For Chicago's Heavy Hitters, It's Steady As She Goes For The Office Market
As vacancy rates reach record lows and rent spreads continue to expand, how much longer can Chicago's office real estate market ride a cresting wave?
Friedman Properties president Jason Friedman, snapped at Bisnow's sixth annual State of Office event yesterday, wonders why WeWork has to be the single largest tenant of office space in Chicago, since the business model of it and other major shared workspace firms is subleasing with major landlord concessions.
Jason has reservations about WeWork's tenants in the growing "gig economy," a group he calls "1099 Millennials," and raised concerns about what kind of ripple effect a correction would have across the entire office market. CBRE SVP Dan Lyne echoed Jason's concerns about co-working saturation and what he calls "big-box co-working mania." Fun fact: Dan helped Cards Against Humanity buy Birch Island, a private island off the coast of Maine, which Cards Against Humanity renamed Hawaii 2.
Snapped: JLL EVP Nikki Kern and her partner, Kim Doyle, in front of the game room in 222 South Riverside Plaza's new tenant lounge. Nikki touted the record rent spreads and occupancy rates in this cycle and says JLL's $40M renovations to 222 South Riverside are being done with an eye toward the future, when the leases of longtime tenants are due to expire. Nikki says the rehab and the building's proximity to Union Station will put JLL in position to retain these tenants and recruit new ones to the building. 222 South Riverside Plaza hosted our event yesterday, drawing a crowd of 350 real estate pros.
Cushman & Wakefield EVP Mike Sessa (right, with VTS regional director Lou Jacobsohn) says he's optimistic about the city's decision to rethink zoning regulations in planned manufacturing districts, especially as downtown vacancy rates continue to drop.
Mike says he has clients looking at PMDs and it's a market-driven decision, especially for firms looking for open-plan, 100k SF-plus floor plates. If a company can build a new facility in a PMD, it could spur growth and much-needed tax revenue for the city, which needs to be acknowledged.
NGKF vice chairman Steve Levitas and his partner, Bob Chodos, repped US Cellular in the largest suburban office lease in two years when US Cellular renewed and expanded its lease at US Cellular Plaza.
Steve told us the firm seriously considered a downtown move before deciding to stay put and noted several factors in the company's decision, including access to public transportation and the expressway. Steve sees some future challenges in the marketplace, including higher property taxes, operating expenses and rising rents.
Centrum Partners managing partner John McLinden (right, with Summit Design + Build's Amber Autumn) remembers the challenges of redeveloping 600 West Chicago.
It was outside the CBD, which provided challenges for transportation. Cabrini-Green was in the final stages of demolition. River North and River West were like the wild frontier. But John was resilient, hired a police force for 600 West Chicago, established shuttle buses to transport workers to and from the building, and River North and River West became 24-7 live/work/play neighborhoods.
John says he's impressed by the way companies are attempting to re-create themselves in order to attract and retain talent, and that workers are looking for authenticity in prospective employers and office buildings. John is applying many of those same lessons to Bradley Business Center. The facility's fitness center is now open, its rooftop deck will open Aug. 1 and the center is quickly reaching full occupancy.