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Yesterday, more than 400 packed the ballroom of Trump Chicago (as in, standing-room only) for Bisnow's Chicago State of Office. (And only a few of those people thought it was a conference on the future of NBC's The Office, so nobody was too disappointed.) A good many questions were tossed out for the developer panel, but maybe none so juicy as the simplest ones: Will there be any big office developments in Chicago in the next few years? Should there be?
Most the panelists said that conditions were getting better for Chicago office development and that maybe the time would be soon. (The office market is like pears—if you don't get them just right, they are either really mushy or hard as diamond.) But none would commit to pulling the trigger themselves, though some of them have well-known plans to do so, once financing is squared away.
Reznick (Insight) MCHI
Rich Gatto
Rich Gatto noted that growing tech companies are still interested in Chicago. Google, for instance, took a single floor of a Downtown building 10 years ago and has grown to over 150k SF since—and is still growing. But if there's any Achilles' heel, he warned, it's that most tech companies are growing their sales forces here, not so much their engineers, so Chicago still needs to promote the kind of environment that will attract the tech end of the tech business.
Grady Hamilton
Trammell Crow principal Grady Hamilton told the audience that Chicago companies have quit shedding space in a state of worry (sometimes panic) about what would come next. That trend, along with the relative strength of the recovery and Chicago's longstanding role as a hub of commerce, all bode well for leasing in downtown. That improves the likelihood of new development, especially as large space users become restless in their old space. But there are still things that might hold the office market back: Job growth might stumble again and low interest rates will have to go up sometime.
Kevin Farrell
Fifield Cos COO Kevin Farrell illustrated for us that declining unemployment (or from the looks of Kevin, reclining unemployment) will have a favorable impact on Chicago office vacancies, though progress has been slow for both employment and office occupancy. Considerable uncertainty remains among businesses, however, sometimes to the point of holding back hiring decisions. It's hard, for example, to know the cost of doing business in the current uncertain tax climate, Kevin said, which makes hiring that much harder. (And most companies don't have the time to go through complicated reality shows like The Apprentice to find talent.) As for the office investment outlook, he explained that (with certain exceptions), office buildings aren't being bid up yet. Offices are management-intensive, and for now investors have a stronger appetite for fixed-income investments.
Paul Zeller
Zeller Realty CEO Paul Zeller stridently disagreed with the notion that there's going to be much Chicago office development in the next few years, because the fundamentals don't support it. Unemployment is higher than the official numbers, interest rates are going to go up eventually, and the next generation of office space users won't use as much space as previous generations, he said: "Add it all up, and we have plenty of stuff built.
George Klenovich
Paul also bemoaned the loss of local control when it comes to Chicago office properties. If CMBS makes a comeback, and there are some indications that it will, he warned that would mean that "the control of another generation of Chicago assets would be lost to New York." Finally, a shout out to the Reznick Group's George Klenovich (above), who ably moderated the developer panel.
Drew Neiman,  Rich Gatto, Thomas Saletta,
Colliers International principal Drew Neiman (center), with panelist Rich Gatto and White Oak Realty Partners partner Thomas Saletta, told us that "the usual suspects" are indeed out looking in the Chicago CBD for large chunks of office space—law firms, for example, which might take several hundred thousand feet in a new building, possibly jump-starting a new development.
Brian Atkinson,  Blake Hillemeyer,
JLL VP Brian Atkinson (left), with Hearn EVP Blake Hillemeyer, told us that Downtown Chicago leasing has picked up recently, spurred by the sectors of the economy that are still growing. Brian, along with JLL's Nikki Kern, repped the owner of 10 South Riverside Plaza late last year in one such deal, in which an employee benefits software specialist more than doubled its space by making the move into the building, the better to accommodate growth and attract new talent.
Mike Flanagan, Sharon Mehalek.
Bisnow sponsor LifeStart is growing, too. The corporate fitness company has three new locations in the works in Downtown Chicago, including one opening at 222 North LaSalle in about two weeks, according to president Mike Flanagan, here with director of operations Sharon Mehalek.