The old adage that every cloud has a silver lining holds true for the St. Louis industrial market. After posting positive absorption during every quarter of the current recession, the industrial market got cloudier when Chrysler shuttered its St. Louis plants during the early part of the third quarter. That placed more than 5.1 million square feet of space on the market and boosted the vacancy rate a couple points. The auto industry’s woes trickled down to a number of Chrysler’s suppliers as well. Another 2.1 million square feet of auto supplier buildings also became available. So where’s the silver lining? Actually, there are several. For starters, Chrysler’s plants and its suppliers are primarily located in the South County submarket. Historically, South County has been one of the area’s strongholds for industrial, with a vacancy rate of only 4.2 percent at the end of the second quarter. The availability of space now opens up opportunities for large and small users. A number of companies have already taken advantage of these opportunities. Colt Industries, the area’s distributor for Corian countertops, purchased a nearly 100,000-square-foot building formerly occupied by Dakkota Integrated Systems, which supplied vehicle interiors. An aerosol can supplier has signed …
Illinois
Chicago, the nation’s third-largest metropolitan area, is known as a legendary shopping destination. Occupying a glamorous stretch along Chicago’s Michigan Avenue, the Magnificent Mile is lined with fabulous shops, exciting sightseeing activities, restaurants, luxury hotels and even flagship boutiques for some of the world’s most luxurious brands. But the Windy City, like most of the nation, remains mired in a depressed real estate market and faces the worst slump in retailing growth in at least a decade. Vacancies across the Chicagoland market have increased and are currently hovering between 10 and 12 percent. But because the city is so large, there are varying degrees to which areas are affected. The outlying suburbs, where clusters of homes sprouted from farm fields just as the recession began, seem to be faring worse than the downtown area and the more densely populated suburbs. Retailers are taking advantage of the current conditions and many are leaving the “green,” suburban areas and repositioning within the city or upgrading their locations if they already have an urban presence. In the city proper, a massive new Barneys New York emporium opened its doors earlier this year. The 90,000-square-foot store occupies a new six-story building on the corner …
Chicago’s downtown and suburban office markets continue their dynamic path through an unpredictable and unprecedented economic environment. Although no one can predict the future, it is difficult to argue with the opportunities of a tenant in the current market. New supply in Chicagoland has increased by 3.9 million square feet in the past 2 years. Historically, new space is absorbed quickly; however, 2009 met this new supply with a different embrace than before. Space demand has not been as robust, and positive absorption enjoyed in the years past has decreased. This excess space, coupled with added sublease space, is contributing to Chicago’s pain. Given the tumultuous economy, the sublease market (both CBD and suburban) soared to 6.5 million square feet in second quarter 2009. The sublease market has become such a force in volume and quality that it competes with direct space, resulting in a downward push of overall effective rates. While tenants stand to reap the benefits of the subleases available, current market dynamics reveal the risks associated with leasing and subleasing space. A tenant’s credit has never been scrutinized more closely. Furthermore, the credit of the landlord/sub-landlord and tenant/sub-tenant is a major concern. A Subordination Non-Disturbance & Attornment …
In the wake of rising office vacancies and sublease space, tenant opportunities are at their most pronounced for companies seeking office space throughout the Chicago Metro market, which includes both the CBD and the suburbs, in 2009. In Chicago and across the U.S., credit-worthy tenants continue to be in a position to strike deals at a fraction of previous rents. Landlords are beginning to offer increased concessions such as tenant improvement funds, rent abatement, and greater lease flexibility. Nationally, such offerings have escalated nearly 20 percent over the last 24 months, while rents have been driven down some 10 percent in the last 3 months alone. Chicago’s sublease space climbed to 7 million square feet, including 2.67 million square feet in the CBD plus the suburbs in the first quarter of 2009, according to Jones Lang LaSalle research. Sublease space will jump further in the coming months as corporate America's more recent job cuts trickle down to commercial real estate. The overall vacancy rate, including subleases, in Chicago’s CBD is 18,140,000 square feet, or 13.6 percent, and is 22,900,000 square feet or 23.9 percent for suburban Chicago in the first quarter of 2009. The absorption rate is at -0.8 percent …
What area is your expertise? Chicago Metropolitan Market What trends do you see presently in industrial development in your area? 1). A slowing in closing of sales and execution of leases. 2). A 1.3 percent rise in vacancy rates. Our Midway and South Cook County markets, however, have experienced the highest vacancy rates at 12.3 and 11.1 respectively. 3). Quarterly absorption in fourth quarter 2007 was a positive of 3.5 million square feet to first quarter 2008, which was a negative absorption of 2.5 million square feet. 4). Leasing activity has dipped 10 percent from same time last year. 5). Average sales prices have increased for Industrial product from $59.48 square feet fourth quarter 2007 to $61.81 first quarter 2008 even though sales during those two periods have dropped from 3,750,000 square feet to 3,250,000 square feet (first quarter 2008). Approximately 12 million square feet of projects are under construction at this time and much of the space has yet to lease to the first tenants. What type of industrial product is doing well in your area? Across the board: From 20,000 square feet to 1 million square feet, with a more rapid conclusion to sales and leases on the …
What area is your expertise? Yorkville, Illinois/Kendall County. In March, Kendall County was named the fastest growing county in the nation, according to the U.S. Census, growing 77.5 percent from 2000 to 2007. What trends do you see presently in retail development in your area? Because of the unprecedented growth of Kendall County since the late 1990s, there are many national retailers who have found their way to the area, and while there has been a recent slow down in the acquisition of retail land sites in the Chicagoland area, production has not stopped on existing sites. The trend in Yorkville is going to be smaller projects with lesser known tenants over the next three to five years. Aside from the current economic woes and tightened lending restrictions, housing demographics are the key factor of this trend. Housing has slowed from one year ago, but there are signs that it’s picking up again. There have been more sales and builders have begun to create new incentives. I expect developers to move in toward the larger population centers and seek infill and/or redevelopment projects to combat inflationary land prices and continuing lender issues. The larger population bases and smaller risk projects …
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