2. Contents
3
Reis Observer
Metro Analysis
Section 1 - Current Metro Rent Details 14
Section 2 - Rent Growth Comparisons 14
Section 3 - Current Metro Vacancy Details 15
Section 4 - Vacancy Rate Comparisons 15
Section 5 - Metro Inventory Detail 16
Section 6 - Inventory Growth Comparison 16
Section 7 - Construction/Absorption Change 17
Section 8 - Submarket New Construction Project Tally 18
Section 9 - New Construction Listing 19
Section 10 - Market Data by Building Class - Class A Properties 26
Section 11 - Market Data by Building Class - Class B/C Properties 28
Section 12 - Submarket Snapshot 30
Section 13 - Economic and Demographic Trends 31
Section 14 - Submarket Boundaries 32
Section 15 - Metro Data 33
Submarket Analysis
Section 16 - Current Submarket Rent Details 35
Section 17 - Rent Growth Comparisons 35
Section 18 - Current Submarket Vacancy Details 36
Section 19 - Vacancy Rate Comparisons 36
Section 20 - Submarket Inventory Detail 37
Section 21 - Inventory Growth Comparison 37
Section 22 - Construction/Absorption Change 38
Section 23 - Market Data by Building Class - Class A Properties 39
Section 24 - Market Data by Building Class - Class B/C Properties 40
Section 25 - Submarket Data 41
Rent Comparables
Sale Comparables
3. Because Reis Observers are narrative reports that present a thoughtful
analysis of Reis findings in a given metro, our editorial staff can not
begin writing them until the Reis quartely data is released. Therefore the
Observers are published on a rolling schedule throughout the quarter and may
contain data that predates the rest of this Asset Advisor by one quarter.
Reis Observer
4. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
THE ECONOMY
Employment:
Broad shoulders. Four successive years of net job losses finally were
relieved in 2005 when, according to data provided by the U.S. Department
BLS reports a seasonally
•
of Labor’s Bureau of Labor Statistics (BLS), average nonagricultural
unadjusted unemployment rate of
employment in the Chicago area Metropolitan Division grew by 1.0%, 4.6% in July for the Chicago
adding 36,800 jobs net to the local economy. It is a modest growth rate MSA.
by U.S. norms but is not insignificant by Chicago standards (year-over-
year increases over the eight-year period preceding the recent recession Average nonagricultural
•
averaged 1.7%). The pace now has picked up—slightly. Non-farm employment in MSA was up
employment as of June 2006 was up 1.2% (44,600 jobs) from 12 months 1.2% year over year in June,
according to data provided by the
prior. But dramatic improvement is not expected. While the economy is
BLS.
broad and diverse, there is no dynamic growth engine that will shake it
loose from the pattern of slow growth. And the Metropolitan Division’s
Economy.com reports a second
•
large manufacturing sector, accounting for about 400,000 jobs, continues
quarter 2006 average household
to struggle. While its losses were the smallest of the series, 2005 was the income of $111,833 for
seventh year in succession to see net employment losses in this sector. Chicago. By contrast, an
And the losses continue. Employment in Manufacturing as of June 2006 average of $108,545 and
was down 1.7% (6,900 jobs) from the preceding June. The economy’s $101,810 are reported for the
overall growth, accordingly, derives from the greater vitality of other top metros in the nation and
sectors (substantial increases are indicated for the professional and Midwestern region, respectively.
business services and educational and health services segments, for
example). Stability, thus, is a chief attribute. The economy is expected to
gain additional leverage over time from the multi-year, $15 billion
expansion underway at O’Hare International Airport, which Marcus &
Millichap Real Estate Investment Brokerage Company expects will
generate 90,000 to 195,000 jobs by completion. The unemployment rate
as of July was 4.6%, down from 6.4% twelve months earlier.
Population growth, another factor in the economy’s typically slow growth,
remains sluggish: the 0.6% annual average increase indicated by Chicago Employment by Sector
Economy.com for the past five years leaves just enough room for modest Manufacturing
Education &
net in-migration. Still, the average annual numerical gain, at about 46,000, 10%
Health Svc. Constr, Trans,
represents significant demand for goods, services and real estate product. 13% Util, Nat. Rsrce
Thus, while Chicagoland growth overall is slow, there are pockets of 9%
Government
vitality. Residential development, accordingly, continues, expanding ever Wholesale
13%
5%
farther into increasingly remote suburban areas, particularly those in the Leisure & Information
far west and far southwest, and downtown Chicago has seen a remarkable Hospitality 2%
9%
surge in condominium development and conversion over the past few Finance
8%
years. That said, home prices, holding to the Midwestern model, have Prof. &
Retail Trade &
shown only moderate increases in the recent term; the local market has Business Svc.
Consumer Svc.
16%
15%
not participated in the huge run-ups that have captured many of the Source: BLS
1
Copyright 2006 Reis, Inc. Page 3
5. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
markets on the nation’s east and west coasts. The National Association of
Realtors reports a second quarter metro area single-family home resale
price (preliminary) of $278,500, up 4.9% over 12 months.
