The advent of remote work has transformed the office landscape of most major metros across the U.S., but as Downtown Chicago’s hustle and bustle continues to reemerge, certain trends—and certain neighborhoods—are leading the rebound.
Illinois Real Estate Journal recently spoke with JLL Executive Vice President of Brokerage Jamie Wallenberg and Cresa Senior Vice President Michael Marrion to discuss the current state of the market and interestingly, they both came up with one conclusion: it’s much more positive than headlines reflect.
The last six months have reflected significant leasing activity of upwards of three million square feet, whether it be growth or rightsizing in terms of footprint, as companies continue to look at this as a tool to continue to drive employees back to their office space. And within the office? Employees are returning. In fact, Chicago, compared with all the gateway cities, has seen one of the highest changes in return rates in the nation since the beginning of the year, at over 50%, based on a report by Kastle Systems. With a job market that’s less frothy, people are realizing in person face time and collaboration is more important than ever.
But the numbers won’t continue to rise without the incentive of experience. Quality over quantity is still being prioritized when it comes to leasing office space as highly amenitized, smaller footprints are favored over those stiff and cubicle-dense with more square footage.
Wallenberg said it starts with addressing two questions: the reason behind employees’ reluctance to go back and the means by which the issue can be resolved. It’s all about the experience. JLL is seeing their clients, as well as others in the market, try to manage what that experience looks like from employees’ morning commute to their lunch break and ending with errands or happy hour on their way home.
“We’re not trying to entice them to come into a designated seat, but rather take part in the entire experience,” Wallenberg said, which does, of course, include the work being done within the space.
Increasing productivity through a positive, exciting experience that is looked forward to, rather than dreaded. That’s the objective, and part of that is creating a space within the office footprint that’s equally as vibrant and productive as the footprint itself, specifically of the West Loop and Fulton Market.
For outdated buildings, and those unwilling to evolve, Marrion said they’re in trouble. More and more are going back to the lender or traded and sold. 161 N. Clark and 200 S. Wacker are both examples of buildings changing hands due to users’ flight to newer, amenitized space.
“Both are beautiful, well-located buildings but have below-average amenity packages,” Marrion said. “They will need to be renovated to remain competitive, and since the current owners have chosen to not move forward, it’s likely both will be sold to new owners willing to take the plunge.”
In these cases, Marrion said one must spend money to make money, and these value-add opportunities—if done right—are likely to pay off in the long run. For example, 161 N. Clark is directly across from Google’s Thompson Center and will certainty benefit, as will the neighborhood around it, once the project is completed in 2025.
It also must be noted that the reluctance of some employees to return to the office has not only affected the office sector but retail and mixed-use buildings, as well. JLL has observed changes in schedules to adjust to the number of people in and around certain buildings in the CBD—Tuesday through Thursday are the weekdays that reflect the highest employee occupancy, and the nearby amenities have been scaled up on those days to meet the demand. While this approach aids in retaining employees on those days, solely offering amenities during that time might reinforce their desire to work from home on other days.
“Limiting our attention to Tuesday through Thursday only furthers the issue at hand because the standard work week is Monday to Friday,” Wallenberg said. “Some of the surrounding businesses are offering certain specials on the quieter days to entice people to come then, too.”
Looking ahead, large users are exploring opportunities in the market and the second half of the year will reflect if more companies have chosen to take advantage of long-term commitment strategies or continue their short-term cycles of rightsize and renew.
Another exciting bit that will be tracked in the second half of the year is the announced office conversions on LaSalle Street, such as 135 S. LaSalle and 111 Monroe, and how it will affect other businesses on LaSalle.
As for the return-to-work movement, JLL and Cresa are optimistic about the future, albeit cautiously so. It’s not as simple as a one-size-fits-all solution, but companies across all sectors are starting to experiment with solutions that allow for flexibility.
“Employees will continue to return to the office, but companies will be more thoughtful in ensuring the space is evolved for the new way of work,” Marrion said. “Boasting a space that is desired is, and will remain, the priority.”