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MarketResearchindustrial | year-end 2008

m e t ro p o l i ta n C h i C ag o

Colliers Bennett & KahnWeiler inC.

metropolitan ChiCago industrial year-end 2008

2 Colliers Bennett & KahnWeiler inC.

table of Contents

Metropolitan Chicago Industrial Overview 3

Central dupage 4

Chicago 5

Fox Valley 6

i-290 north 7

i-290 south 8

i-55 Corridor 9

i-80/Joliet Corridor 10

lake County 11

north suburbs 12

o’hare 13

south suburbs 14

southeast Wisconsin 15

Year End 2008 Industrial Market Statistics 16

Industrial Submarket Map 17

About Colliers Bennett & Kahnweiler Inc. 18

Colliers B&K year-end 2008 suCCess stories

Heitman, LLC 1701 normantown road romeoville, il 814,848 square Feetinvestment sale

Home Depot 1701 remington Blvdromeoville, il 800,000 square Feet renewal

Kimberly Clark 775 prologis parkwayromeoville, il 750,485 square Feet leased

Heitman, LLC 1401 normantown road romeoville, il 716,318 square Feetinvestment sale

Molto Capital 2400 haven avenue new lenox, il 692,913 square Feet investment sale

Colliers Bennett & KahnWeiler inC.Colliers Bennett & KahnWeiler inC. Colliers Bennett & KahnWeiler inC.


VaCanCy and aBsorption* Through Year-End 2008

3

industrial marKet snapshot

metropolitan Chicago industrial overviewthe nation’s economic woes adversely affected the Chicago industrial market in 2008. tight credit and rising foreclosures of both residential and commercial properties has many companies contracting as they forecast slow business ahead. there is hope that the sharp decline in new supply should serve as a market cushion in the future as developers have been unable to get deals financed.

Vacancy and supplyBy the end of 2008, available industrial inventory ballooned to 134.6 million square feet, up 22 percent from the year-end 2007 total. some of this can be attributed to companies releasing excess space to the market. however, 27 million of the 34.2 million square feet of speculative warehouse distribution space delivered to the market over the past five years is still vacant.

the metropolitan Chicago vacancy rate rose in 2008 to 10.32 percent, up from the year-end 2007 total of 8.58 percent. this represents one of the largest recorded year-over-year increases in the Chicago industrial market.

additionally, the current state of vacant supply negates four consecutive years of annual declines.

leasing and sale activityall things considered, leasing activity was stronger than expected. the 2008 leasing volume total of 31.9 million square feet was an 8.5 percent decline from the 34.9 million square feet leased in 2007.

the current credit crisis played a significant role in the declining sale activity. only 13.6 million square feet of sale transactions were completed in 2008, a 27.6 percent decline from 18.7 million square feet in 2007. this 13.6 million square feet is one of the lowest annual totals on record.

absorptionafter six consecutive years of positive annual absorption, the metropolitan Chicago industrial market witnessed absorption of negative 11.08 million square feet in 2008. this performance was very near the record low 11.4 million square feet of absorption that occurred in 2001.

Constructionin 2008, speculative development outpaced build-to-suit projects – 13.1 million square feet versus 5.7 million square feet. the overall total of 18.8 million square feet of new construction was 14.1 percent lower than the 21.8 million square feet registered in 2007.

speculative construction completions of 13.1 million square feet was the second highest annual output ever.

What to expect in 2009a greater number of industrial tenants will complete early lease renewals while trying to negotiate more favorable economic terms with their landlords.

We anticipate with the ongoing recession that 2009 user demand will drop to the level witnessed during the recession of the early 1980s.

tenants with above-standard building improvement needs will have fewer options in 2009, as some landlords with properties available for lease will not have the financial viability to compete for those deals.

Current economic conditions have instilled fear in the consumer, causing a decrease in spending on non-essential big ticket items. Because of this, fewer consumer-based big box industrial tenants are expected to be in the market in 2009.

Chicago Metro

2007 2008

Vacancy Rate

8.58% 10.32% p

Absorption (SF)

14,038,893 -11,080,595 q

Asking Rents

$4.85 $4.61 q

“Absorption in the metropolitan Chicago

industrial market reached a near-record negative 11.4

million square feet in 2008.”

-15,000,000

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0

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2003 2004 2005 2006 2007 2008Square Feet Absorbed

0%

2%

4%

6%

8%

10%

12%

Vacancy Rate

Absorption Vacancy





Central dupageVacancy and supplytwo spaces totaling almost 500,000 square feet returned to the Central dupage market in the fourth quarter of 2008, adversely affecting the year-end vacancy rate. the current total of 10.23 percent was 65 basis points higher than the previous quarter’s level of 9.59 percent. the increase is more substantial when compared to fourth quarter 2007 when the vacancy rate totaled 8.31 percent.

there are 23 buildings with vacancies over 100,000 square feet in the Central dupage market, which accounted for 4.4 million square feet of the 8.6 million square feet vacant in the fourth quarter of 2008. Carol stream has the most options for a tenant in this size range with 2.1 million square feet available in 10 different properties.

ConstructionConstruction activity in Central dupage this year consisted of one build-to-suit of 80,000 square feet and one speculative development totaling 140,000 square feet. additionally, a building of 58,200 square feet was torn down. the net result was 161,800 square feet added to Central dupage’s inventory base in 2008.

in contrast, construction volume in 2007 totaled 806,100 square feet.

lease and sale activity2008 Central dupage leasing activity totaled 2.3 million square feet, which was a decline of 28.42 percent from 2007 volume. leasing activity hasn’t been this low since 2002 when only 2.2 million square feet of lease transactions were reported.

smaller users were the dominant player in 2008 leasing activity. of the 68 leases signed in 2008, more than half (35) were in spaces under 25,000 square feet.

sale volume declined from the 1.1 million square feet sold in 2007, posting just 588,400 square feet – a 46.1 percent decline.

