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Real Estate Bisnow
January 3, 2013 
Superior Spaces LTile2
What Sectors
Are Back?

Hello there, Chicago office and retail. We missed you during the downturn. Don't be jealous, but you'll notice multifamily and seniors housing are already inside—where capital is flowing freely.
J.C. Anderson EVP Michael Yazbec says most of the headwinds facing the economy are abating—and will die down more in ’13. The company builds office, healthcare, and higher ed, and Michael tells us all signs point to increased activity. “But we haven’t reached the inflection point where we can increase our profit margins,” he says. Michael also expects to see continuing migration of businesses into the city from the 'burbs, such as the recent move of Aryzta AG, a Swiss food conglomerate, from Park Ridge to River North, which created a 21k SF buildout job for the company.
Bisnow (PropManage)
Retail investment sales will continue to surge in the first quarter and beyond, according to The Kudan Group’s Jeremy Kudan, who specializes in bread-and-butter retail deals in Chicago and the 'burbs. He expects the volume of sales, both traditional and foreclosures, to increase as many REOs are scheduled to close in the coming months. But just as important for actually closing the deals, both sides are getting more realistic about sales prices.
The Kudan Group repped MB Financial in the sale of 28 Main St in Park Ridge. The bank-owned property, previously a restaurant, caught the eye of a dentist, who plans to open an office in the 7k SF space this summer. Many investors are looking for opportunities in the current (and historic) low-interest rate environment, which they know will last a while longer—but not forever, Jeremy says. The better the economy gets, the more the pressure there is to close on financing, since ultimately a stronger economy will cause interest-rate upticks.
Retailers are defying expectations, says Englewood Construction prez Bill Di Santo. Michigan Ave is a trendsetter in this regard: Nearby competition is no longer confined to carriage-trade stores: Nordstrom Rack has opened on Michigan Avenue, Marshalls on Rush and Ontario, and TJ Maxx, H & M, Old Navy and Target are all holding court on State Street. Neiman Marcus, Bloomingdales, and Niketown all started major renovations last year to remain competitive. “The trends we are seeing on Michigan Avenue are also applicable to smaller markets,” Bill notes. Englewood is working on creating space for a new Seasons 52 at the Shops at North Bridge.
Beech Street Capital EVP Joshua Rosen, in the Chicago office, says 2013 will be much like 2012 for seniors housing finance. Interest rates will stay put (matching the mobility of many seniors), and capital will continue to be readily available, but only for seasoned pros. “Lenders get flooded with financing requests—borrowers need to bring a strong operational track record, market stability, and having some skin in the game,” Joshua tells us. Beech Street Capital recently closed a $9.6M loan under FHA 223(a)(7) to refi the Lake Park Center, a 210-bed skilled nursing facility in Waukegan.

The Latest Office Numbers
A sneak peak at some spanking-new Q4 2012 Chicago office market stats, fresh today from NAI Hiffman’s director of statistics Craig Hurvitz: First, very little office space was under construction during the quarter: only 190k SF in a market that totals 261M SF or so. Direct vacancies for all classes are down for the quarter: “A” space end the year at 14.25%, “B” at 17.54%, “C” at 13.78%. Fourth-quarter net absorption was 1.14M SF, out of a total of 3.84M SF for the whole year.

Upcoming Bisnow Events!
Tuesday, Jan. 29, 7am-10am. Bisnow's Chicago Data Center Boom! Our all-star panelists will discuss what is driving demand for data centers, what are user requirements, what new technologies are required, and the different data center technology methodologies. Register here.
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