“These two major deals are strong evidence of the quality and value that 1111 Touhy offers to larger tenants,” said Fred Ishler, senior vice president with Transwestern’s agency leasing group. “The transactions also signify a noticeable upturn in activity in the O’Hare office market.”

The property is a 148,444-square-foot class B office building owned by Siete7 and located in Commerce Centre, a three-building development in the O’Hare submarket. The building offers quick access to all major expressways and is a five-minute drive to O’Hare International Airport. Amenities include on-site management, conference facilities and an on-site deli. The building is in close proximity to many restaurants, hotels and public transportation options.

Transwestern’s Fred Ishler, Joe Stevens and Zach Fox represented the landlord in both transactions. Peter Livaditis and Paul Diederich of CBRE represented National Insurance Crime Bureau and Steve Kardel of Glenlake Capital Partners represented Founders Insurance Co.

“We continue to expand our Midwest regional capabilities and market coverage through a combination of recruiting the foremost professionals and expanding our national footprint,” says Robert Bagguley, president of Transwestern’s Midwest Region. “Balke Brown’s reputation and entrepreneurial approach to real estate is a great fit for Transwestern. This affiliation will provide us with the ability to leverage Balke Brown’s local market expertise for the benefit of our clients’ needs. This is an exciting addition for Transwestern.”

Founded in 1979, Balke Brown is one of the largest commercial real estate firms in the St. Louis area, with a portfolio of 56 projects totaling more than 6.4 million square feet of space.  The firm employs 40 people, including 10 brokers, who provide brokerage, investment, property management and development services in the office, industrial, medical and multi-family sectors.

“This affiliation provides us the ability to counsel clients on a national basis and will enable Balke Brown Transwestern to grow our portfolio in St. Louis.  Our firm and team members are already reaping the benefits of Transwestern’s national platform,” adds Mike Donovan, principal at Balke Brown Transwestern.

Gary Nussbaum and Tom Gorman of Transwestern’s Investment Services Group, with assistance from John Robinson of Jones Lang LaSalle’s Indianapolis office, represented the sellers, affiliates of Northbrook, Ill.-based Romanek Properties, Ltd., in the transaction.

The asset was purchased for $85 million by an institutional investor focused on owning real estate leased to government tenants. The sale represents one of the largest office purchases in the Indianapolis market during the last 10 years.

“Recently, there have been very few large suburban office transactions in the Midwest as investor demand for suburban office product has remained weak,” says Gary Nussbaum, managing director of Transwestern’s Investment Services Group, “However, institutional investors are still attracted to modern, Class-A core suburban office assets if they have credit tenancy and long-term leases. The Intech I, II and III offering was a rare opportunity that met all of these requirements.”

Situated in Intech Park, the largest self-contained office development in Indiana, the property consists of three Class-A core office buildings. The 97-percent occupied property is anchored by the U.S. General Services Administration, which leases 56 percent of the project on behalf of various units within the Department of Homeland Security.

Net absorption of office space in the CBD hit 986,000 square feet in the second quarter, bringing the total to 1.3 million square-feet for the year-to-date, reports Transwestern.

This is quite a jump for the market, recording more positive absorption in six months than any full year since 2007. The surge in activity brought the overall vacancy rate in Chicago’s CBD down to 12.5 percent in the 2nd quarter of 2011, from 13.3 percent in the 1st quarter and a cyclical high of 14.1 percent a year ago.

Transwestern’s reports typically show vacancy rates 2-3 percent lower than most other industry reports, because the firm includes data from buildings less than 15,000 square feet, single tenant, and owner occupied facilities. All told, the report includes 50 million square-feet more than if it tracked multi-tenant alone.

This is done in efforts to show correlation between job growth and occupancy of inventory, and, because owner occupied space often does become competitive space. The addition of Blue Cross Blue Shield’s space at 300 E. Randolph is a prime example. It added 800,000 square feet to its facility that was supposed to be  all owner-occupied. It eventually offered half of it for sublease. If an owner does not offer up space for sublease, the facility is recorded as 100 percent occupied.