OUTLOOK Chicago Non-Farm Employment Growth
100 3%
The broad shoulders of the local economy, its lack 2%
Jobs Added (000's)
50
of high-growth drivers, and the good health of its
Rate of Growth
1%
service sectors suggest that the recently regained 0%
0
stability will continue, as long as the national -1%
economy can lend support. In the meantime, -50
-2%
expanding employment and ongoing population -100 -3%
growth, particularly in selected suburban areas and 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
downtown, should fuel demand for real estate of all Jobs Added Rate of Growth
types. Source: BLS
Population Trends
1.8%
Population Growth (% change)
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Chicago Midwestern US US
Source: Economy.com
Office Employment Trends
Office Employment (% change)
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Chicago Midwestern US US
Source: Economy.com
2
Copyright 2006 Reis, Inc. Page 4
6. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
THE REAL ESTATE MARKET
Special Real Estate Factors::
In the space of three years, from year-end 2000 to the end of 2003, the
Chicago office market, undermined by the collision of robust Grubb & Ellis Company recently
•
development with precipitous negative absorption, added 1,000 basis reported that landlords marketing
points to its vacancy rate and 23.4 million square feet to its stock of metro Chicago’s abundant stock of
Class B space soon will be faced
vacant space. High vacancy and other symptoms of softness lingered for
with a decision. “If they are
a while thereafter, and only last year did the market begin to show signs of
willing to spend some money on
recovery, which now are multiplying. While development remains active,
tenant improvements and offer
demand volumes have soared to their highest level in years, finally
generous lease packages,” explains
surpassing new supply. Vacancy, while still elevated, is moving downward
the firm, “they will be able to
decisively, and growth has returned to rents. The local economy, creating attract tenants.” Those reluctant
jobs in the business services and financial sectors, provides the to make such decisions will see
foundation. That said, however, large volumes of vacant space still damp their vacancies linger, that source
this market, even as a new development cycle is rearing its head. cautions.
Marking Los Angeles-based
OCCUPANCY •
BentleyForbes’s entry into the
Chicago market—as well as its
The latest dramatic Office Vacancy Trends
largest acquisition to date—that
cycle of development
privately held investment company
25%
and the simultaneous
spent approximately $470
descent of absorption 20%
Average Vacancy
million, or about $214 psf, to
into negative territory 15%
acquire the two-building (41 and
resulted in vacant
64 stories, respectively), 2.2-
10%
above 19.0% in million-square-foot Prudential
5%
2004—as in turn the Plaza office campus in downtown
volume of vacant 0%
Chicago’s East Loop adjacent to
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
stock rose above 43.5 Millennium Park. The site
Chicago Midwestern US US
million square feet (an includes the original Prudential
Source: Reis, Inc.
entire city’s worth of Building, located at 130 E.
Randolph Street and completed in
empty office space). But the combination of revived absorption and the
1995, and Two Prudential Plaza
removal of stock (mainly lower-tier) from the market for conversion to
at 180 N. Stetson Ave.,
other uses reversed the trend in 2005. By the end of that year the vacancy
completed in 1990. San
rate had slipped to 18.7%. Improvement now has become more earnest.
Francisco-based Shorenstein
With demand running strong, the rate had declined to 17.9% by mid-year Properties was the seller, which
(representing 40.8 million square feet, 17.7 million of which are Class A). according to Crain’s Chicago
A decline to 17.4% is anticipated by year-end after which substantial year- Business paid about $182 a
over-year decreases will drop the number to 12.6% by the end of 2010, square foot for the property in
according to our latest forecast. Occupancy’s recovery has begun: its 2000. According to that source,
effects, as detailed below, now extend into the rental and development the complex is about 85% leased.
sectors.
In July, Jackson, MS-based
•
Parkway Properties closed its fee
simple purchase of the 1.0 million-
3
Copyright 2006 Reis, Inc. Page 5
7. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
Grubb & Ellis sees a similar trend, although its descent timetable lags
Reis’s a bit—or according to this source, a vacancy peak of 19.3% was Special Real Estate Factors:
reached as recently as third quarter 2005. Since then, the rate has dropped Continued
to 17.2%. Julien J. Studley Inc. reports second quarter overall and Class A
square-foot, 32-story One Illinois
vacancies at 18.3% and 18.4%, each down 50 basis points from a quarter
Center office tower at 111 E.
prior and each down 130 points year over year. Reis, for its part, puts the
Wacker Drive in downtown
quarter-end Class A rate at 16.7%, down 220 points over 12 months, as
Chicago’s East Loop, Grubb &
the volume of vacant stock in this class decreased by about 950,000 square
Ellis reported in its second quarter
feet.
Capital market Updates.
Parkway Properties Inc. already
SUPPLY AND DEMAND owns Two Illinois Center. The
selling price, excluding closing costs
Net absorption, after and transfer taxes, was $198
Chicago Office Supply and Demand Trends
turning in its first million, or $215 psf (RSF).
substantial total last year 10,000 25%
According to a company press
(1.1 million square feet) is release, “The purchase price
5,000 20%
Square Feet (000's)
Vacancy Rate
represents an estimated 23%
expected to soar to 3.4 0 15%
discount to current estimated
million in 2006, 2 million -5,000 10%
replacement cost of $280 RSF.
of which had been
The property is expected to
-10,000 5%
accomplished by mid-year.
produce an initial unleveraged
-15,000 0%
While construction,
yield or going-in cash
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
dominated by the capitalization rate of
Completed Absorbed Vacancy Rate
downtown markets, Source: Reis, Inc.
approximately 6.3% in the first
remains active, the 1.5 million square feet projected to deliver in 2006, twelve months of operations,
nearly all of which have already, will amount to only 43% of same-term calculated using first year
absorption. Significantly, 2006 will be the first year since 2000 in which estimated net operating income of
net absorption exceeds same-year deliveries. That trend should continue. $13.5 million and the total
purchase price of $215.4 million.”
