Delta Associates

Market Information: Chicago

Economy

Office

Industrial

Economy: Year-End 2009

Weak Across All Sectors

The Metro Chicago economy continued to retrench through the fall of 2009, with payroll employment declining by 197,800 jobs – a 4.4% decline – over the 12 months ending October 2009. This compares to a 4.0% decline nationally in this period. All sectors of Chicago’s economy continue to lose jobs, even Education and Health Services, which had been the only part of the local economy gaining jobs until recently.

The Metro Chicago unemployment rate was 10.3% in October 2009, up from 6.2% a year ago, but down from 11.0% in June 2009. The national unemployment rate was 10.2 in October 2009 and declined to 10.0% in November.

Office Market: Year-End 2009

Metro Chicago office market conditions remain weak, although the rate of contraction has slowed substantially from earlier in 2009.

Metro Chicago office market highlights:

Net absorption: Positive 198,000 SF at year-end 2009; negative 3.1 million SF for all of 2009.
Overall vacancy rate: 15.0%, up from 14.8% in the 3rd quarter and 13.0% a year ago.
Rents: Metro Chicago rents declined 4.7% in 2009. CBD Class A rents fell 10.9% and Suburban Class A rents were down 4.2% during the year.
Under construction or renovation: 2.2 million SF of office space at year-end 2009, down from 3.6 million SF in the 3rd quarter and 6.5 million SF one year ago.
Deliveries: Three major deliveries in the CBD significantly boosted absorption in 2009. Suburban Chicago deliveries totaled 811,000 SF in 2009, compared to 4.1 million SF in 2008.
Office investment sales volume: Totaled $551 million in Metro Chicago in 2009, compared to $2.3 billion in 2008. Sales prices averaged $145/SF in Metro Chicago in 2009, down 25%from the 2008 average of $193/SF.

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Industrial Market: Year-End 2009

Market Remains Weak

Metro Chicago companies continue to shed warehouse and manufacturing space due to the ongoing economic weakness.

Additional Highlights:

The Metro Chicago industrial market recorded negative 5.6 million SF of net absorption during the 4th quarter of 2009. Net absorption for all of 2009 totaled negative 15.9 million SF, compared to positive 6.0 million SF in 2008.
There is currently 6.5 million SF of sublease space on the market at year-end 2009, up from 6.1 million SF a year ago. Sublease space currently represents 0.6% of standing inventory, the same as at year-end 2008.
The overall industrial vacancy rate in Metro Chicago jumped to 11.8% at year-end 2009, from 11.2% in the 3rd quarter and 9.7% a year ago. The direct vacancy rate rose to 11.2% at year-end 2009, from 10.6% in the 3rd quarter and 9.1% a year ago.
There is 346,000 SF of industrial space under construction in Metro Chicago at year-end 2009, from 1.7 million SF in the 3rd quarter and 5.0 million SF a year ago. Space under construction at year-end 2009 is 96% pre-leased.
Industrial deliveries totaled 8.3 million SF in Metro Chicago in 2009, down from 18.7 million SF in 2008. Space delivered in 2009 was 39% leased upon delivery, compared to 24% in 2008.
Industrial rents decreased 6.0% in 2009, after declining 3.2% in 2008. Overall rents averaged $4.79/SF, NNN, at year-end 2009.
Industrial investment sales totaled $312 million in Metro Chicago in 2009, compared to $1.2 billion in 2008. Sales prices averaged $49/SF in 2009, down from $54/SF in 2008.

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