Chicago’s Michigan Avenue still boasts some of the highest retail rents in the world

magnificent mileby Dan Rafter

Chicago’s Michigan Avenue remains one of the most expensive streets in the United States for retailers. But even with retail rents averaging more than $500 a square foot as it winds through downtown Chicago, Michigan Avenue rents still pale in comparison to New York’s Upper Fifth Avenue.

Those are some of the findings from Cushman & Wakefield’s most recent Main Streets Across the World report.

The report, released in early November, tracks more than 500 of the top retail streets around the globe, ranking them by their prime rental value. According to the report, retail rents have risen in 35 percent of streets around the world, even with the increased economic uncertainty across the globe.

New York’s Fifth Avenue again held its position as the most expensive global retail location. According to Cushman & Wakefield, by the second quarter retail rents here reached $3,500 a square foot, a jump of 3.6 percent year over year. Fifth Avenue rents are also 46 percent higher than the average retail rents on the Causeway Bay in Hong Kong, the street that Cushman & Wakefield said had the second-highest average retail rents. Retail rents on Causeway Bay average $2,399 a square foot.

The United States claims seven of the top-10 most expensive cities in the Americas, with Toronto, Rio de Janeiro and Vancouver streets coming in at sixth, seventh and eighth.

Chicago’s Michigan Avenue saw retail rent growth of 8.2 percent year over year, with the average retail rent here hitting $525 a square foot.

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Debunking the big receivership myth

Frank Simon

Frank Simon

Guest post by Frank Simon, Simon PLC Attorneys & Counselors

When a property is in receivership, it is a property that likely comes with many legal issues. The ultimate goal of a receiver is to keep the property or operations in good order and stabilize the value until a buyer is found.

But receivership is often misunderstood. Even the most sophisticated investors may be reluctant to consider buying a property in receivership because they believe a property in receivership must be unusable and undevelopable.  After all, if the property was valuable, the owner would have sold it himself or herself, right?

That misconception is unfortunate because some of the best investment property deals are those in receivership, as the properties are usually deeply discounted to facilitate a speedy sale.

The truth is there are many reasons for receivership, and it is rarely because of the property’s viability. One of the most common reasons a property goes into receivership is that the owner failed to pay the property taxes.  In my experience as a receiver for hundreds of properties, the reasons for tax payment failure are numerous including:

  • The owner is juggling and trying to maintain several properties and is behind on taxes.
  • The owner is going through a divorce or other personal issues and is not paying attention to ownership responsibilities.
  • The owner died and either there is no designated heir or the heir(s) failed to pay taxes.

The above reasons also explain why some properties are neglected and go under despite a property’s worth as an investment. Mismanagement and neglect can make a valuable property unprofitable.

Many times, a property in receivership just needs the right use or solid management to be viable again.

One good example in my experience was an office complex that was neglected for years. The disrepairs and lack of property maintenance drove most of its tenants away. With only a handful left, the 60,000-square-foot property wasn’t profitable, and the owner was in over his head. The property went into receivership and a buyer bought it at a deeply discounted price. The new owner improved its interior and exterior and started maintaining the property’s appearance and operations. Today it is almost 75 percent occupied and is on the market for four times what the new owner paid.

Besides the probability of a good financial deal, another benefit of buying a property in receivership is that the property is “free and clear.”  The act of receivership cleans the slate for the new owner, so there are no liens –tax or otherwise – for the new owner to worry about. When the court orders a sale of the receivership property, they are ordering a free and clear sale.

When buying a property in receivership, there are a few caveats investors should follow.  One is that a potential buyer will work with the receiver directly. The receiver is appointed to deal with any offers for the property.  Every receivership sale has its own requirements through the court, which depends on whether or not the lender is involved, and the receiver is charged with fulfilling those requirements.

A potential buyer should also check out zoning to ensure that the planned use of the property is permissible.

Buying a property in receivership is not the risky venture most investors think it is. With the right management and use of property, an investor can obtain a commercial property at deep discount that will yield profits for years to come.