Reis is forecasting respective net absorption and construction completion
The sellers in the deal were
totals of 16.6 million and 6.5 million square feet for the four-year span
Lincoln Property Co. and Carlyle
2007 through 2010. Also aiding in the recovery of the market is an actual
Group.
reduction of non-Class A supply due to the conversion of space to other
uses. By the firm’s count, Class B-C inventory decreased by 1.8 million
Other significant sales include the
•
square feet last year, with 622,000 additional square feet of such space $300 million purchase by
leaving the market during first half 2006. With Class A inventory growing Fremont Realty Capital and
by similar amounts, the supply of total existing inventory, now reported at Shorenstein Properties of the
227.8 million square feet, has held roughly steady. Now, however, with 70%-occupied 311 S. Wacker
over-supply concerns in the residential condominium market, the Drive building, GlobeSt.com
attractiveness of older office buildings to residential developers appears to reported in August 2006
Walton Capital was the seller
be on the wane.
“Vacancy rates in the Chicago
Downtown office market are
Further, Grubb & Ellis Company warns of the potential danger of a new
decreasing,” stated an executive
round of development in the downtown markets: nearly 3 million square
with Carlton Advisory.
feet, this source notes, are expected to arrive on line in the CBD over the
“Currently in tower space—26
4
Copyright 2006 Reis, Inc. Page 6
8. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
next few years (Reis’s research, as referenced in the Submarkets section,
also show a heating up of activity downtown). “As tenants leave current Special Real Estate Factors:
locations in favor of new construction,” Grubb & Ellis notes, “anticipated Continued
future vacancies will temper the pace of recovery.” CB Richard Ellis
floors and up—on Wacker Drive,
reports current construction at 1.8 million square feet, 1.35 million of
rates are at about 7%. That
which are downtown and all of which are Class A. Net absorption for the
remains true with the 311
latest quarter, meanwhile, is counted by this source at 1.5 million square
building; its vacancy remains in
feet, about 43% of which is attributed to the CBD markets. Grubb &
the top floors.” According to
Ellis reports net absorption year-to-date at 3.3 million square feet,
GlobeSt.com, “The property, one
including 2.2 million downtown. According to Studley, the inventory of of the most high-profile buildings
large blocks of space (minimum size 125,000 square feet) has diminished in the Downtown area, had
in both the downtown and suburban markets. For the metro area as a languished for several years under
whole, this source reports 37 such blocks on the market as of mid-2006, a series of owners and weak
down from 50 a year earlier. This progress aside, it should not be market conditions. The purchasers
overlooked that the volume of vacancy in these spaces and in the market feel the Chicago market is entering
a period of resurgence, with falling
as a whole remains considerable. Grubb & Ellis’s admonition respecting a
vacancies and rising rents.”
new wave of construction in the downtown area should be given serious
GlobeSt. reported earlier that
consideration.
Behringer Harvard REIT I has
spent $27.5 million ($192 psf) to
RENTS acquire the 35-story 222 S.
Riverside Plaza, as well as the
While the average Office Rent Trends
adjacent three-story Union Station
asking lease rate evinced Multiplex at 444 W. Jackson
15%
small increases during Blvd., from Beacon Capital
10%
the last three quarters of Strategic Partners III, LP.
Rent Change
last year, 2006 will be 5%
the first year since 2000 0%
to record a year-over- -5%
year increase, which -10%
Reis forecasts at 2.5%. 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Growth returned to the Chicago Midwestern US US
average effective rate Source: Reis, Inc.
last year, but the small, 0.4% gain was negligible alongside the preceding
losses, which also extended back through 2001. But 2006 is expected to
grace this rental category with a gain on the order of 3.4%. Rates of year-
over-year gain are expected to increase gradually, albeit not steadily,
through 2010. Respective asking and effective averages for second
quarter 2006 were $25.02 and $20.35 psf, up 0.1% and 0.8% from the
preceding quarter. Studley puts second quarter metro area overall and
Class A asking averages at $22.87 and $25.15 psf, up 0.6% and 0.3% for
the period though down year over year. Reis, for its part, cites a Class A
mean of $30.32 psf, down 0.5% for the quarter, up 0.4% over 12 months.
According to Grubb & Ellis, the Class A weighted average asking price
5
Copyright 2006 Reis, Inc. Page 7
9. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
increased by nearly $1.00 psf over the past four quarters, as a result mainly
of “higher asking rates in new Class A buildings.”
SUBMARKETS
Downtown Chicago
The window of opportunity for recovery of the downtown market
•
likely will be brief. Just as a massive wave of development finally is
ending, a new one is getting underway.
“With the addition of new towers in the Loop, landlords are being
•
forced to make upgrades, and the space being vacated is leaving a big
void,” a real estate economist with Property & Portfolio Research
informs GlobeSt.com.
Fifield Company’s 479,000-square-foot 550 W. Adams project in the
•
West Loop delivered in June. USG Corporation and Humana are
tenants. Occupancy scheduled for third quarter, and CB Richard Ellis
puts leasing in the new building at about 76%.