2008 Central dupage user sales were highest in the third quarter at 224,500 square feet or 38 percent of this year’s total sale transactions.

net absorptionCentral dupage’s year-end net absorption drew negative results for the first time in five years. this year’s figure was negative 1.7 million square feet, a swing of 2.7 million square feet compared to 2007’s total of positive 1.0 million square feet.

top 2008 transactionsTenant/Buyer Size (SF) Address Type

domtar 135,579 300 s. mitchell Court, addison lease

Brighton Best intn’l 112,110 250 Kehoe Boulevard, Carol stream lease

start sampling 109,650 195 e. elk trail, Carol stream lease

What to expect in 2009owners with big blocks of available space will likely lower their expectations on rental rates based on the current supply. they also have to take into account that Central dupage product does compete with the lower taking rates of the i-55 Corridor.

rental rate compression will occur in 2009. We anticipate rental rates to be discounted between three and five percent next year.

sellers of industrial product could witness a decrease in pricing from 10 to 15 percent next year.

InDuSTrIAL MArKET SnApSHOT

Central DuPage

2007 2008

Vacancy Rate

8.31% 10.23% p

Absorption (SF)

1,008,087 -1,706,056 q

Asking Rents $6.11 $5.14 q

-2,000,000

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2003 2004 2005 2006 2007 2008

Square Feet Absorbed

0%

2%

4%

6%

8%

10%

12%

Vacancy Rate

Absorption Vacancy

“The Central DuPage vacancy rate rose by nearly two full

percentage points in 2008 as leasing activity reached its lowest level since 2002.”




5

ChicagoVacancy and supplythe vacancy rate in both Chicago markets achieved opposite results in 2008. the Chicago north vacancy rate started the year at 5.65 percent and jumped to 6.47 percent by year’s end. however, in the Chicago south market the fourth quarter vacancy rate of 9.39 percent was 31 basis points lower than the first quarter rate of 9.70 percent.

despite strong fourth quarter leasing and sale activity, available supply in the Chicago north market at year’s end remained unchanged from the previous quarter’s level of 5.9 million square feet. the same held true for the Chicago south market where supply stood at 8.0 million square feet.

Construction

the Chicago south market witnessed the only construction activity this year. a local developer completed a 104,000-square-foot speculative warehouse/distribution facility at 815 W. pershing road.

also in the Chicago south market, Cargill recently announced plans that it would build a 40,000-square-foot plant at torrence avenue and 122nd street.

lease and sale activitylease activity nearly matched sale activity in the Chicago north market in 2008. Just over 1.0 million square feet of lease transactions were completed, more than doubling the 2007 total of 409,400 square feet. sale volume also topped 1.0 million square feet, however, this result was a 27.7 percent decline from 2007.

in the Chicago south market, both lease and sale activity slowed in 2008. lease transactions totaled 1.7 million square feet versus 1.9 million square feet in 2007. sale activity totaled 1.2 million square feet, down from 1.5 million square feet – a decline of 19.4 percent.

net absorptiondespite strong leasing activity, year-to-date net absorption in Chicago north totaled negative 1.7 million square feet. in 2007, net absorption was negative 153,000 square feet.

in the Chicago south market, net absorption reached negative 37,300 square feet. this is a significant decline from the positive 935,600 square feet of net absorption recorded in 2007.


rtC 326,125 2800-50 W. Columbus avenue lease

rapid displays 258,320 4100 W. 76th street lease

azteca mall 210,069 3200 s. Kedzie avenue sale

1031 hans, llC 194,000 1031 n. Cicero avenue sale

preferred Freezer 175,000 4404 42nd place lease

What to expect in 2009the market will be tenuous throughout 2009. slower demand will put downward pressure on pricing of core assets, particularly those further from the Central Business district.

demand for redevelopment or re-use of multi-story loft buildings has ceased. there could be some limited interest from schools in 2009.

land acquisitions for speculative development and adaptive re-use will be non-existent.

tenants will have the upper hand in 2009. rents will be compressed but not as sharply as other markets.


Chicago North

2007 2008

Vacancy Rate

5.20% 6.47% p

Absorption -153,069 -1,732,412 qAsking Rents $5.76 $6.42 p

Chicago South

2007 2008

Vacancy Rate

9.55% 9.39% q

Absorption 935,628 -37,253 qAsking Rents $3.53 $4.26 p

-2,000,000-1,500,000

-1,000,000-500,000

0500,000

1,000,0001,500,000

2,000,000

2003 2004 2005 2006 2007 2008

Square Feet Absorbed0%1%

2%3%

4%5%

6%7%

8%

Vacancy Rate

Absorption Vacancy

Chicago North

Chicago South

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2003 2004 2005 2006 2007 2008Square Feet Absorbed 0%

2%4%6%8%10%12%14%16%

Vacancy Rate

Absorption Vacancy

“The Chicago South market was one of few to experience a decrease in vacancy rate as leasing activity did not

decline as dramatically as in other markets.”



VaCanCy and aBsorption


* Through Year-End 2008


Fox ValleyVacancy and supplyFox Valley’s available supply ended 2008 slightly better than where it started – 10.6 million square feet versus 10.9 million square feet. Fourth quarter sale and leasing activity were a factor in the improvement in Fox Valley’s available supply.

