Chicago Real Estate News from Bisnow

Chicago industrial is poised for growth over the next five to seven years, says Venture One Real Estate principal Mark Goode, who developed two industrial buildings here in ’11. (So book your catering halls now before the rush.) He plans to talk all about it at Bisnow’s Chicago Industrial Summit Jan. 19 at the Stephens Convention Center. Register here!

Mark expects strong performance from US manufacturing as more companies realize the advantage of producing close to America’s consumer market: no oceans to cross and lower transportation costs. For example, Danfoss—the Danish maker of drives for compressors, machinery, and engines—could have expanded last year in Denmark, China, or Chicago. Last quarter, it chose to expand into 100k SF developed by Venture One adjacent to its existing Loves Park facility. (Then again, Denmark and China are not known for their pizza.)

Suburban Core for Sale

With plenty of capital seeking quality core assets, JLL managing director Jim Postweiler (here with associate Nooshin Felsenthal, part of his team with Bruce Miller and Jascint Vukelich) expects attractive pricing on the stabilized 1.2M SF, Class-A suburban office portfolio the team brought to market this week. Jim says there’s no asking price for Deerfield's Corporate 500 Centre and One Parkway North and Rosemont's Pointe O’Hare, all once owned by EOP. (Jim declined to mention the seller.) But Crain’s reported that the current owner is a unit of GE seeking to sell an equity interest of at least 49%, valuing the portfolio at $280M.

Inland’s Cosenza: Tech Troubling Offices

Inland Group vice chair Joe Cosenza says it’s a good time to sell suburban offices. With lots of money seeking income, values are strong and landlords with good properties can make up what they lost in ’09 and ’10. (Inland owns about 90 US office buildings, 26 here, and they’re all suburban.) Joe says he’d even consider buying another one if it was leased for the long term to a healthy tenant. (And if the building asks him nicely.) His criteria: a below-market price and rents with some vacancy. Within ten years, he’d lease it up at rents lower than today’s rates, but appropriate for 2022.

Inland buyers Mark Cosenza and Lou Quilic know that as a suburban owner, Joe also worries about technology possibly overtaking office use. Joe says that he sees it in his own life. With his iPad, he can do anything he can do at this desk, except motivate his staff. So he wonders: How many office workers won’t be around in ten years? “The horrible answer,” Joe says, is perhaps 10% to 15%. Also going forward, post-recession managers will be judged by how much they cut expenses, which would include eliminating underused offices.

Due diligence officers Bob Brinkman and Sharon Anderson-Cox are part of the Inland team, which is trying to buck the trend by lowering rents a little and/or increasing TI by a lot. That’s what Inland did two weeks ago, when it renewed Sharp’s 100k SF lease in Oak Brook. Another way to spur leasing is to offer more amenities than the next guy: parking, restaurants, and perhaps a  health club. But Joe still worries. He says delinquencies on US office mortgages were 8.29% last October versus 6.62% a year earlier. While office vacancy rates may be declining somewhat, Joe wonders if rates reflect actual demand. He asks: How many tenants are subleasing or have vacated space but still pay rent? Joe's word of the day: caution.