Houston-base developer Hines broke ground in July on a 60-story,
•
1.5-million-square-foot tower at 300 N. LaSalle in the River North
area (a.k.a. Gold Coast), reports GlobeSt.com. Anchor tenant law firm
of Kirkland & Ellis has committed to 600,000 square feet in the new
building, leaving their space at 200 E. Randolph Drive. Early 2009
delivery is anticipated. Accordingly, notes this source, “Industry
experts agree that the tenant is a boon for Hines, but that the Chicago
commercial real estate industry could be creating a void by vacating
some older buildings.”
The 1.2-million-square-foot, 40-story 351 N. Clark Street building
•
from Mesirow Financial, also in River North, is scheduled to break
ground on September 1, reports CB. The firm reports pre-leasing at
75.0%.
Hines, reports this source, has proposed a 1.0-million-square-foot
•
project for 200 N. Riverside Plaza.
Fifield Realty has proposed a 37-story, 894,000-square-foot tower at
•
601 W. Monroe on what the developer describes as “one of the last
great office sites available in the West Loop.”
6
Copyright 2006 Reis, Inc. Page 8
10. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
In August, reports GlobeSt.com, Mills sold “a major portion” of 108 N.
•
State to Golub & Company. “The deal gives Golub control of an
office building that will accommodate WBBM-Channel 2 and two
residential towers.”
A 1.25-million-square-foot tower is planned for 301 S. Wacker in the
•
West Loop, reports Reis.
With the start of retail construction, development of Mills
•
Corporation’s $295 million 108 N. State Street (formerly Block 37)
mixed-use commercial-residential project in the Loop is moving
forward. Plans, reports the Chicago Tribune, include 300,000 square
feet of office space.
The last wave…. Recent major completions include Hines’s spec
•
825,000-square-foot One South Dearborn, anchored by law firm
Sidley Austin, which delivered to the Central Loop in December 2005.
The $275-million, 52-story, 1.0-million-square-foot 111 S. Wacker
•
Drive tower from John Buck Company, leased to Deloitte & Touche,
Lord, Bissell & Brook, and RR Donnelly, completed construction in
the West Loop in June 2005. The building has since sold for a record
price of $401 psf.
Higgins Development Partners’ $225 million, 1.5-million-square-foot
•
Hyatt Center at 71 S. Wacker Drive finished construction in July.
Reis puts second quarter West Loop vacancy and average asking rent
•
at 15.7% and $30.69 psf. Net absorption year-to-date is 1.1 million
square feet.
Central Loop vacancy and average asking rent were 18.5% and $28.00
•
psf. Next absorption through the first half of 2006 was 704,000
square feet.
Quarter-end River North vacancy and average asking rent were 11.1%
•
and $23.16 psf. Net absorption through mid-year 2006 was 183,000
square feet.
For downtown generally, Studley expects the gradual rise in rents to
•
become a trend. “Concession packages are beginning to tighten and
free rent is on the decline.”
7
Copyright 2006 Reis, Inc. Page 9
11. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
West Suburban
Development has slowed markedly in Chicago’s extensive western
•
suburban areas. But, as in the downtown market, activity is again
heating up.
In Reis’s suburban West submarket, 6.8 million square feet completed
•
construction from 1998 through 2004.
While only 581,000 square feet delivered during the two-year span
•
2003 through 2004, and only 50,000 finished last year, 2007 is
expected to produce 1.1 million square feet, (following this year’s
291,000 square feet).
In the West, 214,000 square feet completed construction during first
•
half 2006 in a handful of small projects. The largest (by far) was the
110,000-square-foot installment at Estancia Corporate Center in Burr
Ridge, which finished in March.
Many projects are on the drawing board in areas including Naperville,
•
Bolingbrook, Aurora, Burr Ridge, Downers Grove and Lisle.
Major proposed projects include new phases totaling 470,000 square
•
feet for The Corridors complex in Downers Grove. Alter Group is
the developer.
In the same town, the 250,000-square-foot fifth phase of Highland
•
Landmark is planned.
The second phase of Corporetum Office Tower planned for Lisle
•
would add 365,000 square feet, while projects planned for Warrenville
Road in the same town will, if built, add 581,000 square feet.
Studley reports a 105,000-square-foot second quarter lease by Wilson
•
Sporting Goods at 8770 W. Bryn Mawr Avenue in the O’Hare area.
Net absorption year-to-date for the West submarket calculates at
•
negative 82,000 square feet. The net for the year all told, however, is
forecast at positive 336,000 square feet.
The average asking rent for the West is given as $21.38 psf, up 0.8%
•
over the quarter.
8
Copyright 2006 Reis, Inc. Page 10
12. Reis Observer
Office - Asset Advisor Reis Observer
CHICAGO OFFICE MARKET Q2
2006
Metro: Chicago
Q2
2006
Northwest Suburban / North Suburban
From 1998 through 2002, developers added more than 5.6 million
•
square feet of new multi-tenant space to the suburban Northwest
submarket. Thereafter, the pace slowed. In 2005, the annual
completion total fell to lower than 100,000 square feet. Multi-tenant
construction, however, is picking up.
The North’s recent profile is similarly cyclical. Construction dropped
•
to nearly nothing last year and only 46,000 square feet will deliver in
2006. But the 2007-2008 period is expected to see the completion of
482,000 square feet.