Fox Valley’s year-end 2008 vacancy rate was 12.03 percent, an increase from 11.21 percent at year-end 2007.

there are 21 buildings with available space greater than 100,000 square feet. Based on current absorption this represents a three-year supply.

Constructiondevelopers were very active in the Fox Valley market in 2008 compared to 2007. new construction deliveries totaled 1.7 million square feet, a 67 percent increase over the prior year.

new speculative development totaled 1.1 million square feet or 67 percent of all construction projects completed in the Fox Valley market in 2008. this included a 549,600-square-foot speculative bulk warehouse/distribution facility completed by duke realty Corporation at Butterfield east in aurora. there has already been a commitment from midwest Warehouse to lease 350,000 square feet at the property.

lease and sale activitytenant demand was consistent throughout 2008 as leasing activity totaled 3.3 million square feet – the second highest total this decade. this represents a 14.2 percent increase from the 2.9 million square feet reported in 2007.

sale transactions totaled 1.0 million square feet in 2008, a 13.2 percent decline from the 1.2 million square feet purchased in 2007.

net absorptionstrong leasing activity in 2008 had an impact on Fox Valley’s year-to-date net absorption figure which totaled positive 223,000 square feet. however, the return of several large facilities to the market in 2008 hampered the final total.


Freudenberg household products 525,000 diehl road, aurora lease

midwest Warehouse 350,000 100 Ferry road, aurora lease

mcKesson Corporation 350,000 diehl road, aurora sale

reviva logistics, llC 231,880 1203 Bilter road, aurora lease

What to expect in 2009the i-88/eola 4-way interchange was approved in July and will spur further commercial development in that region in 2009.

the abundance of fully improved industrial zoned land in Fox Valley could draw more attention from developers with holdings in the i-55 Corridor as that region’s land base for development is in short supply.

the health care industry, already with a strong presence in the Fox Valley market, will continue to grow in this area in 2009. the northern illinois proton treatment and research Center has commenced construction on a $159 million center within the dupage national technology park in West Chicago. it is anticipated that the Fox Valley market will continue to attract similar companies in the coming years.

Fox Valley

Vacancy Rate 11.21% 12.03% pAbsorption

(SF)567,165 222,954 q


0

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2003 2004 2005 2006 2007 2008

Square Feet Absorbed0%

2%

4%

6%

8%

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14%

Vacancy Rate

Absorption Vacancy

“Leasing activity increased in in the Fox Valley market in

2008 by 14.2 percent, highly unusual during this economic

downturn.”






7

i-290 northVacancy and supplythe i-290 north market imploded in 2008. at the beginning of the year, 5.3 million square feet were available, however, availabilities totaled 8.7 million square feet by year’s end – a remarkable 3.4 million-square-foot increase.

the year-end vacancy rate in i-290 north hit an all-time high of 11.28 percent. sluggish sale and leasing activity during the year coupled with a tremendous amount of industrial space returning to the market was the cause.

Constructiondespite the glut of vacant space, three speculative developments totaling 313,300 square feet were delivered to the i-290 north market in 2008. Centerpoint properties recently enclosed a 142,500-square-foot facility in Franklin park. also, ml realty partners, llC completed a 128,800-square-foot facility at 3801 n. rose street in schiller park. Both facilities are currently available.

in addition to three new buildings, three buildings were retired from i-290 north’s inventory base, depleting it by 549,800 square feet. they were 300 W. north avenue, northlake (300,000 square feet); 79 W. lake street, northlake (125,000 square feet); and 35-45 W. lake street, melrose park (124,000 square feet).

leasing and sale activityWith only 682,700 square feet, i-290 north leasing activity registered one of the lowest annual totals ever. this was significantly below the 1.3 million square feet leased in 2007. in fact, the first quarter 2007 leasing volume of 690,000 square feet surpassed 2008’s volume alone.

sale volume did not fare much better in 2008. only 417,600 square feet of sale transactions were completed in 2008, which represented a 62.3 percent drop from the 2007 level.

net absorptionpoor user demand, in addition to an enormous amount of space released back into the marketplace, caused the i-290 north market’s net absorption figure to fall to negative 4.1 million square feet. this is the market’s first negative result after four consecutive years of positive totals.

i-290 north market net absorption figure recorded the lowest level of any metropolitan Chicago market in 2008.


mcshane Corporation 300,000 300 W. north avenue, northlake sale

signature aluminum 116,484 10800 W. Belmont avenue, Franklin park lease

turner Construction 109,000 505 n. northwest highway, northlake lease

King supply 64,800 9201 W. Belmont avenue, Franklin park lease

What to expect in 2009landlords will be faced with the dilemma of filling their assets by completing transactions with companies with questionable credit or holding out for stabilized rent in the future.

demand for space in 2009 will come from users in the 20,000-square-foot to 80,000-square-foot size range.

demand for first generation space will remain flat in view of the fact the gap in pricing for these facilities is higher than tenants are willing to pay.

I-290 North

2007 2008

Vacancy Rate

6.62% 11.28% p

Absorption (SF)

81,804 -4,113,826 q

Asking Rents

$5.80 $5.61 q

-5,000,000

-4,000,000

-3,000,000

-2,000,000

-1,000,000

0

1,000,000

2003 2004 2005 2006 2007 2008

Square Feet Absorbed

0%

2%

4%

6%

8%

10%

12%

Vacancy Rate

Absorption Vacancy

“New construction deliveries and poor tenant demand resulted in a tremendous decrease in net absorption and a skyrocketing vacancy

rate in 2008.”







i-290 southVacancy and supplythe i-290 south vacancy rate jumped to 7.59 percent in 2008, a substantial increase from the fourth quarter 2007 level of 5.08 percent. a majority of this increase was incurred during the second quarter of 2008 when 903,500 square feet of product were returned to the market. the i-290 south available supply occurred mostly in spaces greater than 100,000 square feet. of the 3.3 million square feet currently available, 2.1 million square feet (64 percent) is in available spaces 100,000 square feet and above.

