This Week's Chicago Deal Sheet
Class-A buildings drove growth in Chicago’s downtown office market during the first quarter, according to a new Cushman & Wakefield report. Net absorption was 323K SF in the quarter, but Class-A net absorption totaled 422K SF.
“Overall vacancy declined 40 basis points since Q4 to 13.9%, mainly resulting from new occupancy and lag in deliveries,” Cushman & Wakefield said.
The vacancy rate in Class-A properties declined the most, falling 110 basis points to 12.7%. Class-B fell 30 basis points to 15%, and Class-C increased by 80 basis points to 13.6%.
Leasing activity continued at last year’s accelerated pace, with tenants signing 2.3M SF of new leases in the first quarter. The largest transactions were renewals: United Airlines signed an 858K SF renewal at Willis Tower and USG Corp. renewed 221K SF at 550 West Adams. RSM McGladrey signed the largest new deal by agreeing to take 146K SF at 30 South Wacker.
Cushman & Wakefield attributes the central business district’s growth to three major drivers: technology firm growth, suburban to urban migration and absorption from coworking providers.
“Although no behemoth tech leases have been announced yet this year, substantial organic growth is occurring, including Upwork’s expansion from 12K SF to 67K SF and G2 Crowd’s 65K SF lease signed this quarter at 100 South Wacker,” the firm noted.
Mondelez International became the latest suburban firm to lease downtown space when it decided to occupy 94K SF at 905 West Fulton, which will deliver later this year. Coworking growth was led by WeWork, including a 134K SF lease in 167 North Green, and Convene signed three new leases totaling 185K SF, including 110K SF in the recently renovated 311 West Monroe.
Although many observers speculate the nation is on the verge of a recession, Cushman & Wakefield pointed out that 2018 gross domestic product growth was robust at 3.1%, unemployment remains extraordinarily low at 3.8%, and consumer sentiment remains high.
“Overall, despite warning signs on the horizon, most indicators suggest steady office demand in the short term.”
Chicago-based Belgravia Group made a few changes to its leadership team. After 30 years with the real estate firm, Alan Lev was made chairman. David Goldman and Jon McCulloch were promoted to co-CEOs, and founder Buzz Ruttenberg will take on a new role as chairman emeritus. Goldman and McCulloch will handle the 20-person firm’s day-to-day operations, working with Lev and Ruttenberg on major decisions and new developments. Moving from his role as executive vice president and chief operating officer, Goldman will continue overseeing construction, engineering and project management. Previously senior vice president at Belgravia, McCulloch will continue overseeing financial management of the firm’s projects and the company’s debt needs and equity raises.
JLL promoted Neil Murray to global CEO of corporate solutions, to succeed John Forrest, who will leave the company and return to Australia. Chicago-based Murray will also join the company’s global executive board. Mark Caskey will succeed Murray as EMEA CEO, corporate solutions. The changes will take effect on June 1. Prior to joining JLL in 2017, Murray was chair of the UK and Ireland and CEO of corporate services at outsourcing specialist Sodexo. Caskey joined JLL in 2016 as head of account management.
Marc Brash joined Colliers International | Chicago as vice president, corporate solutions. Brash will work in the firm’s downtown office and help expand and streamline the company’s transaction management accounts. Brash was most recently a managing director of transaction management with Savills, and responsible for RSM’s 1.9M SF national office portfolio. Brash began his career at Savills in 2002 as a research manager.
Clear Height Properties named Nena Guillory Hamilton as controller, Joe Young as vice president of asset management and acquisitions, and Kailey Cooper as administrative assistant. Prior to joining Clear Height, Hamilton was assistant controller for CBRE’s Chicagoland portfolio.
Kiser Group hired Sam Boye and Patrick O’Brien as its newest brokers. Boye previously worked at Golub & Co., where he managed more than $100M in value-add renovations. O’Brien previously led a team at Beitler Real Estate Services, a Chicago-based developer. At Beitler, he underwrote more than $500M of value-add, adaptive reuse and development projects across office, hospitality, retail, parking and multifamily asset classes.
