LIVE BLOG: Data Centers in Chicago event

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JLL’s Chicago data center gurus — Matt Carolan, Sean Reynolds and Andy Cvengros — are hosting a discussion on data center activity in the Chicago and U.S. market, the impact data centers are making on companies of all shapes and sizes, and new trends in the marketplace.

Also on the panel are consultant Paul Schlattman of ESD and real estate attorney Michael Rechtin of the law firm Quarles & Brady.

Here is a minute-by-minute recap of some of the highlights of their discussion:

5:35 p.m. – Carolan on the increasing demand for data center capacity. “From the simplest of terms, the traditional demands of data centers have increase exponentially over the past few years.”

5:36p.m. – Cvengros on the national landscape: “350 E. Cermak is the most valuable building in Chicago … More than the Sears Tower, more than any place else.”

5:37 p.m. – Cvengros: “In the 11 key markets nationwide (including Chicago), we’re tracking more than $2 billion of data center construction currently.”

5:38 p.m. – Carolan: “All of a sudden, Google and DripBox and Microsoft and Twitter … When the product is there, they’ll take down the space.”

5:41 p.m. – Reynolds: “The 3.3 million square feet of data center space in Chicago is pretty equally split between the city and the suburbs and there’s equal demand for both.”

5:43 p.m. – Cvengros: “users now longer want to be in the business of owning, operating and maintaining data centers.”

5:45 p.m. – Carolan: “when you thin about it, if you have a 50,000-square-foot office and a 1,000-square-foot data center, the data center is more valuable.”

5:47 p.m. – Cvengros: “Tier III has really become the standard nationwide. People really don’t look below that.”

5:49 p.m. – Schlattman: “The top four factors driving data center activity are energy efficiency, security, power capacity and virtualization.”

5:50 p.m.– Schlattman: “the primary trend within data center trends is outsourcing focused.”

5:54 p.m. – Schlattman: “The reason colos and wholesale facilities are so popular is because it’s really become a speed-to-market issue.”

5:56 p.m. – Schlattman: “Data centers at a Tier III level are at a $1,200 to $1,500-per-square-foot price point.”

5:59 p.m. – Carolan: “Here in Chicago, we’ve had 5 major data center built-to-suit for major corporations.”

6:05 p.m. – Carolan: “Anyone who’s looking at building a data center, you need to look at risk in addition to the financials.”

6:07 p.m. – Carolan: “The ‘total-cost-of ownership’ (TCO) analysis is critical to evaluating between colo, cloud and owned.”

6:10 p.m. – Rechtin: “The decision-making process around data centers involves a lot of players: IT, Real Estate, Finance, Legal, Brokers and Consultants. There are so many people that are involved in these transactions.”

6:13 p.m. – Carolan: “Data centers are one of the hottest asset classes going today … even among very conservative investors like pension funds. There’s a ton of downward pressure on cap rates.”

LIVE BLOG: JLL CEO Colin Dyer at Executives’ Club of Chicago Global Leaders Luncheon

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JLL CEO Colin Dyer (second from left) is one of three panelists at today’s Global Leaders Luncheon hosted by the Executives’ Club of Chicago. The topic is “Capital Flows and Global Footprint” and the other panelists are David Sayer (second from right), Global Head of Banking for KPMG, and Hung Tran (far right), Executive Managing Director of the Institute of International Finance. The panel is being moderated by Robin Bew from The Economist (far left).

Below are some highlights from their conversation:

12:35 p.m. — Colin Dyer:  “In 2007, international investment in commercial real estate across the world totaled $750 billion. That dropped after the crisis back to around $150 billion … What we’ve seen since then is a gradual re-establishment of confidence and a rapid re-establishment of the amount of equity that international investors have been putting into real estate to the point where our forecasts expect that, next year, investment in real estate globally will be back to the levels we saw in 2007 … There is a huge amount of equity going from the U.S. to Europe and from Europe into the U.S.  And the multi-polar side has grown as well. We’re seeing, now, a lot more equity flowing from Asia into the West.”

12:39 p.m. — Hung Tran: “Total cross-border capital flows have declined from $8.5 trillion to $3 trillion since the peak in 2007. It’s driven mainly by banks withdrawing from investing cross-border.”

12:42 p.m. — David Sayer on the aftereffects of increased regulation: “Banks have become safer and it’s important that banks are safe. But the cumulative effect of regulation has been that we’ve now gone beyond the tipping point to where regulation is inhibiting economic growth. There’s been a huge deleveraging … a huge reduction in the capacity of banks to support trade finance. The conclusion, when history is written about this period, will be that we’ve probably gone too far.”