ConstructionFour projects (two build-to-suit and two speculative) were completed in 2008, adding 454,400 square feet to i-290 south market’s inventory base. the two speculative projects totaled 370,500 square feet. as a comparison, there was no new construction delivered to the i-290 south market in 2007.

the last time speculative development exceeded build-to-suit activity was in 2004.

leasing and sale activityi-290 south leasing activity was consistent three of the four quarters of 2008, bringing the year-end figure to 512,800 square feet. however, this was a 43.9 decline from the 2007 total.

although leasing activity was behind 2007’s level, new speculative development witnessed significant activity in 2008. a recently completed 100,280-square-foot warehouse/distribution facility at Cicero Business Center was leased by BWay Corporation. mcCook Business Center ii, a 270,200-square-foot facility, gained gpa specialty printable substrates, inc. as a tenant in a 60,300-square foot unit.

all sale activity occurred during the second half of 2008, totaling 137,400 square feet. this was a decline from the 292,400 square feet sold in 2007.

net absorptionthe large amount of space released to the i-290 south market during the second quarter created a huge hole that leasing activity could not overcome. the 2008 net absorption figure totaled negative 487,700 square feet, a disappointment after two prior years of positive results.


Chicago history museum 102,553 2525 Braga drive, Broadview sale

BWay Corporation 100,280 5900 W. ogden avenue, Cicero lease

garcoa laboratories 91,041 825 26th street, lagrange park lease

arnold logistics 81,600 7250 santa Fe drive, hodgkins lease

What to expect in 2009the recent success of speculative development projects will create more interest in redevelopment opportunities in 2009.

Food users will remain active in the market in 2009.

land prices will hold firm in 2009.

I-290 South

2007 2008

Vacancy Rate 5.08% 7.59% pAbsorption (SF) 658,421 -487,698 q

Asking Rents $4.26 $4.80 p

-600,000

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0%

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Vacancy Rate

Absorption Vacancy

“Leasing activity in the I-290 South market declined by 44

percent in 2008.”






9

i-55 Corridor

Vacancy and supplyi-55 Corridor’s vacant industrial supply surpassed the 11.0 million-square-foot threshold for the first time since the fourth quarter of 2005. at year-end 2008, vacant supply totaled 11.9 million square feet, a significant 2.5 million square feet increase from the 9.4 million square feet available at year-end 2007.

40 percent (3.3 million square feet) of the 8.0 million square feet returned to the i-55 Corridor in 2008 became available in the fourth quarter. second generation returning to the market caused the increase in the year-end available supply.

the i-55 Corridor vacancy rate increased 294 basis points from the year-end 2007 level of 13.47 percent to the current rate of 16.40 percent. this marked the second-highest of all metropolitan Chicago markets in 2008.

Constructionnew i-55 Corridor development projects decreased 23.9 percent in 2008 to a total of 2.8 million square feet. 3.7 million square feet of new projects were completed in 2007.

For the seventh consecutive year, speculative construction completions exceeded build-to-suit projects. While 2.3 million square feet were completed on a speculative basis, only 258,000 square feet were built for a specific user.

one building was removed from the i-55 Corridor industrial inventory. the 548,100-square-foot former tellabs facility at 1000 remington Boulevard in Bolingbrook was converted to office use.

leasing and sale activitytenant demand was sluggish during the first half of the year, impacting the year-to-date leasing volume of 4.8 million square feet. this represents a 20.5 percent decline from the 2007 total.

sale volume dramatically improved from the 2007 volume of 290,300 square feet to the current total of 715,900 square feet. Four buildings greater than 100,000 square feet were purchased in 2008.

net absorptionstronger sale volume was just enough to keep i-55 Corridor’s net absorption positive in 2008. however, the total of positive 191,800 square feet was far inferior to the positive 3.7 million square feet registered in 2007.


Kimberly Clark 750,485 775 n. prologis pkwy, romeoville lease

dsC logistics 499,200 1053 schmidt road, romeoville lease

spX 230,081 1385 Weber road, romeoville lease

What to expect in 2009rents will continue to be compressed in 2009. however, based on current absorption patterns and the lack of fully improved industrial land sites for future speculative development we anticipate rents to stabilize by the end of 2009.

the speculative building frenzy that has kept developers busy in the i-55 Corridor over the past ten years will come to an end in 2009. the market will be fortunate to deliver 1.0 million square feet of speculative development in 2009.

Buildings that can accommodate trailer storage will be in high demand next year.

I-55 Corridor

2007 2008

Vacancy Rate 13.47% 16.40% pAbsorption (SF) 3,737,359 191,800 q


0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2003 2004 2005 2006 2007 2008

Square Feet Absorbed 0%

5%

10%

15%

20%

25%

Vacancy Rate

Absorption Vacancy

“Vacancy reached 16.4 percent in the I-55 Corridor,

the second-highest of all submarkets.”







i-80/Joliet Corridor

Vacancy and supplyi-80/Joliet Corridor’s available supply rose again at an alarming rate in 2008 to 12.7 million square feet, a 2.7 million-square-foot increase from year-end 2007. during the first quarter of 2008, three large speculative distribution facilities totaling 2.8 million square feet were completed that remain vacant.

