CoStar News’ Post

Chicago Office Building Trades for $82 per Square Foot; 63% Discount from 2022 Transaction Trade Details: - Allstate purchased the asset in 2022 for $29.7 million ($222 PSF). - At the time of purchase in 2022, office vacancy in Chicago was significantly increasing. - Reports suggested Allstate was considering relocating to the asset, but this never happened. - A local investor recently purchased the asset for around $11 million, or $82 per square foot. - This trade reflects a 63% discount from the price Allstate paid in 2022. Asset Details: - 10-story office building at 29 North Wacker Drive. Built in 1961. - 133,600 SF. - ~57% occupied My Thoughts: - I'm curious about Allstate's business plan or rationale for acquiring the asset, especially given the rising vacancy rates at the time. Were they evaluating the purchase as an occupier or purely as an investment?

Is 60 percent enough

Oftentimes when my career as a CRE broker comes up in conversation, I’m met with sympathetic looks and comments about the "struggles" of today's market. To most people's surprise, I'm always quick to respond with enthusiasm about the activity we're witnessing firsthand. Despite the noise and naysayers, our team has sustained a wave of momentum this year, and we couldn't be more bullish about the future. The Atlanta office market saw a remarkable 2.4 million square feet of leasing activity in Q1; a 5-year high - underscoring robust tenant demand. Major corporations like UPS and NCR are implementing 5-day in-office models for most employees, and we're seeing a resurgence in large-scale transactions. Significant deals, including Manhattan Associates' 210,000 square foot renewal at Wildwood and Workday's 113,000 square foot expansion at 3350 Peachtree, demonstrate companies' confidence in their office future.   Tenants continue to capitalize on increased concessions amid an oversupplied market. While Q1 2024 numbers show overall availability climbing to 29.6% due to new construction deliveries, this influx of premium Class A+ product represents the future of a workplace that people want to leave their living room for. I also genuinely believe the market will correct itself as outdated office supply that can't compete with its newer counterparts is removed from the supply altogether, whether through conversions or demolitions.   Our team feels privileged to work with amazing clients and brokers across our multifaceted platform. Greenleaf, PPF Real Estate, OA Development, The RMR Group, Somerset Properties, Brightman-Gil Real Estate Investment Management and many others continue to keep us busy! As our team expands, we're excited to continue working hard to best serve our clients across all verticals and situations. RJ Zurak | Brad Kirschner | Stewart Thrash | Craig Kalinowski | Sean Moynihan | Newmark

Part of what defines the #Apocoffice is the downsizing of office space. In this instance, Allianz is nearing a deal to move from its existing 73,200 s.f. Chicago office to another building, where it will take 28,000 s.f. That's a 62% reduction in space. For a landlord, that's #ValueVaporization. If you have real estate or a note/mortgage to sell, debt to refinance or restructure, or need an Independent Director, CRO or Receiver, let's talk.   Reach me at [email protected] or 914-980-8555. #bankruptcy #ChiefRestructuringOfficer #cmbs #commercialrealestate #cre #creValueAdd #cmbs #deedinlieu #default #defaults #delinquencies #distressedassets #economy #finance #foreclosure #independentdirector #leaserenegotiation #letstalkrealestate #leveragedfinance #leveragedloans #lodging #multifamily #npl #probaterealestate #shortsale #shortsales #receiver #receivership #realestate #realestateadvice #realestatebroker #realestatebrokers #realestatebrokerage #realestateconsultants #realestatedebt #realestatedevelopment #realestateexpert #realestateexperts #realestateexpertise #realestateexperience #renegotiation #restructuring #specialservicer #ValueVaporization #workout Keen-Summit Capital Partners LLC American Bankruptcy Institute Turnaround Management Association NAFER | NATIONAL ASSOCIATION OF FEDERAL EQUITY RECEIVERS National Conference of Bankruptcy Judges (NCBJ) https://lnkd.in/e3_fb3D7

