Redefining the suburban office Matt Baker July 8, 2019 Share on Facebook Share on Twitter Share on LinkedIn Share via email Downtown Chicago has benefitted from a steady stream of corporate relocations in the recent past. Many of these companies didn’t have far to move as they were already in the suburbs. So how is the suburban office market coping with all of these emigrations? In it’s second quarter Chicago Office Market report, Newmark Knight Frank (NKF) found that the situation in the suburbs is sluggish, depending on where you look. Vacancy increased for the third consecutive quarter to 21.8 percent, while rental rates dropped by $0.30. This trend is not universal to all of suburbia, however. Large suburban complexes continued to outperform individual assets last quarter. In fact, selecting for the largest complexes in the suburbs yields a vacancy rate of only 16.5 percent, which is more competitive with the 12.8 percent recorded in the CBD last quarter, according to NKF data. One of the main offerings that these large complexes have is a variety—and higher level—of amenities. Today’s tenants aren’t content with the view that suburban offices are second tier to downtown spaces. The driving trend is for amenities on par with those in the Loop, Fulton Market or River North. Many suburban complexes are upping their amenity game: food trucks coming on site, state-of-the-art gyms that offer fitness classes, cafes with professional baristas, high-tech common areas and more. The largest lease transaction last quarter was ACCO Brands’ long-term extension in the Kemper Lakes Business Center in Lake Zurich, Illinois. The consumer products manufacturer was compelled to keep their global headquarters at the facility in part because of the property’s amenities. Managed by Lincoln Property Company, Kemper Lakes includes a full-service cafeteria, 600-person capacity conference center and an on-site day care center. The PGA-caliber Kemper Lakes Golf Club is also immediately adjacent. ACCO Brands has called the 1.1 million-square-foot Kemper Lakes home since 2012. The business development and recruitment opportunities that the property’s amenities present were a main reason why the company decided to renew its 189,000-square-foot lease. The most successful large office parks have been those that underwent renovations that helped the property mimic an urban environment. This can mean accessible outdoor spaces as well as proximity to dining, retail and unique experiences. But the key to an urban feel, even in the suburbs, is access to public transportation. Two 40,000-square-foot suburban lease renewals last quarter were in the O’Hare submarket, which is well served by public transit. Fidelity Investments recommitted to Presidents Plaza II, 8700 W. Bryn Mawr Avenue in Chicago, and Culligan International renewed at Riverway II, 9399 West Higgins Road, Rosemont, Illinois. Both properties are within walking distance of CTA Blue Line stations. Of course the biggest suburban office story of last quarter—really of the last few years—was John Paul DeJoria’s $40 million acquisition of the former McDonald’s campus in Oak Brook, Illinoi. The co-founder of the John Paul Mitchell Systems hair care brand hasn’t disclosed his plans for the three-building property. The beautiful, wooded Oak Brook campus is a throwback of sorts. It’s a massive property at 80 acres, the type that corporations such as McDonald’s developed in bedroom communities during the ‘60s and ‘70s to lure professionals away from the city center with the promise of a shorter commute. But today’s companies and their employees have higher priorities. They want smaller footprints, concierge-level amenities and cutting edge technologies. It will be interesting to see what changes DeJoria makes to transform the campus. Will it even look to court office tenants or will he reposition the site? No one really knows.