Vacant space in the i-80/Joliet Corridor continues to climb at a disturbing rate. the year-end 2008 total of 19.64 percent is a 310 basis-point-increase from the 16.54 percent reported during the fourth quarter of 2007.

the i-80/Joliet Corridor vacancy rate was the highest of any metropolitan Chicago market in 2008.

Constructiondespite a 2008 decrease, the i-80/Joliet Corridor continues to boast the most construction activity of any market. in 2008, 4.3 million square feet of new projects were completed, down 14.1 percent from 2007 volume of 5.0 million square feet.

speculative development once again surpassed build-to-suit deliveries – 3.4 million square feet versus 867,900 square feet.

lease and sale activityleasing activity was consistent in three out of four quarters in 2008, posting a year-end tally of 1.7 million square feet. this was noticeably lower than the 2.0 million square feet registered leased for all of 2007.

the mega-distribution user was non-existent in 2008. the largest transaction was completed by ryder logistics, which leased 477,000 square feet at 2780 mcdonough street in Joliet. in 2007, two transactions greater than 800,000 square feet were completed.

sale activity could not keep pace with 2007’s level of 1.2 million square feet, falling 24.56 percent to 920,300 square feet.

net absorptiondespite the decline in lease and sale activity in 2008, the i-80/Joliet Corridor’s net absorption figure remained positive. the year-end figure measured 1.5 million square feet. however, this is a decrease from the positive 2.0 million square feet of net absorption measured in 2007.


ryder logistics 476,988 2780 mcdonough street, Joliet lease

Cypress medical products 383,499 20901 Walter strawn drive, elwood lease

Kohl’s 330,000 ottawa sale

What to expect in 2009developers that shelved plans for big box speculative development in 2008 will remain cautious in 2009. We do not expect any new speculative deliveries next year.

land speculation has dried up which will have a negative impact on land prices next year.

the trend of developers marketing their vacant buildings for sale will continue in 2009.

I-80/Joliet Corridor

2007 2008

Vacancy Rate

16.54% 19.64% p

Absorption (SF)

2,016,391 1,485,673 q

Asking Rents

$4.62 $3.67 q

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,000

2003 2004 2005 2006 2007 2008

Square Feet Absorbed 0%

5%

10%

15%

20%

25%

Vacancy Rate

Absorption Vacancy

“Available supply rose to 12.7 million square feet in the

I-80/Joliet Corridor in 2008 as developers continue to

deliver speculative product.”






11

lake CountyVacancy and supplylake County’s available supply grew to 7.7 million square feet in 2008, up from 5.9 million square feet in 2007. this was attributed to weak user demand.

the vacancy rate in lake County skyrocketed from 8.79 percent in the first quarter of 2008 to the year-end rate of 11.04 percent. several large blocks of space returned to the market during the fourth quarter, adding 1.0 million square feet to lake County’s year-end available supply.

Constructioneight new buildings were completed in lake County in 2008, which added 849,100 square feet to the total inventory base. this volume was just above half of the 1.6 million square feet built in 2007.

all speculative projects delivered to the lake County market in 2008 were geared towards tenants with space requirements ranging in size from 20,000 square feet to 100,000 square feet.

lease and sale activitylake County leasing activity totaled 1.4 million square feet in 2008, a 22.8 percent decline from the 2007 total of 1.9 million square feet.

user sale demand dropped precipitously from 2007’s total of 2.0 million square feet to just 846,300 square feet in 2008.

demand for space in lake County was hampered in 2008 by the reluctance of companies to expand. in the current market, most tenants and buyers felt the financial burden was higher than the need for additional space.

net absorptionlake County’s net absorption figure posted negative results in three of the four quarters in 2008. the year-to-date total was negative 1.1 million square feet, one of the market’s lowest net absorption figures ever recorded.

lake County’s 2008 net absorption total was the first negative result in five years.

top 2008 transactionstenant/Buyer size (sF) address type

safco dental supply Co. 161,724 1100 Busch parkway, Buffalo grove sale

Visual pak 111,182 1725 Waukegan road, Waukegan lease

yX investments 91,098 801 park avenue, libertyville sale

What to expect in 2009distribution users with leases expiring will reevaluate their space needs and could move those operations to the more economical i-55 and i-80/Joliet Corridors.

developers have turned their attention away from land acquisitions for speculative development.

tenants will have the upper hand in 2009. rents will be compressed but not as sharply as other markets.

Lake County

2007 2008

Vacancy Rate 8.53% 11.04% pAbsorption

(SF)1,271,294 -1,061,111 q


-1,500,000

-1,000,000

-500,000

0

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2,500,000


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2%

4%

6%

8%

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Absorption Vacancy

“Lake County reached a near-record low of negative

1.1 million square feet of net absorption in 2008.”







north suburbsVacancy and supplythe 2008 vacancy rate in the north suburbs totaled 6.10 percent, increasing sharply from the third quarter when it measured 5.52 percent. this was the result of poor fourth quarter leasing volume.

despite the fourth quarter increase, the 6.10 percent vacancy rate is still lower than the 6.22 percent reported vacant at the end of 2007.

available supply climbed to 3.6 million square feet, up from 3.3 million square feet at the end of 2007. the second quarter of 2008 alone witnessed a return of 1.0 million square feet back to the market.

Constructionno new developments were completed in the north suburbs in 2008. developers have not been as attracted to this mature area as they have to other infill redevelopment areas of Chicago.

With no development on the horizon, 2009 could produce the same net results.

lease and sale activitysteady tenant demand throughout the year was enough to put 2008’s year-to-date leasing volume of 982,900 square feet ahead of the 789,800 square feet leased in 2007.

