President's Plaza Joins Elite Suburban Properties Preparing For The Future
Portions of the suburban office market may be in the doldrums, but a set of well-located, elite properties are in high demand, and the owners are willing to spend what it takes to retain top tenants.
GlenStar Properties and its joint venture partner Angelo Gordon & Co. have launched a $20M renovation campaign at President’s Plaza, a two-building, 830K SF complex at 8600 and 8700 West Bryn Mawr in Chicago’s O’Hare submarket. The owners expect to complete the project in the second quarter.
The previous ownership team, which included GlenStar, already spent $15M on recent renovations, but company officials have set their sights higher.
“At the end of the day, we want to have the best buildings in the O’Hare submarket, maybe even the best in the suburbs,” GlenStar principal Michael Klein said. GlenStar and Angelo Gordon bought the buildings for $147M earlier this year.
In the renovation’s first phase, ownership concentrated on spiffing up the modernist buildings’ exteriors, which now include new landscaping, canopies and a fountain.
“From the outside, it looks very contemporary, but the minute you walk in, you see the buildings have this dark, purple granite that really looks like the 1980s,” Klein said. A full gut lobby refresh at both buildings will change that. “When you walk in, it’s going to feel like a building that was built today.”
Amenities are one of the most important factors for companies that want to attract millennials, Klein said, and the partners plan to create a tenant lounge connected to an outdoor patio and complete with a full-service coffee café and bar.
Furthermore, workers today “do not want a little fitness center, they want a true health club,” Klein said. The property’s existing center has been shut, and the team is rebuilding it from scratch. Midtown Athletic Club will operate the new 16K SF facility.
Tenants will also see a renovated deli, a physical and technological overhaul of the conference center, a new lobby stairwell, new passenger elevator interiors and a continuation of the restroom and corridor renovations.
“Everything is going to feel modern,” Klein said.
The building was already considered a success, even before this new plan was announced. A few years ago, its occupancy had shrunk to just about 50%, but today stands at 94.4%. Klein said he believes that holding onto tenants looking to recruit and retain millennials requires creating a best-in-class property.
“We want to keep everyone. What we’re hearing from today’s tenants is that they want to work with us, almost as a partner, to recruit and retain talent.”
GlenStar is one of the most active owners in the suburban Chicago office market. Its suburban portfolio includes Schaumburg Corporate Center, Bannockburn Lakes and Continental Towers, all developments where they have launched major renovations.
President’s Plaza sits right on the CTA’s Blue Line, an increasingly popular mode of transportation as more commuters choose urban lifestyles. In 2006, just 10% of the property’s workers got off the Blue Line each morning, a number that now stands at 35%, Klein said.
“People are trying to recruit workers from the city, and O’Hare is the only suburban market where you have a connection with the Blue Line. If you live in Logan Square, it’s a 15- to 20-minute commute.”
That means a lot to O’Hare landlords. Rents have moved up significantly in the submarket, where the Class-A vacancy rate stands at 5.6%, one of the tightest in the metro area. President’s Plaza was getting about $18/SF net only one year ago, but now garners about $23 to $24/SF net, Klein said.
And as different trends take hold, President’s Plaza, along with the other Class-A O’Hare offices, may have an advantage. Millennials are getting older, getting married and having kids, Klein pointed out. If they decide to look for work closer to their new homes, “they are going to want to work in a building that feels like the buildings they knew in the city.”