Q3 2012 | INDUSTRIAL | BIG BOX

CHICAGO

THE BIG BOX REPORT

A SNAPSHOT OF CHICAGOS BULK WAREHOUSE DISTRIBUTION TRENDS

Heightened Expectations
WHAT THE MARKET LOOKS LIKE
>>

The Chicago big box inventory base consists of 256 facilities totaling 132.1 million square feet.

>>

70 percent of this inventory is institutionally owned while the remaining 30 percent is owner
occupied.

>>

The highest concentration of inventory is located in the I-55 and I-80/Joliet Corridors, which
have 35.5 million square feet and 31.3 million square feet of big box facilities, respectively.
Three of Chicagos submarkets - Chicago North, McHenry County and North Suburbs - have
no such facilities.

VACANCY AND SUPPLY

MARKET INDICATORS

>>

The third quarter vacancy rate totaled 11.29 percent, up 50 basis points from the 10.79 percent
reported last quarter. A considerable decline in tenant demand caused third quarter vacancies
to rise.

>>

One facility returning to the market also negatively impacted the third quarter vacancy rate.
World Kitchens 700,200-square-foot facility, located in the Far South Suburbs at 5800
Industrial Drive in Monee, is now available for sublease. This is the largest Big Box sublease
on the market this year.

>>

Vacant
industrial
supply
at the end of the third quarter totaled 15.0 million square feet, climbing
Historical
Construction
Deliveries
300,000 sq.
ft. & Above
800,000
square
feet from the second quarter total of 14.2 million square feet. Vastly inferior
tenant demand coupled with an increase in space returning to the market caused the rise in
third
quarters vacant industrial supply.
10.00

>>

9.00
Users
looking for large blocks of space in excess of 700,000 square feet now have two
8.00
options:
849,700 square feet at 501 Internationale Parkway North, Minooka and 700,200
7.00
square
feet at 5800 Industrial Drive in Monee. Last quarter there was only one choice.

Chicago Metro
2Q 2012

3Q 2012

VACANCY 10.79%

11.29%

ABSORPTION 2,064,545

161,161

Current Big Box Vacancies

CURRENT BIG BOX VACANCIES

18
14

Square Feet Millions

16

13

12

>>

10

8
6
4
2
0

1.00

1
300 - 500K

500 - 750K

750K+

Source: Colliers International Research

0.00

2008
2009
LEASING 2005
AND 2006
SALE2007
ACTIVITY

$2.50
$2.00
www.colliers.com/chicago

3.02

3.09

2010
1.48

2011
2.66

2012
1.27

Only three markets secured big box leasing activity in the third quarter, with the I-55 Corridor
experiencing the highest volume at 982,000 square feet or 63.5 percent of all third quarter
leasing volume. In the second quarter, six markets witnessed big box tenant activity.

Historical Taking Net Effective Rents

$3.00

3.62

>>

>> Clear ceiling heights of 28 clear or higher

Buildings with significant specialized improvements (i.e.
$3.50
$3.23
Freezer/Cooler area) are excluded from
our $3.20
findings.$3.32 $3.23

5.39

Spec 7.44volume
8.78 in the
9.31 third
8.36quarter
0.46 totaled
0.00
0.60
Leasing
a0.00
disappointing
1.5 million square feet. This was a
dropSource:
of 65
percent
Colliers
Internationalfrom
Researchthe prior quarter level of 4.7 million square feet. The weaker results
were caused by the lack of interest of large users, as the largest third quarter transaction was
354,200 square feet. Three significant second quarter transactions totaling 2.8 million square
feet nearly doubled this quarters total volume.

>> Located within the Chicago Metropolitan Area

>> Precast construction

BTS 3.81

>>

BUILDING CRITERIA
>> 300,000 square feet or larger

6.00

The
5.00 I-80/Joliet Corridor vacant industrial supply totaled 4.5 million square feet in the third
quarter,
a decline of 500,000 square feet. This submarket incurred the largest decline in
4.00
vacant
supply, however, it still holds 30.2 percent of the overall available big box supply in the
3.00
Chicago
area.
2.00

>>

Just like the second quarter, one user sale was reported in the third quarter. However, at
400,100 square feet it was smaller than the 600,000-square-foot second quarter sale.

$2.95 $2.97

$2.78 $2.81

RESEARCH & FORECAST REPORT | Q3 2012 | CHICAGO | INDUSTRIAL | BIG BOX

LEASING AND SALE ACTIVITY (CONTINUED)

>>

Investment sale activity was down in the third quarter due to fewer portfolio sales. The largest
transaction was Stockbridge Real Estate Funds purchase of a two-building 545,200-squarefoot portfolio in the Central DuPage market. TA Associates sold the package for $17.9 million,
representing a 6.2 percent capitalization rate.

NET ABSORPTION
>>

After seeing no
speculative big box
construction in the Chicago
area since 2009, a new
604,100-SF project is
underway in Romeoville.