Frank Simon is the founder and managing partner of Simon PLC Attorneys & Counselors of Bloomfield Hills, Michigan. In addition to the firm’s Michigan headquarters, Simon PLC has offices in Arizona, Illinois, Florida, New York, Ohio and Texas. For more information visit

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Where can renters find a great deal in Chicago? Trulia knows

Rogers Park is home to Loyola University

Rogers Park is home to Loyola University

Guest post by Hannah Goodman of Trulia

Home to more than eight major universities, the Chicago metropolitan area is a bustling rental market. Chicagoans are lucky; in many large metropolitan areas like San Francisco and Manhattan, more than 85 percent of one-bedroom apartments rent for $2,000 plus a month. The Windy City’s many diverse neighborhoods offer easy access to public transportation and university campuses with an average rent of $1,786 a month.

At Trulia, we took a step further to discover which Chicago neighborhoods are most affordable, safe and accessible.  The three communities that rose to the top were Rogers Park, Kenwood and Hyde Park.

Rogers Park, the northernmost neighborhood of Chicago, has an average rent of $902.50 per month for a one-bedroom apartment.  Despite the area’s distance from downtown, Rogers Park is home to multiple transit stops, making any commute a simple one.  As one of the most culturally diverse neighborhoods in the city, the area offers great restaurants, theaters and nightlife options, within walking distance from most rental units.

Next is Kenwood, with an average rent of $928 a month.  Kenwood is an affordable lakefront neighborhood known for its tree-lined Chicago streets and art-deco architecture. Most rental units in the area are multi-family high rises. The neighborhood’s proximity to nearby University of Chicago brings a great deal of young students into the area. While Kenwood itself is a mostly residential area, a short walk or bus ride will get you to an area with more nightlife options.

One of those areas, just south of Kenwood, is Hyde Park. It is home to many restaurants and bars. However, with the average rent for a one-bedroom sitting at a hefty $987, it is the priciest of the three areas. As the site of the 1893 Chicago World’s Fair, Hyde Park is one of Chicago’s most famous and popular neighborhoods for locals and tourists alike.  A rental in East Hyde provides access to that history. In addition to the Lake Michigan waterfront and the University of Chicago Campus, the area also caters to commuters, with nine transit stops and one train stop.

Rogers Park, Kentwood and Hyde Park are just a few of Chicago’s great rental neighborhoods. With great amenities almost universal access to Chicago’s excellent public transportation system, there is a home and neighborhood for renters in every price range.

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Customers are loyal to Chick-fil-A. To McDonalds? Not really

chick-fil-aby Dan Rafter

How loyal are you to your local grocery store? How about to your bank or your favorite restaurant?

If your favorite grocery store is Trader Joe’s, you’re probably extremely loyal.

This mid-sized grocery chain has some of the most loyal customers in the country, according to Temkin Group. Other companies that enjoy a loyal customer base include ACE Rent A car, Apple and JetBlue Airways.

Temkin recently released its Temkin Loyalty Index that charts the loyalty of 10,000 U.S. consumers to 293 companies spread across 20 industries. Temkin bases customer loyalty on five factors:

The likelihood that a consumer will buy again from the company
The likelihood that a customer will recommend the company to others
The willingness of customers to forgive a company if it makes a mistake
How trustworthy customers consider the company
How likely consumers are to try the new offerings from a company

Not surprisingly, the index found that supermarkets, fast-food chains and retailers tend to have the highest loyalty levels. TV-service providers and Internet-service providers have the lowest.

Those companies that have gained the most customer loyalty include supermarket chain H-E-B, hotel chain Courtyard by Marriott, fast-food restaurant Chick-fil-A, Apple, appliance maker Electrolux and auto dealer Lexus.

Of course, plenty of retailers are struggling these days when it comes to retaining the loyalty of their customers.

“Only a few companies have truly strong levels of consumer loyalty,” said Bruce Temkin, managing partner of Temkin Group, in a written statement. “It’s scary how little loyalty has been earned by TV-service and Internet-service providers.”

Companies that have seen the loyalty of their customers drop inlcude McDonalds, Jeep, Citibank and RadioShack, according to the survey.

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Infographic: Smart phones, Web sites and brick-and-mortar to all play a role in consumers’ holiday shopping this season

By Dan Rafter

How will consumers shop this holiday season? Blackhawk Network, a supplier of prepaid gift cards and payment tools, says that consumers will again flock to the online world to buy their gifts. Retailers, then, have to run Web sites that make it easier for consumers to find, buy and receive their purchases this holiday season.

