Motorola Mobility leaving suburbs for Merchandise Mart

As reported here in May, Motorola Mobility is leaving it’s longtime digs in Libertyville for a swanky new space in the Merchandise Mart.  Taking up the top four floors with access to the roof deck, Motorola will lease 600,000 sq ft for the next 15 years.  The announcement is a coup for Mayor Rahm Emmanuel who is working with the business community to create a technology hub in the city.  Motorola Mobility, who was acquired by Google in May, entertained offers to relocate to California and Texas but opted to stay in Illinois.  Of the 3,000 jobs that will be moving to the city, 2,000 will be engineers, a continuing trend with young, tech savy workers.

See article for more info:http://www.chicagotribune.com/business/breaking/chi-motorola-mobility-leaving-libertyville-for-downtown-chicago-20120726,0,7862959.story

Market Trends in Chicago

With the national unemployment edging towards 8%, commercial real estate executives are hoping that this points towards better times ahead.  According to CoStar, the Chicago office vacancy rate fell to 14.8% in the fourth quarter 2011, down from 15% in the third  quarter.  Respondents to a Real Estate Roundtable Economic Survey found that, “industry executives’ expectations for growth this year are improved, but hindered by concerns about underlying macroeconomic and political risks”. 

What does this mean for office tenants? Building owners are starting to pull back on concessions such as free rent and tenant improvement allowances while being more conservative with increases in asking rent.  If the unemployment rate keeps on dropping ( Bureau of Labor expects the rate to be mid 7% by November) we could see asking rents going north quickly.  In other words, if’ you’re considering a move or lease renewal in the next twelve months, now may be the time to act.

Update on Proposed Accounting Rules

https://byobroker.wordpress.com/2011/08/18/chages-to-accounting-standards-will-affect-office-leases/

In a developing story (and a follow up to our Aug 11 post here ), the International Accounting Standards Board (IASB) is preparing a draft of proposed accounting changes that may have a dramatic effect on commercial real estate lessees, owners and investors.  The new rules call for companies to capitalize office and equipment leases as long term liabilities that diminish over time.  While this may bring US accounting standards more in line with international norms, it would also have the effect of increasing balance sheet liabilities and reducing access to capital.  From a commercial real estate perspective, signing a long term lease would negatively affect the amount of credit available to a company.  Shorter term leases usually mean higher rental rates, effectively raising the operating costs for a business.  Landlords, while getting higher rental rates, would see their property lose value as a building full of short term leases is not as valuable as one with long term leases.

Free Chicago Office Market Report

At BYOBroker we know that information is power, and our mission is to provide our clients with the same information that professional commercial real estate brokers use.  In the same spirit, another brokerage house, Jones Lang LaSalle, recently published a free report that gives commercial office tenants a chance to see behind the curtain of the Chicago office market.  The report features information on average rental rates and vacancies for 54 downtown buildings and shows vacancy on a floor by floor basis.  It also provides an analysis of occupancy trends by building class (A,B and C) as well as their take on where the market is and where it’s headed.  For a free copy, send an e-mail request to: Chicago.Skyline@am.jll.com

JLL Graphic

For more information see David Roeder’s article in today’s Sun-Times: http://www.suntimes.com/business/roeder/10943558-452/take-a-peek-at-where-chicago-office-space-rentals-are.html

We’re back!

The BYOBroker took some time off from the blog but is now back with recharged batteries!  We will be posting a lot of new info on the office leasing market in the next few days so check back often.

Shameless plug for yours truly

I recently attended a presentation by CoStar for their new iPad app (which is fantastic) and made it on their YouTube video.  Check it out:

http://www.youtube.com/watch?v=D0UaiFlVu5g

Downtown vacancy lowest since end of 2009?

Faithful BYOBlog readers (okay, I’m hoping the masses will find this site soon), when you see headlines like this you can be sure of two things:

1) You need to read the details, where you will find that although direct vacancy for downtown space dropped to 14.5% from 14.9% in the second quarter, most of the demand for new space was driven by a handfull of firms like Groupon and McKinsey & Co, as opposed to broader demand from small to medium sized firms, which would signal a more optimistic outlook

2) This is little like putting a bow on a pig.  While Net Absorbption, which measures the change in leased and occupied space from quarter to quarter, was positive for the fourth quarter in a row (549,090 sq ft), the positive trend seems limited to Class A buildings.  Class B buildings actually saw vacancy edge up, while Class C buildings had a small drop.  The general concensus is that there is still downward pressure on demand for office space.

The takeaway from this article is that landlords are looking for any good news to signal a bottom on rental rates.  When tenants approach them without a broker—or BYOBroker–they can justify higher rates with articles like these.  Without the credible market information we provide, you will be negotiating on heresay which in the end will cost you dearly.

“We have a really good relationship with our landlord”

Among the many reasons  tenants have for not using a broker, this is one of my favorites.  Landlords love it even more.  Once a tenant tells his (her) landlord that they will not be using a commercial office broker, it basically signals to the landlord that they win.  You don’t play hardball with friends, and the landlord, who is in the business to make money, wants yo u to believe you are negotiating with a friend.  Unfortunately, his new “perspective friends”, other tenants looking at the building with brokers, will be getting dramatically more competitive proposals simply because they are using market forces to aid them.  Current market knowledge specific to your building and the kind of deals are being made in comparable buildings force a landlord to compete with the market and ensure better terms for you.  As we’ve said before, a straight renewal of and existing lease should result in a reduction in rent.  Depending on the current market and the amount of construction in the original lease this reduction could be between 5-40%.  If you’re negotiating without a broker–or in this case without BYOBroker—you’re not going to get this reduction.  With our help you’ll be able to present your friend with a compelling, well documented proposal that will save you money and help your buisness succeed.

Why BYOBroker….

Over the last decade of representing office tenants in commercial real estate leases, one of my biggest frustrations has been every time I hear, “we don’t need a broker–we’re going to do it ourselves“. Eighty-five to ninety percent of tenants will always use a broker and recognize the value we bring to the table. The remaining ten to fifteen percent just can’t be convinced that we add anything other than a commission. As a seasoned veteran, I know the value that brokers bring to the table, whether on a lease renewal or searching out and negotiating a lease in a new space. Business people, who negotiate contracts every day, naturally assume that they can do as good of a job as a commercial real estate broker–and possibly better if there is no commission involved.

Unfortunately, with only a few exceptions, this is not the case. Landlords are in the business of making money, and when they come across a tenant trying to negotiate a lease without a broker, they are more than happy to tell them they might get a better deal on their own. Lawyers have a saying that goes,” a lawyer that represents himself has a fool for a client“. Ninety-nine percent of the time the landlord wins and it’s only after the deal is done that the tenant finds out that they could have made a better deal if they had better information.

That’s where BYOBroker comes in. Go ahead and do it on your own, but give yourself the best chance of winning. We level the playing field and give you access to the same information that landlord’s use. We provide lease templates that allow you to present your proposals in a format that landlords are used to working with and alert you to potential pitfalls. We identify cost-savings and show you how to build flexibility into lease terms.  In short, we help you Be the Best Broker you can be.  I look forward to sharing more thoughts in the future.