4 Steps for Postmasters to Prepare for the Sale of Their Post Office   Drawing from our extensive conversations with Postmasters seeking to sell their branches, we've distilled four key steps to ensure readiness when the time is right:   1. Strategic Planning: Begin planning your exit today, even if the sale lies in the future. The better your business performs, the higher its valuation. Demonstrating sustained performance and profitability over time enhances the value proposition. Reducing costs where you can and improving revenue will drive bottom-line profits and your valuation significantly higher. Delivering these improvements over a longer period will make your business far more attractive, so start early to maximise your business's worth.   2. Information Provision: Transparency is non-negotiable in successful business exits. Compile comprehensive documentation, including the last two or three years of accounts, latest management reports, PO Rem reports, and details of lease agreements and staff contracts. Providing accurate information facilitates swift negotiations with potential buyers. For added security, consider requesting a Non-Disclosure Agreement (NDA) to safeguard sensitive information.   3. Selecting a Trusted Buyer: Choosing the right buyer is paramount. Seek reputable companies with a proven track record, industry expertise, and a commitment to preserving your business's legacy. Partnering with an established operator ensures continuity for employees, customers, and suppliers.   4. Why UOE Is the Ideal Partner: UOE stands out as a trusted and reputable Post Office operator. Established in 1983, led by our CEO and Postmaster, Elliot Jacobs, UOE boasts over 50 Post Office trained staff and unparalleled experience in the industry.   Postmasters considering UOE as a partner in their exit strategy can benefit from: Experience: UOE's existing supply chain, support functions and capability can seamlessly integrate acquired Post Offices and retailers, ensuring a smooth transition. Expertise: With years of experience in the Post Office sector, UOE can expedite the exit process according to your needs and timeframe. Trust: UOE prioritises integrity, transparency, and fairness in all transactions, fostering trust among Postmasters and ensuring they get the exit they deserve. Established Presence: Backed by decades of operational excellence, UOE offers outstanding stability, reliability, and financial capability.   In conclusion, Postmasters must approach business transitions with careful planning, comprehensive information provision, and a focus on reputable buyers. With UOE's proven record, expertise, and commitment to excellence, why not find out more or explore the possibility of selling your Post Office today by taking our 60-second assessment: (https://lnkd.in/ePtriFSX) - it takes less time than boiling the kettle!   #BusinessTransitions #ExitPlanning #UKMarket #UOE #StrategicPartnerships #SuccessionPlanning #Postmasters

𝙇𝙀𝘼𝙎𝙀 𝘾𝙊𝙈𝙋𝙎 𝘼𝙍𝙀 𝙄𝙉 . . . We have completed updating our lease comps to wrap up the first half of the year. Interesting to see what stories these transactions are telling us. We have felt good about the leasing market over the last six months and anticipate this continues through the end of the year. Leasing velocity continues to increase with our transaction count returning to peak levels not seen since 2018 – 2022. 𝗢𝗳𝗳𝗶𝗰𝗲 𝗟𝗲𝗮𝘀𝗶𝗻𝗴 : • Rent is increasing at a greater rate than the 3% annual increases. We are seeing 5% - 10% increases across all classes. • Tenant Improvement Allowances have continued to increase with many transactions becoming “turnkey”. • Given the increased demand for “turnkey” transactions, we are seeing most lease terms between 7 – 10 years. A 5-year lease is no longer the standard. • Today’s Net Effective Rent is similar to 2018 – 2019, however, the path to a signed Lease is far different now than five years ago.   𝗛𝗲𝗮𝗹𝘁𝗵𝗖𝗮𝗿𝗲 𝗟𝗲𝗮𝘀𝗶𝗻𝗴 : • The South Puget Sound’s vacancy ranges from 2.50% - 5.00% pending the submarket, this puts us in the top tier of HealthCare markets in the country. Definitely something to be excited about. • Like the office market, we are seeing rental rates increase at an average of 10% YOY, however, TI Allowances continue to increase as well. Therefore, Net Effective Rent is nearly flat over the last couple years. • Our most active opportunities are “spec suites” where the ownership delivers a universally built out clinic prior to a tenant’s commitment. We have completed ten of these transactions over the last six months with all leases signed prior to construction starting, at our asking rent, and a ten year term. 𝗥𝗲𝗮𝗰𝗵 𝗼𝘂𝘁 𝘁𝗼 𝗿𝗲𝗰𝗲𝗶𝘃𝗲 𝗮 𝗰𝗼𝗽𝘆 𝗼𝗳 𝗼𝘂𝗿 𝗰𝗼𝗺𝗽𝘀. Drew Frame Kathleen Afichuk

