HSA: Where are you seeing the most industrial activity in Chicago right now?
Borkowski: Distribution tenants continue to drive most of the demand in the I-88 and south I-55 corridors, and that’s a trend that will likely continue. However, larger tenants, those greater than 300,000 square feet, have limited options in the I-88 corridor, especially with the types of heavy loading and clear height requirements that modern distribution tenants have come to expect. Therefore, I believe we may start seeing build-to-suit developments and possibly spec development to accommodate these users in I-88 this year.

HSA: Do you see the same type of development taking place along I-55?
Borkowski: The south I-55 corridor has been seeing quite a bit of activity as well. Though there are a few users with proposals out that have yet to settle on a location, there are still several large distribution facilities to choose from. However, availabilities in the smaller, multitenant industrial buildings are becoming harder to find. We have several listings along I-55 where we have seen a flurry of activity in the past month with smaller tenants. We have been very busy responding to proposals and showing space, and believe that the increase in activity bodes well for the rest of the year. As spec development returns in the southwest suburban industrial corridors, I would expect that it will be to satisfy the demand from these smaller tenants.

HSA: Is the industrial investment market just as busy?
Borkowski: There has been a sizeable influx of cash amongst certain institutional investors that are scouring the market right now for investment opportunities. In a lot of cases, those investment dollars are still looking for a place to land, and they’ll continue to put downward pressure on cap rates for Class A industrial product. We’ve started adapting our business model to work with local owners to help them package investment portfolios to attract the attention of investors. For well-leased properties, there really hasn’t been a better time to sell in recent memory.

Brad has extensive experience in warehousing management, having served in several management positions with Midwest Warehouse & Distribution System, Inc., for many years while attending college. His familiarity with warehouse operations allows him to better understand the needs of his clients.

In the February edition of Heartland Real Estate Business, HSA Commercial’s Tim Blum discusses what to expect in Chicago retail development and leasing in 2012. Tim is responsible for the development of The Mayfair Collection in Wauwatosa, Wisconsin, a 250,000-square-foot adaptive reuse project in suburban Milwaukee.

As a result of the changes in consumer behavior, traditional full-price retailers have chosen to focus growth on promotional or outlet brands. For example, Sak’s recently opened its third Off 5^th store in the Chicagoland market at the Village Square of Northbrook. Bloomingdale’s announced the closure of four home furniture stores, including a location at Oakbrook Center, at the same time that the company released plans to open five of its Bloomingdale Outlet stores in 2012.

Although such brands as Saks Off 5^th and Nordstrom Rack are seeking opportunities to expand their footprints in the Chicago market, their business model necessitates deal structures that are unjustifiable in a new construction budget. Therefore, to satisfy the demand for growth among these chain stores while still meeting their relatively stringent qualifications for a dense trade area, developers are pursuing less obvious adaptive reuse opportunities in many of the vastly underserved metro Chicago communities.

Older industrial buildings, for example, may have outlived their original purpose, but are structurally sound and well-suited to be recycled into retail facilities. In many cases, the cost of repurposing these buildings can be much less than new construction, thereby allowing for an economical rental structure. HSA Commercial’s proposed 250,000-square-foot adaptive reuse of the so-called “Burleigh Triangle” industrial park in west suburban Milwaukee is a case in point, given the significant retail tenant interest the project has generated.

To read the full article, see page 16 of the February edition of Heartland Real Estate Business.

Last week, HSAwareness joined volunteers from Columbia College Chicago and Nokia to help the Greater Chicago Food Depository (GCFD) repack some of its donated and purchased food for distribution to local pantries and shelters. HSA’s team members were tasked with unpacking and portioning a large shipment of cornflakes that had arrived at the GCFD headquarters at 42nd & Pulaski.

After being unloaded from bulk containers by Craig Phillips and Brenton Schrader, HSA’s Jason Klein, Josephine Thomas, and Rose Colovos (seen above) worked feverishly to bag the shipment of cornflakes, which was then carefully weighed into 8 ounce portions by Wanda Melendez and Minerva Martinez (below).

The HSAwareness team, as well as volunteers from Columbia College Chicago, were able to successfully pack 1,812 bags of corn flakes to be distributed to 650 pantries, soup kitchens, and shelters across Cook County. We are very grateful to all of the team members that chose to take time out of their busy days to participate, and we look forward to more community outreach opportunities this year.

