>What constitutes a. Despite Positive Absorption, Big Box Vacancy Rises. CHICAGO BIG BOX First Quarter Research & Forecast Report

Transcription

1 Research & Forecast Report CHICAGO BIG BOX First Quarter 2017 Despite Positive Absorption, Big Box Vacancy Rises Craig Hurvitz Vice President Chicago Chicago s big box vacancy rate increased by 52 basis points during the first quarter of 2017, the second quarter in a row to post an uptick. Despite this adjustment, net absorption was positive between January and March, totaling 1.8 million square feet. Normally an inverse relationship, the vacancy rate can increase when net absorption is positive if speculative construction projects with vacant space are delivered. Two such facilities totaling 1.2 million square feet were completed during the first quarter of Vacancy & Absorption Over the past year, the big box vacancy rate has increased by 165 basis points to 9.02 percent. Market Indicators CHICAGO BIG BOX MARKET Q Q 2016 Q VACANCY RATE 9.02% 8.50% 7.37% NET ABSORPTION 1,801,023 1,223,11,170,998 NEW SUPPLY 2,,8 3,697,81 2,619,61 UNDER CONSTRUCTION 13,527,20 16,969,50 8,853,001 NEW LEASING ACTIVITY 2,087,55 3,71,77 2,5,515 AVG NET EFFECTIVE RATE $.3 $.3 $3.92 Historical Big Box New Supply The south side of Chicago, known as the Chicago South submarket, witnessed the greatest vacancy rate improvement, dropping by 516 basis points due to Nealey Foods, Inc. leasing 106,780 square feet in the recently-constructed building at 338 S Pulaski Road. The Northwest Suburbs vacancy rate nearly doubled to 6.6 percent due to a user vacating the 300,608-square-foot building at 130 Brewster Creek Boulevard in Bartlett. Net absorption totaled 1.8 million square feet during the first quarter of 2017, a 7.25 percent increase compared to last quarter s total of 1.2 million square feet. Millions of Square Feet SPEC BTS YTD 2017 Active Spec BTS The I-80/Joliet Corridor was the only submarket to witness strong net absorption during the first quarter of 2017, totaling 2.3 million square feet due to the completion of a 1.-million-square-foot build-to-suit facility for Mars Corporation in Elwood s CenterPoint Intermodal Center and the completion of three new leases totaling 95,783 square feet. Net absorption turned negative in five submarkets, as new vacancies outpaced new leasing and user sale activity during the first quarter of At the end of March, there were 22 vacant options in existing buildings for users looking for at least 300,000 square feet of vacant space in Chicago s industrial market. >What constitutes a big box building? Precast construction Located within the Chicago Metropolitan Area 300,000 square feet or larger Ceiling heights of 28 clear or higher Chicago s big box market consists of 30 facilities totaling 170 million square feet, 75 percent of which are institutionally-owned, while the remaining 25 percent is owner-occupied. 1 Research & Forecast Report First Quarter 2017 Chicago/Big Box Colliers International