Weaker big box tenant demand caused the third quarter net absorption figure to measure
just 161,600 square feet. This was a huge disappointment from the 6.2 million square feet
captured in the second quarter.

CONSTRUCTION ACTIVITY
>>

Two buildings were completed in the third quarter totaling 966,600 square feet one
speculative and one build-to-suit. Interestingly, the speculative project was larger. The last
time speculative completions exceeded build-to-suit volume was during the third quarter of
2008. DCT Industrial Trust completed a 604,100-square-foot speculative bulk warehouse/
distribution facility at DCT 55 in Romeoville. This easily surpassed the 362,500-square-foot
build-to-suit facility recently occupied by the Edward Don Company.

>>

Developer interest in speculative product continues to gain momentum. In the third quarter,
Clarius Partners commenced construction on a 1.0-million-square-foot project at Clarius Park
Joliet. This marks the first one million-square-foot speculative development to start since the
first quarter of 2008.
Historical Construction Deliveries

300,000 sq.CONSTRUCTION
ft. & Above
HISTORICAL
DELIVERIES

(300,000+ SQUARE FEET)

Current Big Box Vacancies

10.00
9.00

Historical Construction Deliveries

300,000 sq. ft. & Above

18
14

13

Square Feet Millions

ox Vacancies
16
10.00
9.00

Square Feet Millions

12
10

8.00
7.00

6.00
WINDHAM LAKES SOUTHWEST

5.00

1401-1406 Normantown Road

4.00
3.00
4Romeoville, IL
2.00
67

ational Research

750K+

300 - 500K

500 - 750K
BTS 3.81

2005

2006
5.39

750K+
3.62
3.02

2007

2008

2009
3.09

2010
1.48

2011
2.66

Spec 7.44

8.78

9.31

8.36

0.46

0.00

0.00

Source: Colliers International Research

6.00
5.00
4.00
3.00

1.00

0.00

7.00

2.00

1.00

0 - 750K
500

8.00

Source: Colliers International Research

0.00
2012
1.27

2005
3.81

2006
5.39

2007
3.62

2008
3.02

2009
3.09

2010
1.48

2011
2.66

2012
1.27

Spec 7.44

8.78

9.31

8.36

0.46

0.00

0.00

0.60

0.60BTS

Source: Colliers International Research

RENTS

Historical Taking
Net Effective
HISTORICAL
TAKING
NETRents
EFFECTIVE RENTS
$3.50

$3.23 $3.20 $3.32 $3.23

$3.00
$2.50
$2.00
$1.50

The third quarter net effective weighted average rent was $2.81 per square foot net. This was
up from the second quarter weighted average of $2.69 per square foot net. Although higher,
the third quarter rate represented only one transaction.
Historical Taking Net Effective Rents

$2.95 $2.97

$3.50

$1.00

>>

$2.78 $2.81

$3.23 $3.20 $3.32 $3.23

$3.00

$0.50
$0.00

2005

2006

2007

2008

Source: Colliers International Research

2009
2010
$2.50

2011

$2.00
$1.50

P. 2

$1.00

| COLLIERS INTERNATIONAL
$0.50

2012

$2.95 $2.97

$2.78 $2.81

RESEARCH & FORECAST REPORT | Q3 2012 | CHICAGO | INDUSTRIAL | BIG BOX

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, with over 4.0 million
people employed with a regional product (GRP) of $495 billion.

>>

Chicagos unemployment rate jumped in August to 9.1 percent up from the 8.6 percent
reported in May. The unemployment rate was higher when compared to the August national
rate of 8.1 percent a whole percentage point increase.

>>

The Institute for Supply Management stated that Chicagos business barometer PMI
dropped to 49.7, its poorest outcome in three years. This was significantly inferior to the
June report, when PMI was 52.9. Additionally Chicago fell below the national average of
51.5. A reading above 50 indicates expansion to the regional economy.

>>

The Illinois Association of Realtors, reports home sales in August grew by 23.7 percent
from this time one year ago to 13,264 home sales. The report also states that median home
prices fell .7 percent to $147,000 from the August 2011 sales of $148,000.

>>

Illinois 2011 exports totaled more than 64.5 billion, up 28.98 percent from 2010 volume. This
volume places Illinois as sixth largest U.S. exporter.

>>

September U.S. auto sales of new cars reached 600,956 units up 23.3 percent from one
year ago

HISTORICAL UNEMPLOYMENT RATE

Illinois

US

12

Percentage (%)

10
8
6
4
2

2005

2006

Jul

Apr

Jan

Jul

2011

Oct

Apr

Jan

Jul

2010

Oct

Apr

Jan

Jul

2009

Oct

Apr

Jan

Jul

2008

Oct

Apr

Jan

Jul

2007

Oct

Apr

Jan

Jul

Oct

Apr

Jan

Jul

Oct

Apr

Jan

2012

Source: Bureau of Labor Statistics

TRANSPORTATION

P. 3

| COLLIERS INTERNATIONAL

>>

Chicago is home to six Class I railroads. Intermodal traffic has increased steadily since
2008 when 9.88 million containers/trailers were shipped via rail in the United States. At the
end of 2011, 11.89 million units were hauled by rail.