About HSAwareness
HSAwareness is the social outreach arm of HSA Commercial Real Estate, which was created to encourage generosity and volunteerism among our team members and other stakeholders. In its inaugural event last December, HSAwareness organized a food drive that raised 688 pounds of non-perishable food and $1,640 which provided over 7,013 meals to families throughout Chicago.

Suzy previously served as a principal for The Advisory Board Company, a Washington, DC-based research, consulting and technology firm helping over 3,000 hospital and health systems improve health care through best practice research, implementation support and business intelligence services. Through her 15 years of relationship management experience at The Advisory Board Company, Suzy has developed a reputation as a trusted and knowledgeable advisor for health care executives.

“We expect that Suzy’s thorough understanding of the health care industry and its leadership will help HSA PrimeCare to foster new relationships with hospitals and physicians while providing us with the skills to better serve the client base that we already have,” said John Wilson, president of HSA PrimeCare.

About HSA PrimeCare
HSA PrimeCare, an operating division of HSA Commercial Real Estate, is focused on real estate assets for the health care industry and is a leading developer and manager of medical office buildings, with a portfolio of properties totaling more than 800,000 square feet. HSA PrimeCare currently has three active health care developments in the Chicagoland area: the 22,500-square-foot University of Chicago Cancer Center at Silver Cross Hospital in New Lenox, Illinois; a 9,800-square-foot outpatient clinic to be occupied by Loyola Gottlieb Medical Center in River Forest, Illinois; and the 19,593-square-foot Franciscan St. Anthony Health Cancer Center in Michigan City, Indiana.

HSAwareness Food Drive

HSA partnered with the Greater Chicago Food Depository to help in the fight against hunger. The Food Depository distributes donated and purchased food through a network of 650 pantries, soup kitchens and shelters to 678,000 adults and children in Cook County every year.

For our part, HSA launched a virtual drive, which was distributed to our team members and colleagues. Through a Virtual Food Drive, the Food Depository can purchase food in bulk quantities, at prices well below the market rate. As part of the firm’s first virtual food drive, HSA was able to raise $1,640.24 to benefit the Food Depository. Due to the efficiency and buying power of the Food Depository, this will provide approximately 6,500 meals to families across Chicago.

Throughout the entire month of December, HSA also set up boxes at its office and at the firm’s medical office buildings throughout Chicagoland to collect physical donations for the Food Depository. HSA’s employees and building tenants were unbelievably generous, donating 28 boxes (seen above) equal to 688 pounds of non-perishable food which will provide over 513 meals to families throughout Chicago.

Chicago Commons Clothing Drive

In late 2011, Chicago Commons reached out to HSAwareness about providing winter clothing to 40 families at the Piccolo Elementary School, a school in a high poverty community that is working hard to improve its results. Chicago Commons is a 117-year-old institution that fosters well-being for thousands of children, adults, seniors, and families through programs designed to provide the tools necessary to help strengthen skills and develop self-sufficiency.

Through the generosity of the company’s team members, HSA was able to provide essential winter clothing and supplies for 19 of the school’s at-need families. HSA’s Homer Hill, Dorothy Witkowski, and Alina Zaj are seen above with the wrapped presents prepared for delivery to the Chicago Commons facility in Humboldt Park.

The team at HSAwarness would like to sincerely thank everyone who participated or contributed to our food and clothing drives, and we look forward to working with all of our friends and colleagues to make a difference in the lives of others through our future endeavors.

HSA: What would you say is the state of the office market for 2012?
Shulman: The current office market in the Chicago CBD continues to benefit tenants as there is still a large inventory of space that has yet to be absorbed. While larger tenants—those above 100,000 square feet—may have somewhat limited options, the smaller tenants can really find space anywhere and will likely gravitate to availabilities in the Class A office buildings where they can receive the best possible amenities with an aggressive deal. As a rule-of-thumb, tenants should expect to see improvement allowances up to $5 per square foot per lease year and one month of rent abatement per lease year.

HSA: The current situation sounds very similar to 2011. How do you think the office market has changed?
Shulman: In 2010 and the better part of 2011, the Chicago office market was plagued by “zombie” buildings where undercapitalized landlords were unable to provide the necessary funds for improvement allowances and commissions in order to execute deals. As a result of the influx of investment capital, many of the CBD office buildings have now traded hands or the loans have been modified, which has put these landlords in a better position to offer the types of incentives necessary to secure tenants. Naturally, those owners are aggressively seeking to fill the vacancies created by the previous “zombie” landlords and will add more downward pressure on rents.