For the second straight year, a former corporate headquarters facility was acquired for a school conversion. in 2008, the ida Crown school purchased the 283,000-square-foot former rand mcnally facility at 8255 n. Central park avenue in skokie.

Buildings available for sale still attracted buyers, however not at the pace witnessed in 2007. By the end of the 2008, 1.1 million square feet of sale transactions were completed, compared to 1.4 million square feet sold in 2007.

net absorptionConsistent user demand was not enough to keep the north suburbs’ net absorption figure positive. the year-to-date total was negative 238,600 square feet, which was significantly behind the 126,700 square feet of positive absorption in 2007.


ida Crown school 283,008 8255 n. Central park avenue, skokie sale

W.W. grainger 234,715 6300 W. howard street, niles lease

dreams, inc. 188,636 725 landwehr road, northbrook lease

Champro sports 186,600 1175 Wheeling road, Wheeling sale

What to expect in 2009Buildings for sale in the 10,000-square-foot to 40,000-square-foot range are in short supply and will command higher prices in 2009.

the north suburbs will continue to witness the redevelopment of older industrial facilities into alternative uses rather than replacing them with new industrial product.

there were four large users in the market that completed transactions in 2008. however, volume is expected to be about half that amount in 2009 in the north suburbs.

North Suburbs

2007 2008

Vacancy Rate 6.22% 6.10% qAbsorption (SF) 126,739 -238,619 q

Asking Rents $5.12 $5.14

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Vacancy Rate

Absorption Vacancy

“Market conditions in the mature North Suburban

market are benefitting from a lack of new development and

consistent user demand in 2008.”






13

O’Hare

2007 2008

Vacancy Rate

9.01% 10.95% pAbsorption

(SF)-1,899,007 -2,804,059 q

Asking Rents

$6.02 $6.02

o’hareVacancy and supplythe o’hare available industrial supply grew to an all time high of 15.4 million square feet in 2008. this was a 2.8 million-square-foot increase from the year-end 2007 volume of 12.6 million square feet.

as expected, the 2008 o’hare vacancy rose to 10.95 percent at year-end 2008, up from 9.89 percent in the first quarter and 9.01 percent at the end of 2007.

the increase in o’hare’s vacancy rate was primarily due to weak sale activity coupled with a higher-than-normal amount of space returning to the market.

Construction2008 construction activity in the o’hare market encompassed speculative and build-to-suit projects in addition to demolition. the net result was 441,300 square feet of inventory added to o’hare’s base.

despite the rising vacancy rate, developers pushed forward on speculative projects in 2008. Five buildings were completed over the course of 2008 totaling 738,200 square feet.

one build-to-suit project was completed in o’hare as nippon express usa assumed occupancy of its 155,000-square-foot airfreight facility at 401 e. touhy avenue in des plaines. also, sysco Food service expanded it’s des plaines facility by 100,000 square feet.

three o’hare market buildings were razed in 2008 totaling 551,900 square feet. they will be replaced with two speculative and one build-to-suit project totaling 424,100 square feet.

lease and sale activitylandlords enticed tenants with very economical lease terms in 2008, resulting in 4.9 million square feet of lease transactions in 2008, a 37.8 percent increase in volume over the 2007.

user sales declined substantially as just 734,700 square feet of sale transactions were completed in the o’hare market in 2008. approximately 2.0 million square feet of user sales were completed in 2007.

net absorptionstrong leasing activity did not stop o’hare’s net absorption from reaching negative 2.8 million square feet in 2008. absorption in 2007 totaled negative 1.9 million square feet.


Judge & dolph 306,590 1010 Foster avenue, Bensenville lease

rauland Borg 240,617 1800 Central road, mt. prospect lease

midwest Warehouse 174,332 500-510 Country Club drive, Bensenville lease

nippon express usa 155,000 401 touhy, des plaines sale

What to expect in 2009land values, which have escalated dramatically during the past 18 months, will drop to pre-2006 levels of $14.00 per square foot.

tenants in the market will benefit from the numerous choices available in the o’hare market and will be able to negotiate more attractive terms than in year’s past.

We will see more institutions put their vacant o’hare assets on the market for sale in 2009.

-4,000,000

-3,000,000

-2,000,000

-1,000,000

0

1,000,000

2,000,000

200320042005200620072008

Square Feet Absorbed2%

4%

6%

8%

10%

12%

Vacancy Rate

Absorption Vacancy

“Although leasing activity increased by 38 percent in the O’Hare market in 2008, it

wasn’t enough to stop absorption from reaching negative 2.8

million square feet.”







South Suburbs

2007 2008

Vacancy Rate


(SF)1,725,442 -2,504,204 q

Asking Rents

$4.25 $3.68 q

south suburbsVacancy and supplythe available supply in the south suburbs witnessed a dramatic increase to 11.8 million square feet, up from the 2007 year-end total of 9.2 million square feet. the completion of one large speculative development in sauk Village, coupled with the return of several large second-generation facilities to the market, caused the increase.

the vacancy rate in the south suburbs jumped from a first quarter level of 10.71 percent to the year-end rate of 11.89 percent. the opposite held true in 2007, which had a first quarter rate of 10.77 percent while ending the year at 9.33 percent.

