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S U B M A R K E T R E P O R T

Far West Submarket, Chicago MSA First Quarter 2008

SUBMARKET MAP SUBMARKET FACTS




31
Submarket Metro


38



88


294 Population 536,926 9,573,949


56

Avg. Annual Five-Year Chg.* 1.7% 0.6%

Total Households 184,156 3,375,144




355


83

Avg. Annual Five-Year HH Chg.* 1.2% 0.4%




34 Far
Far West
West
Median Household Income $93,666 $63,396

Median Age 35.9 35.5




171 Employment 270,853 4,656,565


59
55

Vacancy Rate (4Q 07) 10.7% 8.9%

Avg. Asking Rent (4Q 07) $20.58 $19.66




126


7
* 2007-2012 Forecast

SUBMARKET VACANCY RANKING SUBMARKET HIGHLIGHTS


4Q 07 4Q 07 Strong demographics, including forecast popula-
Submarket Vacancy Asking Rents tion growth of 1.7 percent annually through 2012, have
attracted retailers to the affluent Far West submarket.
North 5.0% $26.41
As a result, developers have been adding to supply at
South 5.8% $21.11 an elevated pace for the past five years, a trend that will
continue through 2008. In the western half of the sub-
Far North 6.6% $22.27 market, absorption rates have slowed, putting upward
pressure on vacancy. Due to a sales tax rate that is over
Near West 6.7% $19.05 twice the DuPage County levy, the Far West submarket
has experienced increased demand from retailers and
Arlington Heights 7.3% $16.98 investors looking for alternatives to Cook County loca-
tions. Infill along the Cook County border, though, will
Southwest 7.4% $17.57 support demand for retail space in the short term.
Transaction time has been extended as banks per-
Far Northwest 7.9% $17.99 form a greater amount of due diligence; however, deal
flow has not been slowed. With uncertainty in the econ-
Kane 8.9% $18.18 omy, investors have targeted single-tenant assets with
national-credit occupants in a flight to quality. The shift
Lake/McHenry 9.3% $20.99 in investor focus to single-tenant properties has driven
these assets to trade at a greater velocity than in previ-
Far West 10.7% $20.58
ous periods, outpacing multi-tenant sales. These prop-
erties will also provide a steady source of cash flow in
the short term without additional capital expenditures
for improvements and turnover.

Chris Best © Marcus & Millichap 2008


Research Associate www.MarcusMillichap.com
Far West Submarket, Chicago MSA Retail Submarket Report ◆ First Quarter 2008

Construction Trends CONSTRUCTION TRENDS


◆ In 2007, developers completed almost 500,000 square feet of retail
Square Feet Completed (thousands)

800
space in the Far West submarket. Last year’s deliveries outpaced
600 the trailing five-year average of 190,000 square feet annually.

400 ◆ Developers continue to ramp up retail construction activity, with


651,000 square feet slated to arrive in 2008. While supply growth
200 will accelerate this year, future completions are expected to be
limited as the planning pipeline contracts due to slowing retail
0 sales. In addition, tighter standards for construction loans will
04 05 06 07 08* force some builders to shelve projects.
* Forecast
Sources: Marcus & Millichap Research Services, Reis, TWR

◆ The largest under way development is the 200,000-square foot


Willowbrook Town Center on Kingery Highway. The shopping
center is scheduled to be completed in the third quarter of 2008.

RENT AND VACANCY TRENDS


◆ Large additions to inventory and slowing retail sales pushed
vacancy 380 basis points higher to 10.5 percent last year. In 2008,
Asking Rent and Vacancy Trends vacancy is forecast to increase 50 basis points to 11 percent.
Average Asking Rent per Square Foot

Average Asking Rent 15%


$22 Vacancy
◆ Despite rising vacancy, rent growth has accelerated in the past 12
$21 12%
months. Asking rents have advanced 4 percent to $20.58 per
Vacancy Rate

square foot, while effective rents have posted a 3.2 percent gain to
$20 9% $18.59 per square foot.

$19 6% ◆ Asking rents are anticipated to improve 2.3 percent to $21.05 per
square foot this year, and effective rents are forecast to rise 1.4
$18 3% percent to $18.85 per square foot. Concessions are being offered in
04 05 06 07 08*
* Forecast an effort to attract quality retailers to the area while retaining cur-
Sources: Marcus & Millichap Research Services, PPR, Reis
rent tenants as vacant space becomes harder to fill.

SALES TRENDS
◆ Multi-tenant sales velocity has slowed over the last year by 45 per-
cent, while deal flow for single-tenant assets has increased signif-
icantly; investor focus has shifted to these properties, which usu-
ally have quality occupants and long-term lease deals with sched-
Sales Trends uled rent escalation.
$400 Single-Tenant
Despite decelerating multi-tenant sales, the median price for this
Median Price per Square Foot

Multi-Tenant ◆

$300 asset type improved 12.5 percent to $232 per square foot in 2007,
while single-tenant prices appreciated 1.2 percent to $260 per
$200 square foot. A greater number of quality multi-tenant properties
have traded during the past year, improving the median price.
$100
◆ Cap rates for multi-tenant assets have hovered in the low-7 per-
$0 cent range during the last 12-month period. Meanwhile, single-
03 04 05 06 07 tenant properties have changed hands with cap rates in the high-
Sources: Marcus & Millichap Research Services, CoStar Group, Inc. 6 percent to low-7 percent range, as investors have been more
aggressive in purchasing these assets in their flight to quality.

Chris Best © Marcus & Millichap 2008


Research Associate www.MarcusMillichap.com
Sources: Marcus & Millichap Research Services, BOC, CoStar Group Inc., RCA, Reis, SRC, TWR
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.

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