Office has been slow to rebound after COVID-19’s devastating blow. But February’s mandate lifts accelerated a strong push to get workers back in-office—at least a few days a week—and companies are still navigating uncharted waters to determine a new work model that will best suit varying needs.
The outlook is considerably bright.
At the end of March, 70% of tenants in the market reported that they’re coming back to work or have set a timeline. Average occupancy in buildings is 31%, which is a fairly strong uptick.
There are many factors to consider though, and it largely depends on building and location. Some buildings are experiencing a much higher level of occupancy because of the nature of the tenant mix in the building, for example. Financial services firms are coming back to work more stridently. Law firms, too, are pushing for employees to return to work because their business model is partially or dominantly based on mentoring and in-person collaboration.
Newer buildings are seeing numbers approaching the mid- to high-forties, and the back-to-office movement is expected to accelerate throughout the next few months.
But these numbers don’t tell the whole story. It is true that most employees do want to return to the office to some extent, just not on the pre-pandemic schedule of Monday through Friday, 9 a.m. – 5 p.m. Workplace intelligence is something to be considered, in terms of how to bring people back in a way that benefits both the employee and the business, alike. It’s still early to tell what some these trends will be though, as well as what they will do to inventory/vacant available space.
Some Chicago neighborhoods are already experiencing a stronger rebound than others, though. Danny Nikitas, Principal, Office Leasing Director at Avison Young, confirmed Fulton Market is the most active office market in the U.S, experiencing its largest net absorption year to date. Coincidentally, CBD is the least active, but various other neighborhoods seem to be compensating for its current lack.
“A lot of new development has been along Wacker Drive and Riverside Plaza,” Nikitas said. “You do have the healthiest and most energetic real estate in Fulton Market and West Loop. That said, Pilsen, Humbolt Park and Ravenswood are seeing a lot of velocity, as well. Chicago is well-positioned with what we’re doing to bring it back to life after two years of being remote.”
Landlords are working hard to come up with innovative ways to rejuvenate the market and bring tenants back into building. Tenant experience is evolving; employees expect their needs to be met, and business are looking for specific amenities to make the in-office experience more comfortable. People want an accessible place to congregate out of the office, for example, without the hassle of leaving the building.
“A number of buildings have tenant lounges, fitness facilities, coffee bars, nap rooms, roof desks—places where, when you are in the office, you can go and have lunch and socialize,” Nikitas said. “Those are being used much more than ever. Lobbies, too. There’s a renovation happening at 500 W. Monroe that’s going to be hotel-style, with comfortable seating and places to collaborate.”
These small changes seem to be working, and there are many new buildings—like Wolf Point Tower—nearing 100% occupancy. Bob Chodos, Vice Chairman at Newmark, explained that Newmark represented Kirkland and Ellis in its move to Wolf Point. The company leased the balance of the space in that building.
“They were coming from 300 North La Salle, one of the top buildings in the market, but they selected Wolf Point because of its amenity-rich environment,” Chodos elaborated. “Buildings that were on track to add amenities are continuing to add them; buildings that are lacking amenities are working now to improve tenant experience starting from the ground level.”
The bottom line? Remote work has proven to be successful, and many want to continue to to—but it’s not necessarily a panacea solution to how business should operate. Employees of all ages seem to be desiring in-person connection now more than ever.
For entry-level employees who have yet to experience working in a professional setting, in-person collaboration is especially beneficial. Both Chodos and Nikitas placed emphasis on the importance of in-person collaboration and mentorship regarding entry-level workers.
“The younger workforce needs to be around others to learn the business through collaboration,” Nikitas said. “Man is a social creature. People are social beings. Therefore, when setting up an office environment, it’s important to consider not just the building, but the people who work within it. We need to consciously focus on the overall health of people who work in an office environment—and that’s getting great focus as we see it.”
Choice is an important part of this. Employees do want to return to work, but they want to have the option to choose how often. Amenities will provide employees plenty of space to work both comfortably and effectively in-office, but it’s necessary for companies to remain flexible in terms of employee-to-employee needs. Nikki Kern, Senior Vice President at The Telos Group, LLC, highlighted the value of flexibility in today’s work climate.
“Everyone wants the option to do what they want to do,” Kern explained. “Companies are having to respond to candidates’ requests to provide flexible hours in the office. They’re being forced to provide as much optionality as they can. Otherwise, their competitors will offer it, and they’ll lose out on the better candidates that can demand it right now.”
She continued:
“We’re at an interesting point in time. Companies are still figuring out what their new office model looks like. Once they’ve been in person for a few months and they see how their new model is working for them, they’re going to start making more permanent decisions about how to lay out their office space and what types of policies they will implement with their employees. It’s tough for companies right now to decide what to do while they’re in this limbo position. We likely have a few months of this limbo period of decision-making, and we’ll all be very busy later this year when decisions have been made.”