Delta Associates

Market Information: Chicago

Economy

Office

Industrial

Economy: First Quarter 2008

Modest Growth

The Metro Chicago economy continued to expand at a modest rate in the 1st quarter of 2008. The growth was propelled by Chicago’s Professional and Business Services sector, which added 10,100 jobs – 1.4% – over the 12 months ending January 2008. Overall, Metro Chicago payroll employment grew by 28,800 jobs – 0.6% – over the 12 months ending January 2008.

The Metro Chicago unemployment rate was 4.9% in December 2007, up from 3.9% in December 2006. The national rate of unemployment in December 2007 was 5.0%.

Office Market: First Quarter 2008

The Metro Chicago office market experienced modest growth in the 1st quarter of 2008.

Metro Chicago office market highlights:

Net absorption: 221,000 SF in the 1st quarter of 2008.
Sublease space: Decreased by 960,000 SF in the 1st quarter of 2008.
Overall vacancy rate: 12.7% at 1st quarter 2008, down from 13.8% a year ago.
Rents: Up 1.6% in the 1st quarter of 2008, an annualized rate of 6.4%, compared to 6.2% in 2007.
Under construction or renovation: 8.4 million SF in the 1st quarter of 2008.
Deliveries: Totaled 937,000 SF in the 1st quarter of 2008 in Suburban Chicago. There were no office deliveries in the CBD for this period.
Office investment sales volume: Totaled $689 million in the 1st quarter of 2008, down from $2.3 billion one year ago. Sale prices averaged $214/SF in the 1st quarter of 2008, even with 2007.

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Industrial Market: First Quarter 2008

Growth Continues

The Metro Chicago industrial market remains healthy, with net absorption of 2.7 million SF in the 1st quarter of 2008, compared to 462,000 SF in the 1st quarter of 2007. Net absorption of Warehouse/Distribution space totaled 4.3 million SF in the 1st quarter, compared to 508,000 SF during the 1st quarter 2007. Manufacturing and flex space saw negative net absorption of 853,000 SF and 733,000 SF, respectively, during the 1st quarter of 2008.

Additional Highlights:

Available sublease space increased to 6.1 million SF in the 1st quarter of 2008, up from 5.1 million SF a year ago. Sublease space currently represents just 0.6% of the standing inventory.
The overall industrial vacancy rate in Metro Chicago is 9.1% in the 1st quarter of 2008, up from 9.0% at year-end 2007 but down from 9.8% a year ago. The direct vacancy rate is 8.5%, up from 8.4% at year-end 2007 but down from 9.8% a year ago.
There is 12.7 million SF of industrial space under construction in Metro Chicago at 1st quarter 2008, up from 9.8 million SF a year ago. 25% pre-leased, compared with 21% a year ago.
5.0 million SF of industrial space was delivered in Metro Chicago in the 1st quarter of 2008, up from 3.5 million SF a year ago. 39% of that space was leased upon delivery, compared to 42% a year ago.
Industrial rents increased by 2.5% in the 1st quarter of 2008, after increasing by 3.7% in all of 2007. Overall, rents averaged $5.40/SF NNN at 1st quarter 2008.
Industrial investment sales volume totaled $462 million in Metro Chicago in the 1st quarter of 2008, up from $321 million a year ago. Sales prices averaged $56/SF, down from $64/SF a year ago.

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