Q2 2012 Chicago, Illinois Office Property Sales Analysis

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Q2 2012 Chicago, Illinois Office Property Sales Analysis

Metro Volume and Pricing

The pace of office investment sales continued to be moderate in Chicago in the second quarter, as eight deals netted $437.5 million at a mean price of $131 psf.* During 2010 and 2011, most of the dollar value of sales was finalized in the second half of the year, and the sales total for first half of 2012 is more than in either of those years. The annual total was $2.7 billion in 2010 and $2.95 billion in 2011. In the largest sale of the second quarter was the 1.3-million-square-foot Chicago Board of Trade and Annex property which sold for $151.5 million ($120 psf). CME Group Inc. sold it to USAA Real Estate in April.

Top Submarkets

Downtown Chicago submarkets dominates investment sales over the past 12 months, with the Central Loop in the top position with 5.7 million square feet sold for $1.3 billion. The Southwest submarket, however, leads in price per-square-foot at $352.

Cap Rate Comparisons and Forecasts

The mean cap rate for Chicago’s office sales was 8.1% in the second quarter, up from the 7.8% reading a quarter earlier and similar to the 8.0% recorded in the second quarter of 2011. It was about equal to the U.S. and Midwest averages. The rolling 12 month mean cap rate is 7.5%, and has been within 30 basis points of that level for seven consecutive quarters. The rolling 12 month mean had been between 7.0% and 7.5% prior to the recession, but was above 8.0% for a six-quarter span in 2009 and 2010. Reis predicts the rolling 12 month mean will gradually decrease to a low of 6.5% in 2015.