>>

The Illinois highway system contains three coast-to-coast interstates (I-70, I-80 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).

>>

OHare International Airport is the second largest airport in the country. For the first two
months of 2012, 219.7 thousand tons of cargo passed through Chicagos OHare and Midway
Airports.

>>

Illinois has more than 1,100 navigational miles of waterways which provide a direct link to
the Gulf of Mexico and the Atlantic Ocean.

RESEARCH & FORECAST REPORT | Q3 2012 | CHICAGO | INDUSTRIAL | BIG BOX

THIRD QUARTER 2012 MARKET STATISTICS

Under
Construction
Square Feet

Market

Total Inventory

New Supply
Square Feet

Available
Square Feet

Vacancy Rate

Leased
Square Feet

Sold Square Feet

Net Absorption

Central DuPage County

6,922,774

Chicago North

977,292

14.12%

0.00%

Chicago South

2,053,492

384,000

18.70%

DeKalb County

3,422,099

Elgin I-90 Corridor

4,074,289

0.00%

254,636

6.25%

Far South Suburbs

9,175,158

Fox Valley

15,357,107

700,200

1,273,233

13.88%

-700,200

592,672

1,368,940

8.91%

400,100

I-290 North

19,913

1,651,741

134,900

318,733

19.30%

-134,900

I-290 South

1,955,005

0.00%

I-39 Corridor

1,918,365

104,008

5.42%

52,005

52,005

I-55 Corridor

35,830,954

966,624

1,326,334

4,000,983

11.17%

982,040

622,330

I-80/Joliet Corridor

31,317,898

2,619,232

4,527,842

14.46%

512,133

512,133

Lake County

2,692,282

0.00%

McHenry County

0.00%

North Suburbs

0.00%

Northwest Suburbs

700,000

320,265

45.75%

O'Hare

1,500,394

95,796

6.38%

South Suburbs

2,849,828

209,665

825,281

28.96%

-209,665

Metro Chicago Totals

121,421,386

966,624

2,619,232

2,963,771

14,451,009

11.90%

1,546,178

400,100

161,616

Northwest Indiana

1,940,749

93,000

4.79%

Rockford Area

1,900,014

0.00%

Southeastern Wisconsin

7,588,591

450,954

5.94%

Grand Totals

132,850,740

966,624

2,619,232

2,963,771

14,994,963

11.29%

1,546,178

400,100

161,616

Came on Market

The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability. As new, corrected or updated information
is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports.

P. 4

| COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT | Q3 2012 | CHICAGO | INDUSTRIAL | BIG BOX

CHICAGO INDUSTRIAL SUBMARKET TOP TRANSACTIONS MAP

522 offices in
62 countries on
6 continents

THIRD QUARTER 2012 TRANSACTIONS

Map

Tenant/Buyer

Size (SF)

Address

Type

Handi-Foil Corporation

400,100

2275 Diehl Road, Naperville

Sale

Reviva Logistics, LLC

354,211

1000 Veterans Parkway,

Bolingbrook

Lease

Lennox

312,205

860-868 Crossroads Parkway,

Romeoville

Lease

United States: 147

Canada: 37
Asia: 36
Australia/New Zealand: 165
Latin Ameria: 19
EMEA: 118

SOUTHEAST WISCONSIN

> $1.8

billion in annual revenue

> 1.25

billion square feet under management*

> Over

12,300 professionals

* The combination of Colliers International

and FirstService results in 2.55 billion under
management (2nd largest in the world)

LAKE COUNTY
McHENRY COUNTY

45

12

83

www.twitter.com/ColliersChicago

60
94

83

Lake Michigan

22

45

ELGIN I-90

NORTH
SUBURBS/COOK

Lake Cook Rd.

NORTHWEST
SUBURBS

72

www.colliers.com/chicago

68

12

14

41

21

62

94

59

53
90

O'HARE

294

58

O'Hare Expy.
inElg

20
31

20

CENTRAL
DuPAGE

64

DeKALB
COUNTY

41
90

190

CHICAGO
NORTH

290

290

94

I-290 NORTH

53
355

90

64

I-88 / FOX VALLEY

I-290 SOUTH

83
59

290

CHICAGO
SOUTH

43

45

88

ay
East-West Tollw

88

RESEARCHER:
90

34
294

94
55

34

50

43
53

355

I-55 CORRIDOR

94

90

55

12

20

SOUTH SUBURBS

57

94

53
171
7

50

45

NORTHWEST
INDIANA

George A. Cutro
Vice President
Research Services
Colliers International Chicago
6250 N. River Road, Suite 11-100
Rosemont, IL 60018
TEL +1 847 698 8295
george.cutro@colliers.com

I-80 / JOLIET CORRIDOR

294
80

80

FAR SOUTH SUBURBS

NORTH
0 1

10 miles

55

www.colliers.com/marketname

Accelerating success.