In Lake Forest (in Reis’s North submarket), Opus North has
•
commenced construction of the $35-million, 160,000-square-foot,
speculative Class A Landmark II project on S. Sanders Road, reported
the Chicago Daily Herald in July. The developer expects completion in
July 2007.
Also in Lake Forest, Duke Realty Corporation will break ground in
•
October on its 100,000-square-foot West Lake at Conway, a Class A
spec office building. “The announcement,” notes GlobeSt, “follows
Duke's lease-up of another speculative building in the same park—
Cadence at Conway, a 138,000-square-foot office development,”
leased to tenant Hospira Inc. in June.
Grubb & Ellis cites the Elgin area in the far northwest as “hot” with
•
“significant activity along I-90m between Route 31 and Randall
Road,” due to “tremendous growth in Kane County.”
Komatsu America Corporation has moved its headquarters to Rolling
•
Meadows in the Northwest, reported GlobeSt. at the end of July. The
firm now occupies 105,437 square feet in Prime Group Realty Trust’s
280,000-square-foot Tower 1 at Continental Towers, located at 1701
Golf Road. The 911,000-square-foot Continental Towers complex is
now 92% leased, this source reports.
In the Schaumburg area, Citigroup moved into 177,000 square feet
•
during second quarter. Grubb & Ellis characterizes the deal as “the
largest suburban office lease year-to-date.”
9
Copyright 2006 Reis, Inc. Page 11
15. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Section 1 - Current Metro Rent Details
Asking Rent by Age Asking Rent Distribution Asking Rent Growth Rate Distribution
Low 25% Mean Median 75% High Low 25% Mean Median 75% High
Year Built Rent
Before 1970 $23.05 $14.03 $20.08 $25.24 $24.86 $29.73 $39.74 - 5.0% - 0.1% 0.9% 0.9% 2.5% 8.1%
1970-1979 $24.79
511 633
510
1980-1989 $25.48
Number of Properties
Number of Properties
1990-1999 $28.59
354
After 1999 $30.10
All $25.24 313
308
As of 09/30/06
184
178
103 113
107
53 52 48
22
15
Under $17.25 $20.46 $23.67 $26.88 $30.09 $33.30 $36.51 Under - 4.8% - 3.2% - 1.6% 0.0% 1.6% 3.2% 4.8%
$17.24 $20.45 $23.66 $26.87 $30.08 $33.29 $36.50 Over - 4.9% - 3.3% - 1.7% - 0.1% 1.5% 3.1% 4.7% Over
Negative Growth
515 Positive Growth1237
As of 09/30/06 Qtr Ending 09/30/06
Section 2 - Rent Growth Comparisons
Asking Rent Growth
Quarterly Annualized
3Q06 2Q06 YTD Avg 1 Year 3 Year 5 Year 5 Yr Forecast
Chicago 0.9% 0.1% 0.6% - 0.1% - 1.4% - 1.3% 2.7%
Midwest 0.4% 0.1% 0.4% - 0.0% - 1.0% - 1.0% 2.2%
United States 1.8% 1.6% 1.6% 2.6% - 0.6% - 2.1% 3.9%
Average over period ending: 09/30/06 06/30/06 09/30/06 12/31/05 12/31/05 12/31/05 12/31/10
Metro Ranks
Metro Rank Total
Compared to: Metros
3Q06 2Q06 YTD 1 Year 3 Year 5 Year 5 Yr Forecast
Midwest 13 6 9 5 9 12 12 2
United States 75 50 67 55 68 65 65 50
Asking Rent Growth Rate Trends and Forecast
%
6.0
4.0
Chicago
2.0
Midwest
0.0
US
-2.0
-4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Period ending 12/31/10
Copyright 2006 Reis, Inc. Page 14
16. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Section 3 - Current Metro Vacancy Details
Vacancy Rate By Age Vacancy Rate Distribution
Low 25% Mean Median 75% High
Year Built Vac. Rate
Before 1970 16.0% 0.0% 5.3% 17.6% 13.4% 23.0% 59.4%
1970-1979 19.1%
582
1980-1989 18.8%
Number of Properties
1990-1999 17.0%
After 1999 15.9%
All 17.6%
260
257
As of 09/30/06
201
164
122
93 73
Under 5.1% 10.1% 15.1% 20.1% 25.1% 30.1% 35.1%
5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Over
As of 09/30/06
Section 4 - Vacancy Rate Comparisons
Vacancy Rates
Quarterly Annualized
3Q06 2Q06 YTD Avg 1 Year 3 Year 5 Year 5 Yr Forecast
Chicago 17.6% 18.0% 18.0% 18.9% 18.8% 16.6% 15.5%
Midwest 17.7% 17.9% 17.9% 18.5% 18.3% 16.4% 15.4%
United States 13.5% 13.8% 13.8% 15.5% 16.0% 14.3% 12.1%
Average over period ending: 09/30/06 06/30/06 09/30/06 12/31/05 12/31/05 12/31/05 12/31/10
Metro Ranks
Metro Rank Total
Compared to: Metros
3Q06 2Q06 YTD 1 Year 3 Year 5 Year 5 Yr Forecast
Midwest 13 8 8 9 9 10 10 7
United States 75 64 62 64 63 60 54 62