Constructionnew construction deliveries in 2008 totaled 587,300 square feet, an increase from 412,900 in 2007.

one completed development comprised the majority of all construction completions. dp partners completed a 496,300-square-foot speculative warehouse/distribution facility at logistiCenter at sauk Village.

the south suburbs witnessed the demolition of three buildings totaling 392,600 square feet. two of the three sites are being marketed for alternative uses.

lease and sale activityalthough down in 2008, leasing activity still posted a healthy 1.9 million square feet. over 2.7 million square feet were leased in 2007 – a record year.

tenant demand came in all size ranges, however, five transactions totaling 706,100 commanded 37 percent of total leasing activity.

the south suburbs was one of only two markets to achieve an increase in user sales. 1.2 million square feet were sold in 2008 versus 819,600 in 2007.

net absorptionstrong leasing activity in 2008 had little positive effect on the year’s net absorption. a glut of second-generation space returning to the market (6.0 million square feet) contributed to the negative 2.5 million square feet of net absorption.


superior manufacturing 241,280 5655 W. 73rd street, Bedford park sale

Winpak portion packaging 225,000 1001 W. Washington street, Chicago heights lease

holly hunt 134,852 5025 W. 73rd street, Bedford park lease

What to expect in 2009We anticipate additional large second-generation facilities to populate the south suburbs available supply next year.

developers will focus on build-to-suit projects in 2009. We do not expect any large speculative developments to break ground in 2009.

user demand will be slower in 2009, causing landlords to be more aggressive as they compete for tenants.

-3,000,000-2,500,000-2,000,000-1,500,000-1,000,000

-500,0000

500,0001,000,0001,500,0002,000,000

2003

2004

2005

2006

2007

2008

Squa

re Fe

et A

bsor

bed

0%

2%

4%

6%

8%

10%

12%

14%

Vaca

ncy R

ate

Abs orption V ac anc y

“The South Suburbs was one of only two markets to achieve

an increase in user sales in 2008.”






15

Southeast Wisconsin

2007 2008

Vacancy Rate


(SF)-267,402 892,698 p

Asking Rents

$4.68 $4.12 q

southeast WisconsinVacancy and supplyavailable supply in the southeast Wisconsin market escalated from the first quarter level of 3.5 million square feet to an all-time high of 5.6 million square feet at year-end 2008. several new speculative construction projects contributed to the increase.

the vacancy rate, typically one of the lowest in the metropolitan Chicago area, rose to 9.62 percent at the end of 2008. this was a 216 basis-point-increase from the fourth quarter 2007 rate of 7.45 percent.

Constructionthe southeast Wisconsin market has experienced the same rush to the market with speculative development that the i-55 Corridor has encountered over the past 10 years. in 2008, 1.3 million square feet of speculative product was delivered to the market, with 1.1 million square feet remaining available.

Build-to-suit development kept pace with speculative construction as 1.2 million square feet of projects were completed this year. these projects include rust-oleum’s 600,000-square-foot bulk distribution center at First park Kenosha and sC Johnson Wax’s 432,000-square-foot bulk distribution center at the renaissance Business park in sturtevant.

the 2.5 million square feet completed this year places the southeast Wisconsin market with the second most deliveries in the metropolitan Chicago in 2008.

lease and sale activityleasing activity reached a new all-time high 2.3 million square feet, up from 2.2 million square feet in 2007. the first quarter of 2008 alone witnessed 1.0 million square feet of transactions – nearly half the total volume for the year.

user sale volume declined 12 percent in 2008 for a total of 159,700 square feet. all 2008 sales occurred during the second half of the year.

net absorptionthe southeast Wisconsin net absorption figure benefited greatly from heightened 2008 leasing activity. this year’s volume reached 892,700 square feet, a vast improvement from the negative 267,400 square feet recorded for all of 2007. Better still, this erases three years of negative results.


Coleman Cable system 502,033 11290 80th avenue, pleasant prairie lease

sC Johnson 432,000 2600 enterprise drive, sturtevant lease

liquid Container 300,410 7100 durand avenue, racine lease

rust-oleum 239,221 8691 109th street pleasant prairie lease

What to expect in 2009the southeast Wisconsin market dynamic is changing from an owner/user base and is becoming a tenant-driven market, which will continue for the foreseeable future.

developers will be cautious in 2009 as we expect no new big box speculative developments to commence.

landlords of new product in the southeast Wisconsin market have enjoyed slightly higher rental rates compared to illinois. in 2009, rents will fall closer to those for similar product in illinois.

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

2003

2004

2005

2006

2007

2008

Squa

re Fe

et A

bsor

bed

0%

2%

4%

6%

8%

10%

12%

Vaca

ncy R

ate

Abs orption V ac anc y

“Southeast Wisconsin had healthy leasing activity and a substantial positive swing in

net absorption in 2008.”




sub-markettotal inventory

sq. Ft.new

supplyCame

on market

Vacancy rate

Current Qtr

Vacancy rate prior

Qtr

net absorption

Current Qtr net absorption year end-sq. Ft.

leased sq. Ft. Current Qtr.

sold sq. Ft. Current

Qtr.

under Constr.

Current Qtr.

ave annual asking rate/sf

ave asking sales

price/sF

Central dupage County

83,946,461 139,997 1,304,953 10.23% 9.59% (422,748) (1,706,056) 480,758 84,428 139,150 $5.14 $76.85

Chicago north 90,735,202 0 1,102,211 6.47% 6.48% (241,003) (1,732,412) 380,590 451,738 0 $6.42 $60.10

Chicago south 84,278,069 0 539,815 9.39% 9.57% 135,144 (37,253) 277,160 244,674 40,000 $4.26 $45.03

deKalb County 18,451,565 0 368,276 3.92% 2.04% (347,580) (144,010) 20,696 0 17,000 $3.32 $36.55

elgin i-90 corridor

27,390,168 24,300 347,788 12.17% 12.99% 206,383 (760,373) 226,838 252,033 442,177 $5.26 $71.11