The downtown market activity is being driven by a number of reasons; chief among them is the desire for firms to locate nearer to talent.  Within the last year, companies like United Airlines have announced large-scale moves to the CBD. Motorola and GE Capital have announced major expansions and hot start-ups like Groupon have grown to take on several large blocks of space. As a result, employment growth in Chicago has picked up. The metro Chicago economy recorded a 12- month job growth of 37,100 during the 12 months ending April 2011. The unemployment rate declined to 8.7 percent in April 2011, from 9.5 percent in January, and 10.7 percent a year ago. While this activity may be positive, it is still below the average annual gains of 47,000 from 2005-2007.

Still, the latest numbers have professionals more optimistic about the future.

“It feels like it is back to business,” says Tamara Kos, executive vice president with Transwestern. “It is not the same level of demand as in 2007, but dynamics are returning. We are seeing job growth and I expect that to continue.”

Kos points out that since newly elected Mayor Rahm Emanuel has taken office, multiple firms, such as the aforementioned GE Capital and Motorola, among others, have pledged new hiring to the tune of 4,000 jobs.

“Companies are coming to Chicago for its location and proximity to a young, talented workforce,” says Tamara Kos, executive vice president with Transwestern. “The cache is there now, unlike 15 years ago when firms were moving to the suburbs.”

Today, workers tend to value living and working near public transportation. Chicago has the ability to draw public transit commuters from urban and suburban locations into a central area. Conversely, many suburban locals suffer from the inability to connect public transportation and work centers.

Yet, while some large firms are pledging job growth in the future, recent real estate expansion has been led by the small-to-medium sized firms that are taking advantage of still favorable rental rates, says Kos.

“Class A asking rents in the CBD edged down 0.4 percent in the first half of 2011,” says Kos. “Rates haven’t moved much. Statistically, we hit bottom last year. As absorption continues, eventually, rates will increase and concessions will decrease.”

The market still faces numerous challenges. One of the bigger leases last quarter was by McKinsey and Company, which leased 100,000 square feet at 300 E. Randolph. The firm is vacating a 150,000-square-foot space. Large firms are becoming more efficient with space and finding ways to maximize their square-footage allowance.

“We are seeing employee growth, but big firms are driving down square footage per employee,” says Kos. “The McKinsey deal was not based on job loss, but efficiency.”

Wells Fargo took the largest lease in the second quarter with 300,000 square feet at 30 S. Wacker Drive, followed by Bankers Life & Casualty taking 135,000 square feet at 111 E. Wacker.

Numerous big firms are still looking, with Citadel in the market for 400,000-square-feet, but big floor plates for large scale deals are becoming scarce.

“If you are a 20,000-square-foot tenant you have hundreds of choices,” says Kos. “If you are looking for 100,000-square-feet you have a few choices and there are only a couple sites that can accommodate 300,000-square-feet and above.”

This has fueled speculation for new construction in the downtown market, but with an earliest estimated delivery of 2014, many firms may end up renewing where they are.

Suburban market

The suburban market has not fared as well, experiencing 37,000 square feet of negative absorption, bringing the year-to-date total to negative 385,000 square feet.  The overall Suburban Chicago office vacancy rate jumped to 17.0 percent in the second quarter of 2011, from 16.4 percent in the first quarter and 16.8 percent a year ago.

While owners and landlords are beginning to find equilibrium in the downtown market, the suburban market is still decidedly in the tenants favor. Suburban asking rents for all classes of space declined 2.9 percent in the first half of 2011; Class A asking rents dropped 4.4 percent.

Many areas have been particularly hard hit as they are heavily reliant on specific industries.

“The northwest corridor was hit hard by the struggles of the mortgage industry and the East-West Corridor was very reliant on the technology industry,” says Kos. “Those markets have suffered. They will need to find new industries and diversify their base.”

There is 877,800 square feet of office space under construction or renovation in suburban Chicago at mid-year 2011, up from 768,250 square feet in the first quarter and 696,000 square feet a year ago. Astellas Pharma is building a 416,000-square-foot U.S. headquarters in Northbrook. Suburban office space under construction is 84 percent pre-leased. Three office buildings, totaling 140,000 square feet, were delivered in the first half of 2011. These buildings were 100 percent leased upon delivery.