2 New Construction Four big box construction projects totaling 2.9 million square feet were delivered during the first quarter of Two projects totaling 1.2 million square feet were constructed on a speculative basis, representing 2.27 percent of the space completed between January and March. A total of 20 big box development projects are underway totaling 13.5 million square feet. Speculative activity accounts for 11 of these projects, totaling 5.6 million square feet, or 3.31 percent of the ongoing construction activity. Historical Average Net Effective Rent $5.00 $.50 $.00 $3.50 $3.00 $2.50 $2.00 $3.76 $3.80 $3.51 $3.27 $2.95 $2.97 $ $ $ Only one new big box construction project was started during the first quarter of 2017, a 308,988-square-foot speculative facility being developed by Exeter Property Group in Lockport. Available For Lease Profile The largest active big box construction project is a 1.5-millionsquare-foot build-to-suit development for an undisclosed national consumer products company in Wilmington s RidgePort Logistics Center. Leasing and Sale Activity New leases and lease expansion among big box facilities totaled 2.1 million square feet between January and March, a significant decrease compared to the 3.7 million square feet of new leasing activity recorded during the fourth quarter of The largest new big box lease signed during the first quarter of 2017 involved CTDI, Inc. leasing 501,313 square feet in the 751,769-square-foot building recently completed at 30 Brandon Road in Joliet s CenterPoint Intermodal Center. 300,000-99,999 SF 500,000-79,999 SF 750,000+ SF Vacant Occupied Under Construction MAP # SIZE ADDRESS 1 1,026,000 Core5 Logistics Center I-80, Joliet 2 992, E Millsdale Road, Joliet 3 787, W Road, Romeoville 79, W Bluff Road, Channahon 5 701, W Industrial Drive, Monee No big box buildings were sold in either user sale or investment sale transactions during the first quarter of Chicago Big Box Market Significant Q Lease Transactions Transactions in blue designate Colliers International transactions MAP # TENANT SIZE ADDRESS TYPE 1 CTDI, Inc. 501, Brandon Road, Joliet New lease 2 Madden Communications 300, th Street, Somers, WI New lease 3 Geodis 280, N Pinnacle Drive, Romeoville New lease Kellogg s 262, Crossroads Drive, Joliet New lease Chicago Big Box Market Significant Q Sale Transactions MAP # BUYER SIZE ADDRESS TYPE None to report Chicago Big Box Market Active Construction Projects MAP # TYPE SIZE ADDRESS DEVELOPER 1 Build-to-suit 1,507,55 Ridgeport Logistics Center, Wilmington Ride Property Trust 2 Build-to-suit 1,250,81 Laraway Crossings Business Park, Joliet Ryan Companies 3 Speculative 1,026,000 Core5 Logstics Center I-80, Joliet Core5 Industrial Partners Build-to-suit 1,000,560 Gateway 57 Corporate Park, University Park Venture One Real Estate 5 Speculative 992, E Millsdale Road, Joliet Hillwood 2

3 9 9 9 Chicago Industrial Market Map JOHN H BATTEN MEMORIAL AIRPORT 3 3 BURLINGTON MUNICIPAL AIRPORT SYLVANIA AIRPORT 9 2 Kenosha Regional Westosha Southeast Wisconsin WISCONSIN ILLINOIS Waukegan Regional Rockford Area McHenry County Lake County 9 Elgin I- Northwest Suburbs Chicago Executive 29 9 North Suburbs 39 2 O Hare Ohare Int'l I-39 Corridor 88 DeKalb County Fox Valley Dupage I-88 Corridor Central DuPage Chicago North I-2 North I-2 South 55 Chicago Midway Chicago South I-55 Corridor I-80 Joliet Corridor South Suburbs Far South Suburbs ILLINOIS INDIANA Gary/Chicago Northwest Indiana 3 Research & Forecast Report First Quarter 2017 Chicago/Big Box Colliers International

4 Chicago at a Glance Economic 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 and has a population base of 9.7 million employing over.6 million people with a gross metropolitan product (GMP) of more than $630 billion. U.S. GDP growth grew at its weakest pace in three years during the first quarter of 2017, at an annual rate of 0.7 percent following a growth rate of 2.1 percent during the fourth quarter of Despite this slowdown, the labor market is near full employment and consumer confidence has reached multi-year highs. Additionally, business investment improved, investment in home building rose at a 13.7 percent rate, and exports grew at 5.8 percent rate, leaving a smaller trade deficit. Despite these positive indicators, the Great Recession ended more than seven years ago and the economy will eventually experience another cyclical downturn. Over the near-term the Chicago Metropolitan Area economy looks to benefit as companies locate and expand within the Chicago region due to the area s central location, significant population, and labor force advantages. The unemployment rate in the Chicago Metropolitan Area measured.5 percent in March of 2017, on par with the national unemployment rate. While the Chicago-area unemployment rate has bounced around due to seasonal employment cycles, it has generally been declining for the past three years in stride with the state and national rates, but remains elevated above the unemployment rates for many other major metropolitan areas including Denver (2. percent), Salt Lake City (3.2 percent), and San Francisco (3.5 percent). The Institute for Supply Management s Chicago Business Barometer increased by 30 basis points to 57.7 percent in March, the strongest quarterly performance since the fourth quarter of 201. A reading above 50 indicates expansion in the region s economy. Historical Unemployment Rate 12.0% 10.0% 8.0% 6.0%.0% Source: Bureau of Labor Statistics 201 Chicago Metropolitan Area 2015 United States Jan Apr Transportation Chicago is home to seven Class I railroads which travel over 7,000 miles of track in the state. Intermodal railcar loadings have increased nationwide for the past seven consecutive years and represents the largest commodity moved by rail in Illinois. The Illinois highway system contains three coast-to-coast interstates (I-70, I-80 and I-). Also included within Illinois are three north-south interstate systems (I-39, I-55 and I-57) and five east-west interstate systems (I-2, I-6, I-7, I-88, I-9). O Hare International is the fifth busiest airport in the world. More than 1.7 million tons of cargo passed through O Hare International in 2015, while 76.9 million passengers passed through the airport.

