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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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.

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