12:45 p.m. — Colin Dyer: “For large real estate deals, particularly the high-quality deals that have been in vogue since after the crisis, investors with good equity sources are able to find the necessary levels of debt that they need to do their deals. The change has been that they’re now sourcing that debt largely from local sources. Rather than international banks setting up shop in the U.S. — they’re not here any more … same phenomenon in Europe, the Far East and the developing world.  But debt is available. It’s more local than it used to be on the whole, it’s better undewritten, and the levels of debt-to-total-value have become more conservative.”

12:47 p.m. — David Sayer: “It worries me, in a world that is changing so quickly, that banks have no ‘change capacity’ to respond to [entrepreneurs].”

12:54 p.m. —  Colin Dyer on the role of the emerging world (eg., China) as the dominant player versus the U.S.: “We’re moving in that direction, yes, but money is now flowing out of China in the order of $10 or $20 billion this year in the context of a $350 billion U.S. commercial real estate market. The difference is that the U.S. capital markets are so huge and deep that when you compare them to China, they’re still comparatively underdeveloped. But the movement has started.”

12:58 p.m. — David Sayer: “China is going to be quite cautious in the way they invest. The bold investments are going to be from Chinese corporations and the individuals there who are becoming among the wealthiest in the world.”

1:04 p.m. — Colin Dyer: “We’ve noticed a diffence in the past 5 years that something has happeneed in China which is a policy decision on behalf of the government to push the regulartiory environment to allow the companies to operate and invest more internationally. When that money starts turning outward, there will be a very significant change over the coming decade.”

1:06 p.m. — David Sayer: “The Chinese consumer looks for great value and great quality and great prestige in a brand. But any [company] that piles into China and believes they’re going to penetrate the market like they have elsewhere, [they are mistaken.]”

1:08 p.m. — Colin Dyer: “China is a really hard place, as most emerging countries are, [for Western companies to do business]. At the end of the day, China has a nationalistic approach to business. Ultimately, they want the majority of their economy to be owned and run and controlled by China’s companies rather than western companies so there’s a lot of pressure toward ‘Chinafication’ of business.”

1:10 p.m. — Colin Dyer on Chinese real estate development: “Geographically, there’s been a big shift … [Development] is following the population — it’s going west as well … What used to be built 20 years ago were big factories near the coasts with big warehouses to take goods out of the country on ships. There wasn’t much retail sepending and the consumer economy wasn’t very healthy. There were no big shopping centers and the city center office parks were of low quality and largely filled with Chinese companies. What’s changed is that people aren’t building so many factories anymore and, if they do, they’re high-tech high-value factories and they tend to be more inland because the land costs are so high [near the coasts]. The consumer economy is growing so there’s also a push toward developing high-quality shopping centers and, with that, distribution is moving inward toward the consumer centers. Lastly, there’s also massive amounts of construction for residential … the vast majority of which is being constructed is to meet the massive demand in major cities for people to have basic homes. In the next 10 to 15 years, 200 to 300 million people will move into [China’s] cities from the countryside, so there’s a tremendous pressure in terms of demand for housing.”

1:14 p.m. — David Sayer: “I’ve never known such an uncertain world. Setting a strategy which is resilient in all scenarios has never been harder, but setting a stratgy based on the assumption that everything is going to turn out alright is just wildly optimistic.”

1:15 p.m. — Colin Dyer’s advice to local companies considering expanding overseas: “You’ve got to look inside your business and look at what your strenghts are. If you are robust enough to operate internationally then go do it because there are a lot of big markets out there.”

College-educated Millennials making their mark on Chicago

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It’s no secret that Millennials — specifically, Millennials with college degrees — are making their mark on Chicago. For one, they’re the driving force behind the significant growth seen recently in the tech and creative sectors.

But how does Chicago stack up with other U.S. cities in terms of luring these bright young professionals?

According to research published in the New York Times earlier this week, not bad at all.  6 percent of Chicago’s population is comprised of college-educated men and women between 25 and 34 — lower than seven other cities including New York (6.6%) and San Francisco (7.6%) but ahead of many other peer cities including Philadelphia, LA, Dallas, Houston and Phoenix.

What’s more, Chicago’s population within this demographic has gone up 17 percent since 2000.

Industrial investors ‘stretching’ for Chicago product

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Spurred by the prospect of  continued and sustained rent growth, investors are snapping up industrial properties here in Chicago at a record pace .