Vacancy Rate Trends and Forecast
%
18.0
Chicago
16.0
Midwest
14.0 US
12.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Period ending 12/31/10
Copyright 2006 Reis, Inc. Page 15
17. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Section 5 - Metro Inventory Detail
Inventory By Building Age Office Stock Traits
Metro
Year Built Percent
Low Mean Median High
Before 1970 24.0%
Size (units) 15,000 129,409 56,000 750,000
1970-1979 18.0%
Distance to Highway (miles) 0 0.2 0.2 0.8
1980-1989 36.0% Distance to CBD (miles) 0.2 17.5 19.7 36.2
1990-1999 12.0% Distance to Landmark (miles) 0.4 12.3 11.3 32.3
After 1999 10.0% As of 09/30/06 Landmark =Lake Michigan
All 100.0%
As of 09/30/06
Current Inventory Level
Properties Square Feet
1,828 227,901,000
Average Metro Lease Terms As of 09/30/06
Free Rent Expenses $ Lease Term Leasing Tenant
CRD % (mos) (Commercial) (yrs) Commission % Improvements $
- 6.6% 2.4 $10.92 6.1 4.1% $21.32
Section 6 - Inventory Growth Comparison
Inventory Growth Rates
Quarterly Annualized
3Q06 2Q06 YTD Avg 1 Year 3 Year 5 Year 5 Yr Forecast
Chicago - 0.1% 0.3% 0.0% 0.1% 0.1% 0.9% 0.9%
Midwest - 0.2% 0.1% - 0.1% - 0.2% 0.1% 0.8% 1.0%
United States - 0.1% 0.0% - 0.1% - 0.0% 0.4% 1.1% 1.4%
Average over period ending: 09/30/06 06/30/06 09/30/06 12/31/05 12/31/05 12/31/05 12/31/10
Metro Ranks
Metro Rank Total
Compared to: Metros
3Q06 2Q06 YTD 1 Year 3 Year 5 Year 5 Yr Forecast
Midwest 13 7 4 5 5 5 5 8
United States 75 49 17 29 32 43 42 52
Inventory Growth Comparisons and Forecast
%
2.5
2.0 Chicago
1.5 Midwest
1.0
US
0.5
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Period ending 12/31/10
Copyright 2006 Reis, Inc. Page 16
18. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Section 7 - Construction/Absorption Change
Construction and Absorption
Quarterly
3Q06 2Q06 YTD Avg
Sq Ft Con/Abs Sq Ft Con/Abs Sq Ft Con/Abs
Sq Ft Built Sq Ft Built Sq Ft Built
Absorbed Ratio Absorbed Ratio Absorbed Ratio
Chicago 0 613,000 0.0 1,031,000 1,436,000 0.7 451,333 877,000 0.5
Midwest 809,000 574,000 1.4 2,594,000 1,484,000 1.7 1,557,667 658,333 2.4
Average over period ending: 09/30/06 09/30/06 09/30/06 06/30/06 06/30/06 06/30/06 09/30/06 09/30/06 09/30/06
Annualized
1 Year History 3 Year History 5 Year History
Sq Ft Con/Abs Sq Ft Con/Abs Sq Ft Con/Abs
Sq Ft Built Sq Ft Built Sq Ft Built
Absorbed Ratio Absorbed Ratio Absorbed Ratio
Chicago 2,291,000 1,130,000 2.0 1,720,000 -161,000 -10.7 3,171,800 -2,729,800 -1.2
Midwest 5,859,000 2,468,000 2.4 5,371,333 -637,667 -8.4 9,408,800 -6,316,000 -1.5
Average over period ending: 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05 12/31/05
Annualized
5 Year Forecast
Sq Ft Con/Abs
Sq Ft Built
Absorbed Ratio
Chicago 2,270,800 4,227,200 0.5
Midwest 7,865,400 12,706,600 0.6
Average over period ending: 12/31/10 12/31/10 12/31/10
Construction/Absorption and Vacancy
20
5,000,000
15
Vacancy Rate (%)
0
Square Feet
10
-5,000,000
5
-10,000,000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Vacancy Rate Construction Absorption
Period ending 12/31/10
Copyright 2006 Reis, Inc. Page 17
19. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Section 8 - Submarket New Construction Project Tally
Sq Ft Sq Ft Sq Ft Sq Ft 2006 - 2008
Cumulative
Rank Submarket 2005 2006 2007 2008 Sq Ft Market Share
Market share
1 West 50,000 231,324 1,124,821 1,418,857 2775002 42.6% 42.6%
2 West Loop 1,020,000 479,000 0 400,000 879000 13.5% 56.0%
3 NW Suburbs 98,069 0 312,168 417,700 729868 11.2% 67.2%
4 Southwest 0 189,000 92,500 160,000 441500 6.8% 74.0%
5 99-Balance 0 0 0 440,000 440000 6.7% 80.7%
6 City West 0 430,000 0 0 430000 6.6% 87.3%
7 North 16,400 45,800 363,739 0 409539 6.3% 93.6%
8 Central Loop 820,915 0 0 400,000 400000 6.1% 99.8%
9 O'Hare Area 22,000 16,000 0 0 16000 0.2% 100.0%
As of 09/30/06, based on actual projects (totals may differ from Reis Metro/SubTrend Futures)
Copyright 2006 Reis, Inc. Page 18
20. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Section 9 - New Construction Listing
Size (Sq Est.
