|For two years, it's been one issue after another for the Windy City leasing market. But this morning, experts at our Bisnow Chicago Leasing Summit actually sounded assured.|
|Colliers International's Drew Nieman says the signs are pointing in the right direction for recovery: contiguous blocks of 100k to 200k SFare starting to diminish, especially in the West Loop. Buildings that have had financial difficulties (like 500 W Monroe) are getting worked out, and the sublease market is shrinking back from about 9% to 5%or less. Another good omen: Chicago rents never have big spikes, always staying between $20 and $40/SF, an attraction to some investors and a deterrent to others. Drew also says there's been lots of talk about redeveloping the failed 200-room Shangri-La Hotel atWaterview Tower into an office space.|
|Transwestern's Tom Gorman told the audience that more buildings are coming on the investment sales market, and investors are anticipating about 3% rent growth. He also says landlords aren't willing to sign a lease that doesn't start for another two years. When the market does recover (Tom says sooner than we think), it'll take$200M in equity to develop a new building in Chicago, and only a few people have the money and the desire to do that.|
|From his experience leasing of 155 N Wacker, 111 S Wacker, and 142 E Ontario, John Buck's Bill Truszkowski says Class-A leasing is picking up (over the last four months, he's leased 200k SF in 155, some at $40/SF, a great rate here). Bill is willing to fund TIs for good credit tenants, and finds those are the ones usually looking for space in his buildings. Some larger corporate tenants are required to haveLEED, but smaller tenants still won't pursue if it costs more.|
|UGL Services' Scott Goldman says his corporate clients are definitely making sure their TIs are funded. They're also making surelandlords are solvent so they can fund TIs, even if the lease doesn't start for 18 to 24 months. Recently, he's seen more of his large tenant clients willing to relocate and expand. They're also signing for longer terms, looking to feel at home in a building for up to20 years. But tenants still also want termination or contraction rights so they can adjust to their needs as the market recovers.|
|There's a general consensus that there will be no new construction soon, but Hines' Tom D'Arcy says with few blocks of contiguous space available in the West Loop and several big tenants with leases expiring in '13 to '15, we might see some tenants migrating to the Central Loop, River North, and the East Loop. Smaller tenants are now asking for more from landlords in terms of TIs and SNDAs(that's a subordination and non-disturbance agreement; we didn't know either), so transactions are starting earlier than ever before. Tom says owners who've been sitting on the sidelines with zombiesare realizing the value of their buildings and reconciling with lenders.|
Holland & Knight's David Allswang moderated and gave a brief memorial to the late Harold Pomerantz, the noted DLA Piperlawyer, who passed away this week. He's a member of the leasing department at his firm, which was recently nominated for an award of excellence by Chambers, a legal research publication.