In the latest such example — a deal brokered by JLL’s John Huguenard and Trevor Ragsdale — Dallas-based Hillwood Development Co. paid nearly $91 million for a 1.4 million-square-foot portfolio of six properties in Joliet, Elgin, Hanover Park, Bolingbrook and Carol Stream.

Hillwood paid roughly $66 per square foot for the properties, representing a significant return for developer Northern Builders.

In a story about the deal published this week by Crain’s Chicago Business, Ridge Property Trust CEO Jim Martell (who was not involved in the deal) said cap rates for industrial deals here will only continue to shrink as market fundamentals improve over time:

“From a logistics perspective, Chicago is still very important. I think from a long-term perspective, there’s rent-growth coming and continuing and [investors will] stretch for Chicago in hopes of seeing that rent growth.”

 

Quad Cities colocation facility capitalizing on growing trend for data centers

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In its new report, “Sizing the Cloud, Forrester Research estimates that the data center colocation industry will grow to more than $43 billion by 2018, yet another proof point that companies are increasingly turning toward third-party providers to manage key components of their IT infrastructure.

As one data center expert recently put it, “the data center of the future is the one you don’t own.”

In Bettendorf, Iowa, the owners of the 60,000-RSF, 6-MW ColoHub data center are reaping the benefits of this trend with the addition of a variety of new tenants since opening one year ago. The latest to sign was Midwest Health Exchange, a leading provider of electronic health exchange records in the U.S. Midwest.

Sean Reynolds and Andy Cvengros with the Data Center Real Estate Solutions team at JLL are leading marketing efforts for ColoHub.

“With the facility’s fiber connectivity and the State of Iowa’s aggressive incentive program, we feel that we are going to see continued demand for space in Iowa and specifically here at Colohub,” Reynolds said.

Chicago’s top law firms turning to JLL for tenant representation

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VIDEO: JLL helps AMC recraft the movie-going experience

See the story behind the new AMC theatres. Across more than 138 theatres nationwide, the AMC renovation project is recrafting the movie-going experience … all with help from the JLL Project & Development Services team.

3 questions smart retailers are asking themselves now

1. Are we offering an omni-channel experience?

More and more retailers are striving to build a true omni-channel experience that merges at-home, in-store and mobile commerce into one seamless experience. In other words, if a customer wants to view an item online, purchase it using their phone and pick it up in-store, they can do so in a smooth and effortless way.

Omni-channel is all about continuity of experience and provides the perfect example of merging digital insights with in-store physical experiences. The look and feel of every channel, from mobile to desktop to in-store, should feel the same to the customer.

2. Are we leveraging the right technology?

Smart retailers are saying goodbye to boring, antiquated layouts. They know that if they want to keep people in their stores, they need to make their locations interactive and engaging. This can be done in a number of ways, the most basic of which is by leveraging the right technology. Tablets and smartphones are versatile and can be used in several ways, including taking payments from the customer where convenient rather than making them wait in a checkout line, demonstrating product features, offering more information and encouraging social sharing.

In addition to tablets, smart retailers are implementing interactive experiences with the use of large displays that are meant to fully engross customers to the point where they even forget that they’re inside a store. To the customer, the experience is interactive, engaging, and powerful.

3. Are we collecting actionable data to help personalize the customer experience?

According to a study by Infogroup Targeting Solutions, 54% of marketers have already invested in data solutions to date, and nine out of 10 marketers plan to do so in 2014. Why the focus on data? Because smart retailers know that in order to provide truly personalized experiences, they need to gather as much information about the behavior, history and whereabouts of consumers as possible. Collecting this actionable data through customer loyalty programs, point of sale data and online shopping behavior ultimately enables retailers to implement dynamic browsing, customized displays, personalized recommendations and shopper-specific discounts.

VIDEO: Office vacancy falling, rents on the rise in Chicago and its suburbs

Watch the video above to find out more about how the improving economy is spurring Chicago’s CBD and suburban office markets toward a more robust recovery.

Then, click here to download our complete Q2 2014 Chicago Office Market research reports.

VIDEO: Key trends impacting the tech industry

The fight for talent. The race toward growth. The need for funding. The speed of innovation.

These trends are the top influencers in today’s tech industry and also have a major impact on a tech company’s real estate strategy.

Watch the video above for current statistics and industry insights and to find out how your real estate strategy is critical in driving growth, boosting profitability and mitigating risk.