Newport Beach, California-based KBS signed 17K SF in new leases for its 213 West Institute Place, a 155K SF converted loft-office building in River North. Meredith Corp., a media and marketing services company; Tiesta Tea Co., a loose-leaf tea producer; M1 Financial, a financial services firm; and Studio Brunstrum, an interior design firm, all signed new leases. JLL's Phil Geiger and Amy Berg represented Meredith Corp., Bespoke Real Estate's Victor Sanmiguel represented Tiesta Tea, Truss Real Estate's Nicole Weldon represented M1 Financial, Transwestern's June Simonian represented Studio Brunstrum, and Ameritus' Scott Sessa represented KBS.
Luxury Living Chicago Realty last week kicked off leasing at River City Apartments, a former condo building designed by Bertrand Goldberg. Devon Grace Interiors reconfigured the units to include open-concept kitchens, maximize closet space and allow an abundance of natural light, according to Devon Wegman, the firm’s creative director. New amenities will include lounges and coworking spaces, a party room, an acre of landscaped outdoor space, outdoor grilling stations and a dog run. Blue Star Properties designed and renovated the lobby and front entrance.
Avison Young negotiated a 25K SF industrial lease at 1260 Lunt Ave. in the O’Hare submarket’s Elk Grove Village. The lease brings the 50K SF building to full occupancy. Chicago-based principals Chris Lydon and Chris Tecu represented the owner, CenterPoint Properties. The tenant, Lion Logistics, a national third-party logistics company, was represented by Chicago-based Main Street Real Estate Group. According to research from Avison Young and CoStar, the O’Hare market has recorded approximately 1.1M SF of industrial absorption in each of the past two years and may reach a similar level in 2019.
Men's luxury apparel retailer Peter Millar on Friday opened its first Chicago storefront, according to JLL. The flagship store at 877 North Rush St. in the Gold Coast occupies about 3K SF, the retailer’s largest store in the country. JLL’s Matt Ramsey and Anthony Genovese represented Peter Millar.
Passion House Coffee Roasters and Veteran Roasters, two Chicago-based small-batch coffee roasters, plan on moving to a newly redeveloped, 25K SF warehouse at 328 North Albany Ave. in Chicago. As partners, the roasters will in June become the first tenants in the adaptive reuse development and occupy nearly 8K SF. PHCR officials say they doubled sales in the last year. Veteran Roasters, founded two years ago, is veteran-owned and operated, and partnered with PCHR to hire and train homeless and at-risk military veterans in the coffee industry.
CONSTRUCTION AND DEVELOPMENT
J.C. Anderson completed a 47K SF build-out for Elkay’s new plumbing business headquarters at 1333 Butterfield Road in suburban Downers Grove. The company relocated from 2222 Camden Court in Oak Brook, and its corporate headquarters will move to the same location later this year. The new space features a large waterfall feature made out of stainless steel cutouts from Elkay’s sinks as well as high-end finishes throughout. J.C. Anderson’s construction team was led by Seth Erlich, Andrew Mott and Jose Verduzco. Whitney provided architectural services.
Phoenix Development Partners recently launched a full-scale renovation of its Hyatt Regency Deerfield, a full-service luxury hotel at 1750 Lake Cook Road in Deerfield. It will include a complete revamp of guest rooms and suites, refreshed meeting spaces and updated common areas including the lobby, guest room hallways and Jaxx Bistro and Jaxx Lounge. The first phase of construction includes a $14M renovation of guest rooms and will be completed on April 18. The second renovation phase will begin in fall 2019 and enhance the other common areas. The hotel will remain open during both phases.
Horizon Realty Group welcomed on April 1 the first move-ins to The District @ Sheridan, its renovated, 80-unit apartment building at 5536 North Sheridan Road in Edgewater. Located in the Bryn Mawr Historic District, just across Sheridan Road from the legendary Edgewater Beach Hotel, The District consists of 40 one-bedroom units, 32 studios and eight two-bedroom units. Prices range from $1,139 to $2,179. The company purchased the building, constructed in 1966, in January 2017 and performed a $5M, full-gut rehab, installing new plumbing, electrical, windows, walls, flooring, lighting, kitchens and bathrooms, all other finishes, elevators and HVAC systems.