5 First Quarter 2017 Big Box Market Statistics SUBMARKET TOTAL INVENTORY #BLDGS NEW SUPPLY UNDER CONSTRUCTION NEW VACANCIES VACANT SPACE VACANCY RATE CURRENT QTR VACANCY RATE PREVIOUS QTR NEW LEASING ACTIVITY USER SALE ACTIVITY CURRENT QTR NET ABSORPTION Central DuPage 7,833, , , % 5.99% YTD NET ABSORPTION Chicago North % 0.00% Chicago South 2,070, , % 2.3% 106, , ,780 DeKalb County,00, , % 6.92% Elgin I- Corridor 5,867, , % 15.32% 71, , ,150 Far South Suburbs 10,803, ,857, ,550 7.% 7.% Fox Valley 1,50, ,0 0 15,20 15, % 0.00% , ,696 I-2 North 3,098, , ,089 1,87, % 52.02% I-2 South 2,983, , % 19.81% I-39 Corridor 1,918, % 0.00% I-55 Corridor 1,705, ,898,9 851,0 3,61, % 7.82% 71, ,88-380,88 I-88 Corridor 17,783, ,720 27,360 1,835, % 9.9% 100, ,360-17,360 I-80/Joliet Corridor 3,07, ,10,59 5,526, ,769 1,980,008.60% 5.32% 95, ,339,120 2,339,120 Lake County 3,773, , , , % 5.10% 92, ,267-23,267 McHenry County % 0.00% North Suburbs 306, % 0.00% Northwest Suburbs 1,123, ,03 300,608 72,33 6.6% 37.71% , ,608 O'Hare 1,991, , % 3.89% South Suburbs 2,89, , , % 13.01% METRO CHICAGO TOTALS 153,12, ,,8 11,788,856 2,773,527 1,122, % 8.77% 1,787,55 0 1,989,023 1,989,023 Northwest Indiana 1,, , , % 22.27% , ,000 Rockford Area 1,0, , % 0.00% Southeast Wisconsin GRAND TOTALS 13,05, ,02, ,03.53%.53% 300, ,019, ,,8 13,527,20 2,961,527 15,333, % 8.50% 2,087,55 0 1,801,023 1,801,023 Note: New Supply reflects only construction completions beginning in the first quarter of 2017, the figure no longer includes building demolitions which are removed from market inventory. 5 Research & Forecast Report First Quarter 2017 Chicago/Big Box Colliers International

6 55 offices in 66 countries on 6 continents United States: 153 Canada: 3 Latin America: 2 Asia Pacific: 231 EMEA: 112 MARKET CONTACTS: Craig Hurvitz Vice President Chicago Craig.Hurvitz@colliers.com Jennifer Olsen Senior Research Analyst Chicago Jennifer.Olsen@colliers.com $2.5 billion in annual revenue 2.0 billion square feet under management 16,000 professionals and staff About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,000 professionals operating from 55 offices in 66 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. colliers.com Copyright 2017 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.