There will soon be an increase of space with the redevelopment of the building, the Palmer House hotel and the addition of about 275,000 sf of retail from the Block 37 development. The bulk of the space is expected to come online in the spring of 2009. "They are adding an extraordinary amount of space," says Michael Shields, EVP with Northern Realty. "But, they also have a considerable amount of time before they will open their doors." The additional space could cause excess inventory, but Shields expects that the space will be leased by the time it comes online.

Throughout the Chicagoland area, there will be an increase of 8.9 million sf of retail properties with 7.5 million sf in the suburban markets, according to the Marcus & Millichap report. Last year, 6.9 million sf were delivered. The 475,000-sf Chatham Market and the 440,000-sf Marshfield Plaza are both expected to open in the city in the fourth quarter. The 635,000-sf Promenade Bolingbrook opened earlier this year in Bolingbrook, and construction is expected to begin in the fourth quarter of 2008 on the 600,000-sf Arboretum of South Barrington, as previously reported by GlobeSt.com.

While the overall number of sales transactions has decreased, the number of out-of state buyers increased and the number of sales transaction for single-tenant buildings in the suburbs increased 25% during the past 12 months, according to the Marcus & Millichap report. Out-of-state principals were buyers in 27% of transactions during the past year, compared with 19% in the preceding 12-month period.

A lot of investors in southern Florida, California and New York are turning their attention to the Midwest for acquisitions because of the cap rate yields, Dillon says. A deal that would have a 5% to 6% cap rate in southern California, for example, would likely have a cap rate of about 7% in the Chicago suburbs, even if the two properties are leased by the same national tenant, Dillon says.