Braintree’s story … and how JLL helped

The online and mobile payment software company Braintree is making big waves in Chicago.

Watch the video above to learn more about the company’s history and how, with JLL’s help, it will more than double the size of its Chicago headquarters in a forthcoming move to the Merchandise Mart.

And speaking of the Mart … click here to see JLL’s Phil Geiger and others explain to Crain’s Chicago Business why the River North landmark is the new hot spot for Chicago tech companies.

 

LIVE BLOG: Chicago’s top CFOs talk real estate with JLL

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JLL CFO Christie Kelly (at left above) is moderating a panel discussion on the role of real estate in today’s corporate world before a gathering of some 50 C-level executives from across Chicago. The event, which is being hosted by JLL, is taking place at the Eataly Chicago food emporium in River North.

Panelists include American Medical Association CFO Denise Hagerty; Coyote Logistics CFO Jonathan Sisler; Robert Bosch Tool Corp. CFO Katina Xouria; and William Blair & Co. CFO Jon Zindel.

A minute-by-minute recap of the group’s conversation is below:

5:10 p.m. — Hagerty: “For us, our real estate decision-making is all about brand and culture. The brand had gotten very tired for us. So [our move to the former IBM building] worked out very well. For our employees to walk into a place that’s bright, airy and sunlit has made a huge difference for us.”

5:15 p.m. — Xouria: “Real estate is very expensive, but it’s not about cost for us. It’s about how you get the most out of your spend to energize your workforce.”

5:17 p.m. — Sisler: “As an organization, we’ve found that when you put an employee in a space that they love, they sell better.”

5:20 p.m. — Zindel on William Blair’s planned move to the new 150 N. Riverside office development: “Our decision was very,very organically built from the bottom up based on how our entire team is working and what kind of space best fits our needs.”

5:21 p.m. — Xouria on the impact of technology on the workplace: “We’re trying to get to a totally wireless building. There’s challenges to that, but that’s our goal.”

5:23 p.m. — Xouria on telecommuting: “We have not yet gone to the extreme of taking desks away from people who work occasionally from home, but eventually we’ll get to the point where there are no assigned desks.”

5:25 p.m. — Hagerty: “We have a lot of collaboration space that’s not being used and we suspect it may be because our younger workers are solving their problems via instant messenger and text.”

5:27 p.m. — Sisler: “We move people to new desks every 6 months. We want them to get comfortable with different groups, different people.”

5:29 p.m. — Zindel: “[As we prepare to move,] We’re trying to get people away from the 1980s fixation on having an office and focusing on what they will have in terms of technology, improved functionality, etc.”

5:31 p.m. — Sisler on Millennials: “Our feeling is that if you give them training and give them the right direction and a sense of why they’re there, they’re very hardworking and they do very well for us. We look for people who are competitive and who have done well in a team environment.”

5:33 p.m. — Sisler on his company’s fast growth: “The biggest challenge in that is having the right management (we promote people very young) and balancing our growth with profitability.”

5:36 p.m. — Hagerty on what the AMA looks for in a partner/vendor: “So much of what we face is reputational risk, so it is crucial to us to have partners with high integrity.”

5:40 p.m. — Zindel on his firm’s move to 150 N. Riverside: “it was important for us to feel like our space was a building within a building.”

5:42 p.m. — Xouria: “When I started as a CFO, my biggest concern was the financial statement. Now I’m focused on sales and marketing and growing our market share. I’m focused on attracting and retaining talent and real estate. We, as CFOs, pull it all together to make sure the company makes the right decisions on all these fronts.”

5:47 p.m. — Xouria: “We’re freeing up a lot of office space and turning it into collaboration space.”

5:51 p.m. — Xouria on committing to Illinois: “The reason we’re still (headquartered) in Mt.Prospect is because the value the people that we have. We think that having the right people is more important than tax incentives or anything else.”

5:53 p.m. — Sisler: “The talent pool here in Chicago far outweighs any other drawbacks.”

Law firm rental rates: Landlords could be gaining the upper hand soon

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Moving into your first office space: What you should know

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(The following post originally appeared on the Catapult Chicago Blog)

By Corey Siegrist
Vice President, Tenant Representation
JLL Chicago

Ready to move into your own office space but unsure of how to get started? It’s more than just a space search. We often find that tenants new to the office sector fail to realize the associated costs and requirements necessary to make the jump.

Prioritize Needs Versus Wants

You should set expectations – caviar taste on a beer budget won’t work, unfortunately.