But retailers can’t neglect their brick-and-mortar business, either. According to the Online and Mobile Gifting Survey from Blackhawk Network, shoppers will rely on traditional, online and mobile sources alike to wrap their holiday shopping this year.

Check out the infographic below for more information on what retailers can expect this season.


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CoStar Group: Investors still in love with U.S. commercial real estate

costarby Dan Rafter

Falling unemployment and low interest rates meant good news for the owners of commercial real estate properties in the third quarter of 2015, according to the lastest numbers from CoStar Group.

In its latest report, CoStar reported that these two factors played a key role in boosting the value of commercial real estate properties in the third quarter.

But a more interesting factor helped, too: Uncertainty across the globe.

According to CoStar the shaky economic conditions throughout the rest of the world continues to send investment dollars into U.S. commercial real estate. That’s because investors are looking for save places to stow their money. U.S. real estate remains among the most stable of investment vehicles today.

CoStar’s equal-weighte U.S Composite Index — one of the broadest measures of pricing within the company’s recently released CoStar Commercial Repeat Sale Indices — jumped by 2.6 percent in the third quarter. This means that the value of U.S. commercial properties continued to increase during the quarter.

For the 12 months ended in September of this year, this popular measure of commercial property value increased 11.2 percent.

To no one’s surprise, CoStar pointed to multifamily as a top performer in the commercial sector. The Multifamily Index increased 3 percent in the third quarter and 12.4 percent for the 12 months that ended in September. This index is now 15 percent higher than its prior peak, a rather impressive accomplishment. And, yes, this is all happening despite already-elevated multifamily pricing and heavy construction in this sector.

CoStar reported, too, that the hospitality sector had a strong third quarter. The company’s Hospitality Index rose 13 percent during the 12 months that ended in September. This helped the Hospitality Index move within 11 percent of its previous high. That’s pretty impressive, too, when you consider how far the hospitality business tumbled during the days of the Great Recession.

Investors, of course, have taken note of how strong the U.S. commercial real estate market is. CoStar reported a composite commercial sales volume of nearly $91 billion in the first three quarters of 2015. That number grew 32.8 percent when compared to the first three quarters of 2014. It also put 2015 on a record-setting pace for transaction volume in the CoStar Commercial Repeat Sale Indices.

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CBRE’s Tom Ray: Tackling the questions of open floor plans, long lease terms and financial documents

Tom Ray

Tom Ray

Tom Ray is a first vice president with CBRE, specializing in office brokerage in the St. Louis market. He was one of the top producers in CBRE’s St. Louis office in 2004 through 2007 and 2012 and 2013. Ray recently answered several of the most common questions that office tenants have for commercial brokers. 

Why does my space measure physically less than it says in the lease?
Tom Ray: Landlords charge rent based on a dollar amount per rentable square foot. The rentable square foot in the lease includes the usable space within the walls of the tenant suite plus a common area add-on factor for the building. Therefore tenants are right that they are physically occupying less space than is shown on their lease. This is common throughout office buildings in the St. Louis market.

When comparing different buildings, it is important for tenants to take into account the different common-area factors for each building to better understand each building’s efficiency. 

I am going to use an open floor plan for my new office so I can accommodate more employees. How does this affect my search for office space?
Ray: The number of employees you are attempting to add into a space can significantly change how you search for space. Most buildings are built to accommodate three to four people per 1,000 square feet leased. Many open plans allow tenants to increase this to five or more people per 1,000 square feet leased.

Office users need to take into account five factors when looking to change to an open floor plan with more employees per thousand square feet: Look for buildings that have adequate parking. Consider locations near major public transportation including bus and MetroLink. Consider how many employees are actually going to be working in the office on a daily basis.  Consider whether the landlord will lease additional parking spaces as part of the deal. Consider whether the building’s air conditioning can accommodate the extra heat load of the additional employees. 

What is the meant by “Additional Rent” in the lease? Why do I have to pay it?
Ray: “Additional Rent” in a lease usually refers to the portion of the building operating expenses that are passed through to the tenants. Operating expenses include the cost of utilities, janitorial, snow removal, building maintenance, property insurance, real estate taxes, real estate insurance, landscaping, etc. Landlords pass through to tenants the portion of the operating expenses that exceed the value of their base year.

Tenants should make sure that their office lease includes a base year at least equal to the year that they move into the building. 

