Some exciting news for Chicago’s commercial real estate professionals

I was having lunch today with my friend Dustin Gellman of Catylist.  Since the last time we had seen each other was over pizza at Quartino when the weather was still warm, we had a lot to discuss.  I told him about a client I recently helped in the Loop and how my blog is starting to draw some attention in the blogosphere and Dustin shared with me that his firm Catylist is also providing a customer relationship management (CRM) tool specifically designed for commercial real estate professionals.  He really knows exactly how to get me excited…
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CoStar Releases Q3 Chicago Office Market Report

I don’t know who can be credited with saying “No news is good news,” but I have to completely disagree.  As a real estate professional, I think that all news is good news.  By researching and analyzing trends and activities, tenant representatives like me are better equipped to providing the best services for our clients.  That’s why I was excited to receive a notification in my Inbox that the latest CoStar Chicago Office Market Report was available.  It’s free to subscribers and on sale for 50% off for non-subscribers.

Before you reach into your wallet for the full report, I’d like to provide an overview, at no charge, of key learnings that I have gathered from the trends and statistics contained within the report.

  1. There has been a net absorption of space in the central business district (CBD), and the opposite trend in suburban Chicago.
  2. CBD vacancy has decreased from the previous quarter and suburban Chicago vacancy has increased in the same period.
  3. Fifty-nine percent (59%) of the five million (5MM) square feet under construction in the Metro Chicago submarket is pre-leased.

What does this all mean:

Neither the CBD nor the suburban Chicago market has had much new space delivered in the last quarter.  As a result, the absorption statistics and the vacancy statistics correlate quite highly.  Some major tenant moves, like United Airlines relocation to downtown Chicago, have tipped the scales in favor of the CBD versus the suburban market.  There has been limited new space delivery and increased activity as several firms expanded in the CBD in the last quarter, taking more of the increasingly scarce space.  Until the 5MM SF of new space comes on the market, we anticipate a space crunch that will result in lower vacancy and higher rental rates.  Since a majority of this space is pre-leased, it is likely that this will create a vacuum or domino effect, transferring vacancy to ever-lower classes of office space until the system levels out.  Late 2009 will likely be the best time in the next 2-3 years to be in the market for space.

If you want to know more about how these trends may impact you within your submarket, I definitely recommend getting your hands on a copy of the latest report.  Should you disagree with my assessment, feel free to share your thoughts via comments to this post.

The Crain’s Lists Are Out – Largest Office Leases in Chicago Market

Crain’s Chicago Business just came out with its annual lists of the largest office lease transactions in Downtown Chicago and office lease transactions in the Chicago Suburbs.  Since my blog is still fairly young by internet measurement, I will be establishing this as my baseline against which we can compare future years.

Aside from fulfilling personal curiosity about commercial office market activity, for tenants in these areas, it’s also worth noting if anchor tenants have moved in or out of your building.  Understanding the dynamics of the tenant mix and vacancies in your building can help you when it is time to renegotiate – that’s why when I’m not out helping clients, I’m doing research that I can report on this blog and apply to ensure that I’m the best transaction advisor I can be for my clients.

Here are a few things worth noting from the lists:

  • Tishman Speyer Properties L.P. and the John Buck Co. are the two big winners downtown – each acquired two of the top ten office tenants this year.
  • AT&T Corporate Center* (227 W Monroe) was the best grossing building downtown and the only building to acquire two tenants in the top ten – Citigroup Inc. and Robert W. Baird and Co. – for over 360,000 SF.
  • In the suburbs, Colliers Bennett and Kahnweiler (CB&K) was the big winner on the leasing broker side, winning over 330,000 SF across the buildings that it represents for landlords.

*Building details provided by Emporis

No report for you, as major real estate firm restricts access

I think it’s quite rare that I will have the privilege to report first on what some in the field might describe as “breaking news”.  However, after a cursory internet search, I believe I will be the first to publicly report on CB Richard Ellis’s move to “privatize” their research reports.  A friend and professional in real estate services recently received an email with the following Research Update from CB Richard Ellis.  After many years of providing what most (myself included) would describe as the industry-leading research report, the research department at CB Richard Ellis is locking down a la Willie Wonka and the Chocolate Factory.  For a long time, the facts and statistics that they have painstakingly gathered at CB’s research department have been available to anyone who requested the reports – all you had to do was register.

Ward Caswell, the head of the CB Research Department, made a strategic decision by limiting report access.  If I had a team that could put together the kind of reports that his team did, I would want to reserve it for the highest echelon of reader – my clients.  Ward, I salute you with this bold move.  My only request is that you provide an abridged report for the masses of real estate professionals who have come to view your quarterly reports so highly.

Are you paying rent for someone else’s investment mistake?

The Wall Street Journal posted an article today entitled Ambitious Targets.  This article is more of a brief, discussing the latest trend in office building investments.  After Blackstone Group bought Equity Office Properties and flipped most of its buildings – many of which are now on the market again following the Blackstone sale – the industry coined the term the “EOP Effect”, in which rental rates are raised to justify exorbitant purchase prices.  Is this something to fear or just regular market correction? Continue reading

Evaluating the content in commercial real estate brokerage reports

In my last post, we stepped through the key areas of the CoStar market report for Chicago.  I also promised that I would evaluate specific brokerages’ reports in order to see both how they stack up and what the content suggests from the outlook of a tenant in the market.

Because I am based in Chicago and a large portion of my work comes from Chicago businesses, we will be standardizing the reviews by analyzing commercial brokerage reports that cover the downtown Chicago office market and looking specifically at Q1 2007 reports.  When a major brokerage does not provide a downtown Chicago report, I will note as such below.  I will periodically review one report and update this post accordingly – to be alerted to updates to this thread, subscribe to the RSS feed for this blog.
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Making sense of market research reports

Over the course of my time as a real estate advisor, I have turned to the market reports of other brokerage firms for the necessary market insight and data points to stay on top of things.  These reports can range from a two pages to several dozen pages, ranging from a brief summary to comprehensively highlighting every major transaction in the market, key trends and predictions, case studies of major deals, and insight into what may come in the year ahead.

I would like to aid my readers in their quest for knowledge and career longevity by providing two services:
1. To help my readers “dissect” a research report
2. To provide review of the major brokerages’ reports availability and depth

In order to fully comprehend the finer points of a research report, one has to be familiar with the component parts.  Rather than choose a specific brokerage firm’s report for this step, I will instead utilize The CoStar Office Report – Q1 2007 – Chicago Office Market.  This report weighs in at a whopping forty-one pages of Adobe PDF glory and analyzes both the downtown and suburban office markets in Chicago (similar reports are available for other markets at – CoStar Quarterly Market Report Online Store.  For this exercise, we will not be evaluating specific data in the report, instead focusing on the key sections and statistics worth understanding as a tenant.  We’ll reserve deep analysis for when we evaluate the individual brokerage reports in the near future.
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