Investment sales

The investment market has continued to recover and the first half of 2011 has seen improved activity. The market recorded investment sales of $827 million in metro Chicago during the first half of 2011, compared to $322 million in the first half of 2010. Sales volume in the second quarter of 2011 totaled $413 million in metro Chicago.

The largest sale of the second quarter took place in the East Loop, where  CommonWealth REIT purchased 233 N. Michigan Avenue from Parkway Properties for $162.2 million.

Cap rates on core offices declined to 6.9 percent, down from a high of 9.3 percent in the spring of 2010. The report suggests that cap rates on core, long-term-leased CBD assets should stabilize in the low-to-mid-6 percent range. In the suburbs, core stabilized product will price in the high-6 percent to mid-7 percent range.

The emerging trend is that value-add assets are now finding their way to the market. Previously, investors were only interested in taking on core deals, but as the number of core deals available shrinks, many now are considering taking on buildings that may be a little older and come with some leasing required.

“Value-add investors are now willing to buy more vacancy and do it at a discount,” says Kos. “A year or two ago you couldn’t finance a value-add deal. It’s really amazing compared to where we were two years ago.”

Delta Associates, the research affiliate of Transwestern, complies the information for its quarterly reports.

Advertising Resources Inc. (ARI) specializes in integrative marketing production and packaging, offering fully integrated services from design to packaging to processing. The two connected buildings in Alsip provide ARI with both office and warehouse/distribution space including refrigerated storage, conditioned storage, shipping/receiving doors and truckloads.

“Working with two landlords to structure lease extensions was complicated, with each ownership group presenting unique challenges despite the two properties being connected. In the end, we were able to successfully negotiate and achieve the best results for ARI,” said Fred Freeman, a broker with Transwestern in a release.

Transwestern’s Fred Freeman, Randy Koch and Mitch Rothstein represented the tenant in the transaction.

Bank of America has been a tenant of 1600 Corporate Center since its acquisition of Countrywide Home Loans in 2008. David Olsen, Mark Kolar and Greg Raus of Jones Lang LaSalle represented the tenant. Joe Stevens, Fred Ishler and Zach Fox of Transwestern handled the transaction for Younan Properties, the owner of property.

“The abundant parking, great infrastructure, and central location combined with Younan’s creativity in its deal structure make this building a great fit for this or any tenant,” says Joe Stevens of Transwestern, in a release.

“This is an important renewal for Younan Properties and for 1600 Corporate Center,” said Dan Svachula, leasing manager of Younan’s Chicago portfolio. “Bank of America’s long term commitment to the building is proof of the property’s overall appeal and tenant amenities. There have been significant improvements in the market fundamentals, which is having a positive impact on leasing velocity. We currently are working on more deals that we will be announcing in the upcoming weeks.”

1600 Corporate Center is a 255,440-square-foot 12-story, Class A office building. It is situated on a landscaped campus with unencumbered views of the Ned Brown Forest Preserve.

Assurance Agency, Ltd., an independent insurance broker, renewed its existing lease for the 9th, 10th and 11th floors for a total of 42,997 square feet while taking an additional 18,242 square feet on the 1st and 2nd floors.

One Century Centre is part of a twin building Class A complex. The 212,212-square-foot office tower is conveniently located across Golf Road from Woodfield Mall and directly west of the I-90/Route 53 interchange. It offers tenants amenities such as an on-site conferencing center, food service, structured parking and excellent visibility from both the Northwest Tollway and Route 53. It is 95 percent leased.

Assurance Agency, Ltd. was represented by Lou Hall, Paul Buckingham and Craig Cassell with Grubb & Ellis.

According to Richard Spinell, principal of Oakbrook Terrace-based Mid-America Asset Management Inc., Tuesday Morning plans to open in January 2011 as a new anchor, joining Dick’s Sporting Goods, Jewel/Osco and Pier 1 Imports. Mid-America senior leasing representative Mary Beth Menelli-Iveljic represented the landlord in the lease, while Patrick Owens of Transwestern represented the tenant.