No. Property Name and Address Secondary Type County Submarket Status
Ft) Completion
HSBC NORTH AMERICA HOLDINGS
LAKE
1 Office 99-Balance 440,000 1/2008 2.Under Constr.
RIVERWOODS RD @ TOWNE LINE RD
METTAWA, IL 60045
BLOCK 37
COOK
2 Office Central Loop 400,000 3/2008 2.Under Constr.
108 N STATE ST @ E RANDOLPH
ST/WASHINGTON ST CHICAGO, IL 60602
ONE SOUTH DEARBORN COOK
3 Office Central Loop 820,915 12/2005 1.Complete
1 S DEARBORN ST CHICAGO, IL 60603
WATERVIEW TOWER
COOK
4 Office Condominiums Central Loop 215,000 3/2009 2.Under Constr.
111 W WACKER DR @ N CLARK ST CHICAGO,
IL 60601
2111 W ROOSEVELT RD
COOK
5 Office City West 430,000 4/2006 1.Complete
2111 W ROOSEVELT RD @ N DAMEN AVE
CHICAGO, IL 60612
CHATHAM OFFICE CENTER PH II
COOK
6 Office NW Suburbs 205,000 4.Proposed
1901 N ROSELLE RD @ I-90 SCHAUMBURG, IL
60195
CROSSROADS OF DARIEN PH II DUPAGE
7 Office NW Suburbs 20,700 3/2008 3.Planned
LAMONT RD @ HWY 83 ELMHURST, IL 60126
LAKEWOODS CORPORATE CENTER PH II COOK
8 Office NW Suburbs 150,000 3.Planned
680 E ALGONGUIN RD SCHAUMBURG, IL 60173
PROSPECT POINTE
DUPAGE
9 Office Condominiums NW Suburbs 48,000 6/2006 1.Complete
PROSPECT AVE @ THORNDALE AVE ITASCA,
IL 60143
WOODLAND FALLS PH II
LAKE
10 26225 N RIVERWOODS BLV @ W EVERETT RD Office NW Suburbs 156,160 12/2007 2.Under Constr.
METTAWA, IL 60045
DEER PARK PH II
LAKE
11 21850 LAKE COOK RD @ N HOUGH ST DEER Office NW Suburbs 80,000 8/2007 3.Planned
PARK, IL 60010
POPLAR CREEK OFFICE PLAZA II
COOK
12 MOONLAKE BLVD. @ HIGGINS RD. HOFFMAN Office NW Suburbs 187,000 10/2008 3.Planned
ESTATES, IL 60194
SCHAUMBURG OFFICE CENTER
COOK
13 1998 N ROSELLE RD & I 90 SCHAUMBURG, IL Office NW Suburbs 115,000 4.Proposed
60043
HE ESPLANADE OF ALGONQUIN OFFICE PH III
MCHENRY
14 2300 S RANDALL RD @ CORPORATE BLVD Office NW Suburbs 60,000 12/2008 3.Planned
ALGONQUIN, IL 60102
POPLAR CREEK OFFICE PLAZA III
COOK
15 MOONLAKE BLVD @ HIGGINS RD HOFFMAN Office NW Suburbs 187,000 6/2010 4.Proposed
ESTATES, IL 60194
LAKE ZURICH PROFESSIONAL CENTER
LAKE
16 350 SURRYSE RD @ OLD RAND RD LAKE Medical Office NW Suburbs 32,000 12/2006 2.Under Constr.
ZURICH, IL 60047
Copyright 2006 Reis, Inc. Page 19
21. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Size (Sq Est.
