urban migration viewpoint_apr 2016

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• From 2010 to 2015 approximately 2.5 million sq. ft. was absorbed in the CBD, reflecting

43 relocations from the suburbs.

• The West Loop gained 46% of the total space taken by tenants who relocated to the CBD

from the suburbs, with River North absorbing 31% in the time frame. Meanwhile, 45% of

the companies that relocated to the CBD vacated the North Suburban submarket.

• Even though downtown is the heart of the metro area’s economic activity, the suburbs

have a much larger employment footprint. The suburban workforce is about 3 million,

nearly four times that of the city.

• According to CBRE Research, talent trumps cost for occupiers. A survey of 229 corporate

real estate executives showed that 57% of the respondents see employee attraction and

retention driving workplace strategy, while 44% see cost escalation as a leading challenge.

• The cost of real estate is much higher in the CBD than in the suburban market—68%

higher in average asking gross rent.

• Relocating to the CBD from the suburbs is typically associated with a desire for

densification, better recruitment and retention, trophy office space and access to a larger

labor supply.

• Staying in the suburbs is associated with a focus on lower real estate costs, cheaper and

more experienced labor, and office requirements related to research campuses or lab

space.

Numerous companies are relocat ing their headquarters to downtown Chicago. Whi le

the decis ion is viable for some, i t doesn’t make sense for al l f i rms. Here we explore

the current t rend and the main drivers for the business decis ion to move or s tay put .

You can always

go…downtown but does

it always make sense?

The urban migration paradigm

April 2016 CBRE Research © 2016 CBRE, Inc. | 1

Matthew WalaszekSenior Research Analyst, Office

CHICAGO OFFICE

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Figure 1: Relocations to the CBD from the Suburbs 2010 2015 and % of Suburban Transaction Volume 10K SF+

2%3%

16%

5%

1%

10%

0%

5%

10%

15%

20%

0

200

400

600

800

1,000

1,200

1,400

2010 2011 2012 2013 2014 2015

Sq. F

t. (0

00s)

Suburban to CBD Relocation Volume % of Suburban Transaction Volume

Average CBD relocations out of total transaction volume in suburbs (6%)

Source: CBRE Research, Q4 2015.

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1Calculations by TICAS on data from U.S. Department of Labor, Bureau of Labor Statistics (BLS). 3

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River North48%

East Loop20%

Central Loop16%

West Loop14%

N Michigan Ave2%

North Suburban45.1%

Northwest Suburbs24.7%

E/W Tollway25.9%

O'Hare3.0%

South Suburbs1.2%


Figure 3: Breakdown of Transaction Volume (Sq. Ft.) by Submarket Vacated 2010 2015

© 2016 CBRE, Inc. |

Figure 2: Breakdown of Transaction Volume (Sq. Ft.) by Submarket, Suburban to CBD Relocations 2010 2015

West Loop45.9%

River North31.3%

East Loop11.8%

Central Loop10.2%

NMA0.8%


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Category Millennials (%) Gen Xers (%) Baby Boomers (%)

Walkability 54 45 49

Space between neighbors 50 57 57

Shopping and entertainment 44 36 43

Convenient public transit 39 25 29

Figure 4: Generation Comparison—Preferences

Percentage of respondents indicating "top" or "high" priority, analyzed by major group.Source: America in 2015: A ULI Survey of Views on Housing, Transportation, and Community, Q2 2015.

Figure 5: Labor Pool Breakdown—West Loop vs. Suburban Markets

0

1

2

3

4

5

6

West Loop Oak Brook O'Hare Lake Cook Schaumburg

Mill

ions

Total Population Population 18 To 34 Population 35 To 54 HH Earning $75K & Up Prof/Sci/Tech/Admin*

*Residents working in Professional/Science/Technology/Admin/Information-related industries Source: CBRE, Q4 2015.

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0

1

2

3

4

City Population Suburban Population

Mill

ions

Age 25 - 34 Age 35 - 44 Age 45 - 54 Age 55 - 64

13%

14%

13%

12%

11%

12%

15%

19%

Figure 6: City vs. Suburban Population Breakdown by Age (With % of the Total Population)

Source: Nielsen, Q4 2015.

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Pharma & Healthcare

31%

Financial Services24%

Telecommunications

16%

Insurance Related15%

Wholesale Trade14%

Suburban Market

Figure 7: Occupier Industry Breakdown—Top 5 by Sq. Ft., Suburbs vs. CBD

Financial Services36%

Legal Services29%

Information & Tech14%

Insurance Related14%

Advertising & Related Services

7%


36.79

21.92

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

CBD Suburban

Asking Rent ($/SF)

Figure 8: Average Asking Gross Rent–CBD vs. Suburban Market


CBDMarket

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Figure 9: Needs-Based Comparison–Relocate to CBD vs. Stay in Suburban Market


Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

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