Why do landlords want such long lease terms?
Ray: Landlords need longer lease terms — longer than one to two years — to provide a reasonable payback period for the cost of building out a space for a new tenant. Landlords also typically need a minimum lease term of three to five years to maintain and improve the value of their building.

The cost of a tenant’s build-out will have a large impact on how long of a lease term the landlord needs. If a tenant is willing to pay for the build-out, this will help them negotiate a shorter lease term.

Why does the landlord want to see my financial statements?
Ray: The landlord will request to see a potential tenant’s financial statements for three reasons. The most important reason is for assurance that the tenant will be able to pay rent in a timely manner over the lease term. Second, the landlord is going to invest capital into the build-out of the space, so they have to make sure that their capital invested will be paid back through the rent. Third, a tenant’s financial strength affects the value of the building.

Before going to market to look for space, tenants should plan ahead by meeting with their accountant to prepare at least two years worth of financial statements to share with potential landlords. Tenants can selectively share these financial statements with the landlord at a time that gives the tenant negotiating leverage or at the time when the lease is being prepared.

How does the age of a building affect my use of the space?
Ray: Usually, older buildings have more columns, which can limit the space for office furniture. Newer buildings have fewer columns and wider space, making them more flexible for furniture placement and more efficient. Older buildings often struggle to accommodate today’s higher employee loads because of parking ratios, air conditioning and electrical power.

An older building may work really well for an office tenant. The tenant should evaluate different buildings to consider if the value trade-offs of leasing space in an older building is worth the discount. In addition to column spacing, tenants should consider an older building’s available space, the available parking, the building’s air conditioning and electrical power.

Why does it take so long to have my space ready for occupancy?
Ray: Building out an office space is a complex process. Typically, construction in the new space includes building new walls, moving electrical wiring, moving air-conditioning distribution lines, installing voice and computer data cabling, and installing cabinets and other kitchen appliances for the break room. A trend we are seeing, particularly in Class-A buildings, is that tenants are looking for high-end, custom finishes. Many of these items such as bamboo floors, glass doors and wall coverings take more time to order and install than the standard finishes of paint and carpet.

Additionally, landlords have to take into account building codes. Many of St. Louis’s municipalities are very thorough in their review of tenant plans and very strict in their interpretation of the building code. It’s not uncommon for a local municipality to spend four to six weeks reviewing a set of blueprints before construction can begin, regardless of the size of the space.

The most important thing a tenant can do in regards to having the space ready on time, regardless of the size of the space, is to plan ahead. Ideally, tenants should start their planning process 12 to 15 months before their lease is up, and no less than nine months before their lease is up. Tenants should begin touring the market seven to 12 months prior to lease expiration depending on their size. 

The lease has a “Landlord Relocation Right” section. What is that about
Ray: The “Landlord Relocation Right” clause gives landlords the flexibility to accommodate larger tenants’ growth by relocating other tenants, almost always at the landlord’s expense. Landlords typically keep this clause in the lease of tenants that occupy less than a full floor. 

Note that it is terribly expensive for a landlord to exercise its rights to relocate a tenant. However, to ensure business continuity in this special circumstance, tenants should verify there is language included in the lease stating that the landlord has to give ample notice for a move and will only move the office over a weekend.

I want to bring my pet into work with me. Is that a big deal?
Ray: Generally, bringing a dog or other pet into work is not accepted by landlords. While some co-working spaces do allow pets, most office buildings have written rules that prohibit bringing pets unless they are service animals. Pets need attention and care throughout the day, and can be disruptive to the building.

If pets are critical to company culture, identify immediately if a building will allow tenants to bring pets into the office.

I think high ceilings are really cool. How can I make that work in a suburban office building?
Ray: When converting a suburban office building with a drop ceiling into an exposed-duct style ceiling, building code requires spraying a fire retardant where there may be sprinkler lines, electrical wiring, voice and data cabling and air conditioning ducts overhead. Other code requirements will also be triggered by the open ceiling. Tenants should note that while this is possible to do, it will be costly and might not achieve the desired look because of the fire retardant spray.

Instead of converting the whole office space to have exposed ducts and higher ceilings, tenants may choose to select a limited section of the office such as the break room or the lobby area to convert. This way tenants can achieve the modern, industrial look while controlling cost.

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