HSA: Class A office and other “trophy” assets seemed to be trading the most last year. What does this mean for the Class B and Class C buildings?
Shulman: The most likely outcome is that B & C buildings will continue to suffer. Many of these properties require investments in infrastructure to meet the physical and technical space requirements of the average tenant today. However, many owners have not seen rent appreciation for over a decade, and it’s hard to justify those sorts of capital expenditures when the benefit is unknown as there is still that large inventory of Class A space competing for tenants.

Since entering real estate in 1978, Mr. Shulman has negotiated more than 700 leases and numerous sales and has been involved in virtually every kind of office lease imaginable throughout the Midwest with particular focus on the greater metropolitan Chicago area.

Midwest Real Estate News’ editor Dan Rafter wrote the following of Jack’s long, illustrious career in real estate:

“With his long history of tackling the most prominent projects in Chicago and beyond, Jack Shaffer, the founder and chairman of Chicago’s HSA Commercial Real Estate, has developed a reputation for being a relentless negotiator with a keen eye for opportunities, especially those that benefit his loyal clients…

During his career, he has led the development of more than 60 million square feet of industrial and office space. He’s also handled the acquisition of more than 100,000 acres for the development of business parks, shopping centers, and industrial properties…

Thanks to such major developments, and a consistent reputation for client service, HSA Commercial under Shaffer’s guidance, has earned several of the most prestigious awards in the industry. This includes honors from the Chicago Sun Times, Greater Chicago Food Depository, Urban Land Institute, NAIOP, BOMA and Midwest Real Estate News.”

The full article is available in the Hall of Fame edition of Midwest Real Estate News.

The high-cube warehouse building with 40’ minimum clearance features 25 loading docks and energy efficient fluorescent lighting throughout. The 23-acre site, located at Army Post Road and SW 34th Street, has additional land for a future building expansion of up to 75,000 square feet.

“The quality of the construction and the adjacency to the airport made this a very desirable investment asset,” said Bob Smietana, vice chairman and CEO of HSA Commercial, “But combined with the financial strength and long-term viability of this Fortune 10 tenant, it was a very logical addition to our national portfolio.”

A partnership led by HSA Commercial’s principals similarly purchased two high-cube industrial buildings totaling 504,000 square feet from Dell Corporation in August 2010. The buildings, located in the Nashville International Airport enterprise zone, are fully-occupied by CEVA Logistics, the logistics provider for Dell.

Jeff Devine and Steve Disse of Colliers B&K represented The Opus Group.

Bob Smietana, Vice Chairman and CEO of HSA Commercial, will be a panel speaker at BISNOW’s Chicago Industrial Summit in January. Panelists at the Industrial Summit event will include: Johannson Yap of First Industrial Realty Trust, James Clewlow of CenterPoint Properties, Robert Clark from Clayco, and other distinguished industrial real estate experts.

Bob has completed over 75 building developments comprising over 20,000,000 square feet valued at $2 billion. Bob’s diverse development experience, which began in 1978 as an architect, includes industrial buildings, shopping centers, hotels, suburban and high-rise urban office skyscrapers, senior housing and medical office buildings. His national experience has included all phases of real estate responsibility including land acquisitions, entitlements, design development, financing, construction management operations, property and asset management and brokerage.

According to BISNOW, the following topics will be discussed at the event:

• How is the Chicago industrial market different than other business centers?
• When will spec development come back?
• What does leasing and absorption look like locally and nationally?
• What submarkets have demonstrated healthy fundamentals in 2011 and are poised for future development?
• What is the national outlook going forward, and what are the key drivers?
• What lies ahead for CMBS, and how will this factor into industrial development?
• How are the uncertainties of socioeconomic and political climates across the nation and world affecting outlook?

Why a Virtual Food Drive?
Through the Virtual Food Drive, the Food Depository can purchase food in bulk quantities, at prices well below the market rate. All the items on our food drive have been identified by the Food Depository as ones that are in high demand. Click here to get started!

For this holiday season, HSA is asking that instead of sending an annual holiday gift, please make donations through the Virtual Drive, and help make this a healthy and happy time of year for thousands of local families that depend on the extraordinary generosity of the Greater Chicago Food Depository.

HSAwareness is the social outreach arm of HSA Commercial Real Estate, which was created to encourage generosity and volunteerism among our team members and other stakeholders.