No. Property Name and Address Secondary Type County Submarket Status
Ft) Completion
PARCEL 54
LAKE
17 200 LAKEVIEW PKWY @ RTE 60 VERNON Office NW Suburbs 76,008 10/2007 3.Planned
HILLS, IL 60061
SUPERIOR AIR GROUND AMBULANCE
SERVICE BLDG DUPAGE
18 Office--Owner Occ. NW Suburbs 100,000 10/2006 2.Under Constr.
395 W LAKE ST @ N WALNUT ST ELMHURST, IL
60126
LAKEVIEW BUSINESS CENTER PH II MCHENRY
19 Office NW Suburbs 28,000 10/2005 1.Complete
921 PINGREE RD CRYSTAL LAKE, IL 60014
OAK TRAIL PROFESSIONAL CENTER DUPAGE
20 Office NW Suburbs 17,969 3/2005 1.Complete
260 ARMY TRAIL RD BARTLETT, IL 60103
RANDALL POINT EXECUTIVE CTR KANE
21 Office NW Suburbs 40,100 3/2005 1.Complete
2130 POINT BLVD ELGIN, IL 60123
WILLOW PONDS PROFESSIONAL CENTER
LAKE
22 BLDG II Office NW Suburbs 12,000 6/2005 1.Complete
950 S RAND RD LAKE ZURICH, IL 60047
NORTH BARRINGTON OFFICE CONDOS
LAKE
23 US HWY 12 @ TIMBER LAKE DR NORTH Office Condominiums NW Suburbs 26,250 7/2005 1.Complete
BARRINGTON, IL 60010
BRIARWOOD OFFICE COMPLX BLDG C
MCHENRY
24 MERCHANT DR @ HUNTINGTON Office Condominiums NW Suburbs 17,000 5/2006 1.Complete
DR/GLENWOOD CT ALGONQUIN, IL 60102
WOODFIELD PRESERVE OFFICE CENTER III COOK
25 Office NW Suburbs 150,000 8/2008 3.Planned
30 N MARTINGALE RD SCHAUMBURG, IL 60173
COMMERCE WOODS BUSINESS CENTER
KANE
26 800 COMMERCE PKWY CARPENTERSVILLE, IL Office NW Suburbs 85,544 3.Planned
60110
WESTLAKE AT CONWAY LAKE
27 Office North 100,000 12/2007 3.Planned
I-94 @ RTE 60 LAKE FOREST, IL 60045
RIVERWOODS CORPORATE CENTER
LAKE
28 LAKE COOK RD @ I-94/SAUNDERS Office North 45,800 5/2006 1.Complete
RIVERWOODS, IL 60015
CADENCE AT CONWAY
LAKE
29 N FIELD CT @ STATE HWY 60 LAKE FOREST, IL Office North 102,739 5/2007 3.Planned
60045
OPUS LANDMARK OF LAKEFOREST II LAKE
30 Office North 161,000 7/2007 2.Under Constr.
150 SAUNDERS RD LAKE FOREST, IL 60045
LIBERTYVILLE PROFESSIONAL CENTRE
LAKE
31 1635 NORTHWIND BLVD @ RTE 45/PETERSON Office North 16,400 11/2005 1.Complete
RD LIBERTYVILLE, IL 60048
METROPOLITAN SQUARE
COOK
32 S DES PLAINES AVE @ PERRY ST/S RIVER RD Office O'Hare Area 22,000 8/2005 1.Complete
DES PLAINES, IL 60016
POINT O'HARE PH II COOK
33 Office O'Hare Area 330,000 2/2009 3.Planned
9550 W HIGGINS RD ROSEMONT, IL 60018
Copyright 2006 Reis, Inc. Page 20
22. Office - Asset Advisor 3rd Quarter 2006
Metro: Chicago
Size (Sq Est.
No. Property Name and Address Secondary Type County Submarket Status
Ft) Completion
TUSCANNY TERRACE
COOK
34 6400 N NORTHWEST HWY @ N HARLEM AVE Office O'Hare Area 16,000 12/2006 2.Under Constr.
CHICAGO, IL 60631
300 N LASALLE
COOK
35 300 N LASALLE BLVD @ KINZIE ST CHICAGO, Office River North 1,300,000 3/2009 2.Under Constr.
IL 60610
RIVER NORTH CENTER COOK
36 Office River North 330,000 4.Proposed
CLARK ST @ HUBBARD CHICAGO, IL 60610
351 NORTH CLARK BUILDING
COOK
37 351 N CLARK ST @ W KINZE ST/DEARBORN ST Office River North 1,300,000 1/2009 3.Planned
CHICAGO, IL 60610
WACKER PLAZA
COOK
38 401 S WACKER ST @ CONGRESS PKWY Office South Loop 673,000 12/2009 3.Planned
CHICAGO, IL 60607
CORPORATE CORRIDORS OF MOKENA PH II WILL
39 Office Southwest 50,000 3/2008 3.Planned
W 191ST ST @ S 88TH AVE MOKENA, IL 60488
CORPORATE CORRIDORS OF MOKENA PH III WILL
40 Office Southwest 50,000 8/2007 2.Under Constr.
W 191ST ST @ S 88TH AVE MOKENA, IL 60488
BURR RIDGE CORPORATE PARK BLDG II COOK
41 Office Southwest 110,000 3/2008 3.Planned
945 MCCLINTOCK DR LA GRANGE, IL 60527
ORLAND CROSSING
COOK
42 W 143RD ST @ S LA GRANGE RD ORLAND Office Southwest 21,000 11/2006 2.Under Constr.
PARK, IL 60462
WOODRIDGE COMMERCE CENTER
DUPAGE
43 10204-10216 WERCH DR @ WOODWARD AVE Office Southwest 148,000 3/2006 1.Complete
WOODRIDGE, IL 60517
CORPORATE CORRIDORS OF MOKENA PH I WILL
44 Office Southwest 22,500 5/2007 3.Planned
W 191ST ST @ S 88TH AVE MOKENA, IL 60488
PROVENA MEDICAL BUILDING
WILL
45 7000 CATON FARM RD @ COUNTY LINE RD Medical Office Southwest 35,000 5/2006 1.Complete
JOLIET, IL 60431
CORPORATE CORRIDORS OF MOKENA PH IV WILL
46 Office Southwest 50,000 7/2009 4.Proposed
W 191ST ST @ S 88TH AVE MOKENA, IL 60488
HOMER GLEN PLAZA
WILL
47 S BELL RD @ W 159TH ST HOMER GLEN, IL Office Southwest 20,000 9/2007 3.Planned
60491
PRAIRIE CENTER OFFICE
COOK
48 450 E ROOSEVELT RD @ S LAKE SHORE DR Office Southwest 20,000 2/2006 1.Complete
CHICAGO, IL 60605
CORPORETUM OFFICE TOWER I DUPAGE
49 Office West 189,000 5/2009 3.Planned
1401 CORPORETUM DR LISLE, IL 60532
CORPORETUM OFFICE TOWER II DUPAGE
50 Office West 365,000 3.Planned
1450 CORPORETUM DR LISLE, IL 60532
Copyright 2006 Reis, Inc. Page 21
