Office N Illinois

Comparing the Schaumburg office landscape with the overall Chicago market

Comparing the Schaumburg office landscape with the overall Chicago market,ph01
The office building transaction of the year in the Schaumburg submarket was Planmeca USA Inc.’s $7.3 million acquisition of the former Serta Mattress building in Hoffman Estates, Illinois.

In terms of deal velocity, the Chicago metro office market is in the top five nationwide. But what about one of the area’s largest suburban submarkets, the Schaumburg area in the I-90 corridor?

Cawley Chicago gathered top statistics for leases, sales and projects under construction in Chicago’s office real estate market and contrasted those stats with those of the Schaumburg submarket.

“The Schaumburg area is the fifth-largest office submarket in the metro and contains many large-scale suburban office campuses,” said Tony Russo, principal at Cawley Chicago. “There’s a larger presence of headquarters and regional/local offices for firms engaged in things like the manufacturing and electronics than traditional office in the Schaumburg market.”

The largest office building sale in the past 12 months was Planmeca USA Inc.’s purchase of the former Serta Mattress building at 2600 Forbs Avenue, in Hoffman Estates, Illinois. The 90,000-square-foot, 19-acre site traded for $7.3 million ($82 per square foot) and will serve as the dental equipment manufacturer’s U.S. headquarters.

Of course, there are still plenty of traditional office-using companies seeking space in the area. Earlier this year, for example, software firm Hyperquest | Solera inked a 21,766-square-foot deal to relocate their Chicagoland headquarters to Schaumburg Towers.

Over the past 12 months, the Schaumburg submarket recorded 77,200 square feet of deliveries, notching a 20.4 percent vacancy rate. Compare that to the overall market, which had a 12 percent vacancy rate over the same time period.

New leases weren’t able to keep pace with those lost tenants—such as Yamazen Inc., which will leave Schaumburg next year for a new Elk Grove Village, Illinois headquarters—and absorption was down for the year with -254,000 square feet per Cawley research. Additionally, rents were stagnant, growing only 0.7 percent, while the rest of the market enjoyed 2.4 percent rent growth among office product.

Institutional buyers did experience higher cap rates in the submarket. While the 1,000+ sales comparables among the top overall office sales market-wide yielded an 8.4 percent average cap rate over the past 12 months, the Schaumburg area, across 56 sales, witnessed an average cap rate of 9/1 percent.

The suburban area also proved tighter than the wider market at the time of sale. Though Schaumburg had a 20.4 percent vacancy rate among office space (compared to only 12 percent in the overall market), buildings traded hands with lower average vacancies: 7.2 percent in the Schaumburg submarket (compared to 11.1 percent on average across the rest of the metro).

Following a year of positive net absorption last year, in the last twelve months this submarket recorded negative net absorption. This is due in part to the Chicago CBD attracting corporate relocations from the suburbs as those firms try to attract a younger workforce. According to Russo, however, this inclination may soon turn around.

“I do believe as the millennial workforce gets married and has kids, we will see the trend shift back towards the suburbs,” Russo said. “At the very least, the large corporations will have suburban satellite offices to accommodate the same workforce.”