US Office Market Shows Bottoming Signs, Moody’s Analytics Says: Sellers are finally capitulating, volumes have steadied : Recent deals have brought much more price clarity: report : years-long price decline for US offices could soon be ending as sales volume has stopped falling and large properties are being resold well below prior deal values “We are seeing signs that the market is beginning to function in a healthier way” “A significant increase in price discovery paired with reaching a bottom in transaction volume means we could be nearing a bottom in office pricing” “significant pain” has yet to occur and distressed offices will need liquidation at likely significant losses “Owners and lenders are in a much-better position to evaluate potential losses today — which is the first step necessary to the market recovering” Starwood Capital Group contended that he saw a “huge distressed cycle ahead” three office sales that occurred at a price more than $100 million below their prior sale “While sales like this are typically very painful for equity holders and often bondholders” they “provide the market with a tremendous amount of price discovery — which had been lacking” Office property values have slumped in the wake of the onset of the Covid-19 pandemic and subsequent drop in usage

For office investors, Prudential's staggered exit from its Chicago HQ is a good reminder to really dig in on renewal probability during tenant interviews prior to acquisition. Prudential has leased space in One Two Pru (130 E Randolph St, Chicago) since the first tower's construction in 1955. The second tower fueled the HQ's expansion in 1988. Prior to starting the vacating process in 2020 (soon to be completed), Prudential only occupied 50,000 sq ft of space (~3.4% of RBA), showcasing how they downsized their footprint over time. Their new space in 150 N Riverside (97% leased) will be roughly half their prior footprint at 28,000 sq ft. Despite office being the sandbag everyone has loved to kick around for the last several years, office investments can be great when 👉approached with eyes wide open, 👉a sound investment thesis backed by legal documents, 👉a real understanding of what motivates/detracts tenants from leasing space at the asset, and 👉a conservative basis that can handle shocks to occupancy, tenant/landlord credit, expenses, capital outlays, and capital markets #realestate #office #realestatetrends https://lnkd.in/eAHbBHGb.

You have no deal ❌ until you have a deal ✅ ! It's why it's always so important to have a back up or a contingency plan when it comes to selecting an office. Today I wanted to focus on negotiating a sublease and many of the risks associated with it. What could happen? -Signed and countersigned sublease and the sublessor decides not to sign consent. -Signed sublease and the subtenant decides to use the space themselves- or another division of the company could use it and backfill the space. -Signed and countersigned sublease and the landlord could take the space back and re lease the space to another tenant in the building who needs more or less space. Or maybe because they can re let it for more than the current tenant is paying -Signed sublease and the subtenant could negotiate a termination with the landlord. -Signed sublease and a better offer comes on the table and fhe sublessor tries to re trade or sign the other tenant instead. And these are just a few of the things that could happen. Which is why I always remind my clients that it’s not done until it’s done And that’s why the more time you leave yourself the more optionality you have. COOs & CFOs- Any crazy things happen to you when you were negotiating for a sublease ?

Tad is right on point. The two things we are seeing are more investors entering our market and many companies downsizing their office footprint. We have had a lot of success recently using our software to target these companies to fill our vacant office spaces.