Dallas-based Tuesday Morning is a publicly held company that specializes in closeout sales of upscale decorative home accessories, housewares and gifts. The company opened its first store in 1974 and currently operates 840 stores in 43 states, including around 25 stores in the Chicago area.

The 273,516-square-foot Village Crossing shopping center is located on the southwest corner of Touhy Avenue and Carpenter Road in Niles, adjacent to two additional phases of the project that will bring the total GLA to 809,670 square feet.

In other leasing activity at the center, Super Cuts recently renewed its lease for 1,204 square feet.

Five years ago, Al Skodowski, managing senior vice president at

Rick Walker and Al Skodowski

Transwestern, could not get many companies to call him back. The idea of a green roof or high efficiency toilets did not register with many decision makers, who thought the ideas costly and unnecessary at the time.

Now, Skodowski’s practice is thriving, and the companies that used to reject his offers, now call him. His firm has helped 55 different buildings achieve LEED standards. The company’s efforts have been noticed, as Transwestern is recognized as the only third party property management firm to win the Energy Star Partner of the Year award.

Skodoski says that the proof of green buildings’ success can be reflected in numbers.

“Even in a down economy, the green buildings that we manage have neutral or increased occupancy,” he said. “Operating expenses are down as well. Tenants want green.”

This has made the practice a sound business decision and a socially conscious one, he says.

While the social movement may have sparked it, it now seems that if building owners and property managers want to be successful, building green may be essential.

“You almost have to build green now,” Skodoski says. “If you don’t, your competition will.”

Rick Walker, senior vice president with Transwestern, says that this is one of the major changes from environmental movements of the past. While there was a brief environmental movement in the 1980s, it did not last because Corporate America did not see a benefit.

That has changed.

“Europe is very green, but there it is based on regulation,” says RW. “Here it has become a business philosophy. Companies see it as a way to save money and make a profit. Green has become an opportunity.”

L-R: Lynn Reich, Meredith O'Connor, Alex Cole, Stacey Kruger Birndorf, Kelly Martincin, Deanna Arce

The Third Annual Women in Real Estate Awards luncheon was held today at the University Club in Chicago. Some of the industry’s top women were recognized in five categories as leaders and stand-out performers in their field.

The event was hosted by the Illinois Real Estate Journal and the Chicago Chapter of CREW.

More than 200 attended the event, which included a keynote address from Lynn Reich of Colliers International and president of SIOR International.

The 2010 winners are:

Meredith O’Connor of Jones Lang LaSalle and Deanna Arce of Shepard Schwartz & Harris LLP both took home Bright Horizon Awards. This award is given to women who have five year or less of commercial real estate experience and have demonstrated that they will be industry leaders in years to come. Deanna joined Shepard Schwartz three years ago. Meredith O’Connor joined Jones Lang LaSalle transitioning from the public sector.

Molly Kelly, chief marketing officer of Jones Lang LaSalle, was given the Impact Award. The Impact Award is given to the woman who has had a significant impact on the commercial real estate industry within the last 18 months. Kelly recently celebrated her 20^th anniversary with the firm and continues to impact how the firm is perceived nationally and internationally, as reflected by the honors and recognitions it receives.

The Community Service Award went to Kelly Marticin of HAWORTH, Inc. Marticin has voluntarily served on the board of Hostelling International for more than six years. Additionally, she has been a board member of the Cynthia L. Bischof Foundation for three years. The foundation increases awareness of domestic violence issues.

Stacey Kruger Birndorf of Transwestern received the Crystal Apple Award for her efforts in mentoring women in the commercial real estate industry. In her poignant remarks, Birndorf explained the role of a mentor is to care for someone as they grow in the industry.

And this year’s Career Achievement Award was presented to Alexandra Cole of Perkins Coie LLP. Cole has had a storied three decade career working with some great names and well-known projects in Chicago. She also was involved providing legal counsel to the developers of the first commercial structure in Poland after the fall of the Berlin Wall.