," explained Jonathan Metzl, Studley Associate Director. "All of this inventory means attractive deals for tenants. Tenants have many high quality, second generation options to consider if they want to relocate, and have the upper hand in lease renegotiations if staying at an existing location is the best solution. Landlords want to keep their tenants at almost any cost and companies with strong credit continue to drive the market, negotiating new leases with exceptional concession packages and in certain situations, garnering significant state tax incentives.”
In the fourth quarter, represented by Studley, Dover Corporation signed a nearly 68,000-square-foot lease at Highland Landmark V in Downers Grove that included $6.3 million in state tax credits. The firm will be relocating its corporate headquarters from New York City to the Chicago suburbs.
Declining asset values and stricter lending requirements are expected to take their toll on landlords in 2010 in the way of deep discounts on investment sales and landlord defaults. Though investment sales were limited to mostly small deals in 2009, widespread defaults and foreclosures were contained in 2009. 2010 may paint a very different picture.
“Though 2010 will remain a tenants’ market, it’s necessary to incorporate specific language into new leases that will protect our clients from landlords that could have trouble funding tenant improvements and concessions and/or maintaining their buildings properly,” shared Mr. McLennan. “Unfortunately, it is another sign of the hard economic times we are living in.”
For further details on the Suburban Chicago market, please refer to the attached Studley Report.
Studley is the only global tenant advisory firm with a pure tenant representation delivery platform. Founded in 1954, Studley pioneered this conflict-free business model. Today, with 19 offices nationwide and an international presence through its London office and AOS Studley throughout Europe, Studley provides strategic real estate consulting services to top-tier corporations, law firms, nonprofits, government agencies and institutions of higher education. Information about Studley is available at www.studley.com.