Far south suburbs

42,915,832 0 39,516 6.17% 6.18% 5,681 544,849 45,197 0 192,000 $3.35 $31.15

Fox Valley 88,025,589 484,258 1,002,513 12.03% 12.61% 781,306 222,954 969,305 510,232 988,636 $4.40 $62.87

i-290 north 77,409,060 42,000 2,051,124 11.28% 8.99% (1,829,226) (4,113,826) 129,528 14,270 0 $5.61 $46.76

i-290 south 43,379,811 41,239 111,068 7.59% 7.62% 240,288 (487,698) 187,564 122,553 551,827 $4.80 $42.71

i-39 Corridor* 16,186,944 700,205 0 5.34% 5.74% 724,169 999,289 - 98,000 0 $2.48 $22.85

i-55 Corridor 72,244,737 1,040,362 3,299,151 16.40% 14.16% (652,253) 191,800 1,398,909 249,637 522,265 $3.99 $80.93

i-80/Joliet Corridor

64,679,254 216,664 307,888 19.64% 19.98% 375,626 1,485,673 435,649 228,424 1,743,690 $3.67 $62.29

lake County 69,577,583 150,000 1,744,854 11.04% 9.43% (1,026,272) (1,061,111) 286,451 178,774 98,735 $5.67 $71.37

mchenry County

30,136,712 0 104,583 9.66% 10.23% (16,703) (98,710) 7,200 50,680 0 $5.08 $49.00

north suburbs 58,606,409 0 634,420 6.10% 5.52% (397,338) (238,619) 68,392 136,545 0 $5.14 $52.23

northwest suburbs

33,951,041 484,235 96,281 7.70% 8.17% 535,040 718,464 62,323 550,409 162,248 $4.74 $71.73

o'hare 140,689,793 503,213 2,170,125 10.95% 10.44% (268,285) (2,804,059) 1,260,948 74,632 50,900 $6.02 $66.47

south suburbs 99,083,692 0 937,556 11.89% 11.67% (305,630) (2,504,204) 385,476 181,450 0 $3.68 $35.14

Metro Chicago Total

1,141,687,922 3,826,473 16,162,122 10.61% 10.15% (2,503,401) (11,525,302) 6,622,984 3,428,479 4,948,628 $4.73 $56.14

northwest indiana

60,929,618 30,000 151,604 8.14% 8.13% 15,650 (208,293) 14,000 107,773 0 $3.20 $31.40

rockford area* 43,009,197 172,000 270,575 6.69% 7.94% 371,564 (239,698) 61,710 94,682 0 $2.48 $23.33

southeastern Wisconsin

58,321,522 2,376,383 1,818,103 9.62% 7.20% 796,367 892,698 110,100 117,043 2,455,570 $4.12 $22.83

GrAnD TOTAL

1,303,948,259 6,404,856 18,402,404 10.32% 9.86% (1,319,820) (11,080,595) 6,808,794 3,747,977 7,404,198 $4.61 $54.23

Quarterly Comparison and totals

Q4-08 1,303,948,259 6,404,856 18,402,404 10.32% 9.86% (1,319,820) (11,080,595) 6,808,794 3,747,977 7,404,198 $4.61 $54.23

Q3-08 1,297,543,403 2,404,372 18,612,575 9.86% 9.38% (4,894,028) (9,760,775) 7,221,564 2,884,457 12,218,082 $4.61 $55.00

Q2-08 1,295,091,133 3,222,478 19,166,792 9.38% 9.10% (1,728,093) (4,866,747) 9,636,230 3,267,479 11,533,733 $4.49 $52.07

Q1-08 1,291,786,255 4,897,279 21,397,353 9.10% 8.58% (3,138,654) (3,138,654) 8,233,720 3,704,063 8,281,458 $4.43 $52.47

Q4-07 1,286,284,940 8,324,748 17,084,107 8.58% 8.49% 5,761,050 14,038,893 9,456,332 4,261,682 9,959,999 $4.79 $57.68

The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability. As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports.

YEAr-EnD 2008 MArKET STATISTICS



17

InDuSTrIAL SuBMArKET MAp

1. ChiCago north

2. ChiCago south

3. o’hare

4. north suBurBs

5. laKe County

6. Central dupage County

7. northWest suBurBs

8. i-290 north

9. i-290 south

10. south suBurBs

11. elgin i-90

12. mchenry County

13. FoX Valley

14. i-55 Corridor

15. deKalB County

16. Far south suBurBs

17. northWest indiana

18. southeast WisConsin

19. i-80 / Joliet Corridor

20. i-39 Corridor

21. roCKFord area




ABOuT COLLIErS BEnnETT & KAHnwEILEr InC.


metropolitan ChiCago marKet researCh year-end 2007

42

Colliers Bennett & Kahnweiler inc. is an independently owned and operated business and a member fi rm of Colliers international property Consultants, an affi liation of independent companies with over 294 offi ces throughout more than 61 countries worldwide. locally, Colliers Bennett & Kahnweiler offers full service real estate services including offi ce, retail, investment, and industrial brokerage; development; project/construction management; and property/asset/facility management. in total, some 200 persons are employed by the fi rm – nearly half of which are brokerage professionals.

HEADQuArTErS

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Daniel Arendsrichard BergerGerald Cernickrobert Chodos, SIOrKevin Clifton, SIOrJeffrey DevineSteven DisseJeffrey KahanJeffrey Kapcheck, SIOrSteven KlingAlain LeCoqueGregory pacelli, SIOrFrancis prockJack rosenberg, SIOrAndrew Sexsonphilip StaffordMatthew Stauber, SIOr

DEpArTMEnT LEADErSHIp

Daniel Arendsrichard Bergerrobert Chodos, SIOrdirectors of Corporate offi ce group

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