Here are some key questions that new office users should consider:

  • Where are your employees commuting from?
  • How much space do you need? (Typically we recommend 150 sf per person in a benching environment and 250 sf per person in a private office / workstation environment)
  • Would the chosen space enable growth?
  • What is the minimum lease term? How flexible will the landlord be?
  • Building capabilities? Chilled water, condenser water, fiber, redundancy, power capacity, etc.?
  • Do you want to be in a 24/7 neighborhood?
  • What amenities are offered (bike room, dogs allowed, etc.)?

Be Aware of Hidden Costs

Below are additional expenses that tenants should be aware of when budgeting.

  • Security deposit – typically landlords require 2-6 months rent depending on the company’s financial stability.
  • Furniture – unless you’re lucky enough to find a fully furnished sublease or spec suite that fits your needs, you need to decorate! Typically furnishings cost $10-$15 per sf to purchase (rental is also an option and can be less expensive).
  • Wiring – conservatively, this could cost up to $3 per sf and is usually the responsibility of the tenant.
  • Attorney fees – a lease is a legal document and tenants should obtain the advice of a lawyer that specializes in real estate leases. This can range from $1,500 – $3,000 and is a flat fee.

The bottom line: more goes into choosing office space than the location and dollar per square foot!

JLL’s team provides expertise in successfully moving high-growth companies into their first offices. Contact Corey at corey.siegrist@am.jll.com

Chicago’s corporate facilities have global reach

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  • The Chicago metro area is home to more than 1,500 foreign companies, 55 of which are manufacturing firms.
  • Chicago’s skilled workforce and world-class transportation infrastructure — as well as the state’s efforts to reform its pension system — have made the market more attractive to business leaders around the country and around the globe.
  • Site Selection magazine has noted this with its recent inclusion of Chicago and Illinois on its list of “top markets for new and expanded corporate facilities.” Chicago is on top of the list and Illinois is third among the 50 states.

Law firm growth trends and real estate strategy

 

Jones Lang LaSalle is now JLL

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As you’ve probably seen on social media by now, Jones Lang LaSalle has officially shortened its name to JLL.

The shorter name and new logo (see the top left hand corner of this page) are:

  • Easily recognized and visible in the 75 countries around the world where we do business
  • Memorable and easily pronounced in languages worldwide
  • More suitable for digital applications and mobile channels

Here in our global headquarters city of Chicago, we celebrated the change last night by illuminating our new name on the side of our HQ building, Aon Center (see photo above).

The news is also attracting the attention of the media (including the Chicago Tribune and GlobeSt.com) as well as business leaders like Jeff Malehorn, President & CEO of World Business Chicago, the city’s economic development arm, who said the following:

“JLL has a long history in Chicago and deep roots in our community. We’re proud to have this innovative and forward-looking global firm call Chicago home, and we congratulate JLL on beginning this new chapter.”

Click here to learn more about our shift to JLL.

Four reasons why 2014 will be ‘The Year of the Distribution Center’

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And you thought 2013 was good for industrial?

This year, e-commerce is fueling anall-out boom market.

CLICK HERE to read about the four trends driving demand, development and delivery of distribution centers across North America.

Chicago Office Employment Update

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The U.S. economy added another 113,000 jobs in January, representing a second consecutive month of below-average payroll growth. Unemployment fell by 10 basis points, reaching a recovery low of just 6.6 percent.

Although gains have not consistently met or exceeded the 200,000-job monthly threshold for sustained expansion, growth has been broadening in both industry and geography. Finally, revisions demonstrated that the recovery of late has been more consistent than previously thought, with upward revisions in November and December totaling 34,000 jobs.

Chicago’s unemployment increased for the first time in six months in December, up 10 basis points to 8.1 percent for the month but for the year. Chicago has added 554,500 positions since December 2012.

Check out our full Office Employment Update for a more detailed view of the implications of the recent employment trends on commercial real estate.

VIDEO: 2014 Commercial real estate lending forecast

Last month, our JLL Chicago Investor Services team welcomed more than 50 clients and guests for our 2014 Downtown Chicago Investor Forecast Breakfast at the Peninsula Hotel.

Among the speakers was JLL Managing Director David Hendrickson, who offered his predictions for the year ahead relative to the commercial real estate lending markets. Click on the video above (1 minutes, 15 seconds), to watch Dave give his forecast.

Looking for more? Email him at david.hendrickson@am.jll.com  for access to the materials that accompanied his presentation.