Chicago’s Loop has ceded much of its monopoly on office space to the West Loop and Fulton Market. But combined, these submarkets remain the nexus around which business across the entire Midwest revolves.
So much has changed in the past year, however, to make one wonder if that dominance may stall out. Looking to find some answers, REjournals marshalled some of the top minds in Chicago CRE for the 2nd Annual State of Downtown Office, West Loop & Fulton Market conference.
Moderating the first panel was Erin Miller, director of business development, CBD at Clarion Construction. Joining her were Drew Nieman, vice president of leasing at Riverside Investment & Development; Tom Sitz, executive director at Cushman & Wakefield; Katherine VanBerschot, vice president, senior private banker at Wells Fargo Private Bank and Robert Wislow, CEO and chairman at Parkside Realty, Inc.
As is common with most conversations these days, the first topic was COVID-19 and its impact on office development. Wislow pointed out that sustainability has become almost automatic in new construction, and he has little doubt that health and wellness will be too in a post-pandemic world.
Such measures would protect occupants not just from this novel coronavirus, but seasonal cold and flu sickness, as well as any future outbreaks. VanBerschot added that real estate ownership groups can improve their ESG standing —environment, social and governance—by improving the indoor air quality, among other tactics, in the properties within their portfolios.
Those are more long-term concerns and many of those tuning in wanted the experts’ opinions on short-term scenarios. Namely, are we going to see office vacancy in the Loop and West Loop hit a nadir as companies decide to let their employees continue to work from home, at least part time, after the pandemic?
“People have leases and leases have expiration dates,” Nieman said. “None of the leases signed before all of this had pandemic clauses, so people have to make decisions.”
Nieman acknowledged that normal leasing velocity has been down year-over-year, though he still has received proposals. He expressed hope that momentum will lead to increased occupancies as more and more individuals become vaccinated. Wislow went further, predicting “an explosion of leases signed at the end of the year.”
The panelists were unified in their confidence that the Chicago CBD will remain an attractive locale for corporations. Once office development begins again, Wislow said he expects it to be in the strip of land that falls between Fulton Market to the west and the Union/Ogilvie trains to the east, a stretch of under-developed land that runs all the way north to the 30-acre site near Grand Avenue owned by Tribune Real Estate Holdings.
Sitz said that he expects to see a continuing trend of adaptive reuse. Chicago has had great success with the repositioning of the Merchandise Mart and the Old Post Office, for example, and he believes Chicago has more opportunities like this out there, with the capacity to create new office submarkets.
Andrea Upwood, director of real estate at Captivate moderated the second discussion with Jillian Brown, senior consultant, flexible office solutions at Avison Young; Alba Colavitti, senior design associate at CRG; Sean McCarthy, vice president of business development and strategic initiatives at Comcast; Ryan Rademann, CRE technology leader at Wipfli and Brian Ross, CEO/president at Ross Management and Consulting LLC.
The key to returning to the office, these panelists agreed, is flexibility. Those office spaces that prove to be successful in the next 12 to 18 months will be the ones that can adapt to everyday changes and find a way to bring everybody back safely while simultaneously allowing for collaboration.
“When you are looking at a building and designing flex workspaces, you need technology,” McCarthy said. “Who would have thought we would be designing ‘Zoom rooms?’ When you are looking at new projects, technology infrastructure is right up there with electricity, water and other utilities.”
Ross added that there are a number of factors to consider before an office space can get back to full functionality. These include finding ways to safely stay connected to clients and colleagues, staggered start times, touchless technologies, access to sanitation and PPE equipment and overall creating a secure envelope within which employees can still function.
Perhaps the biggest hurdle in getting employees back in the office is communication. That means being transparent about cleaning regimens and indoor air quality. Rademann brought up the displays that some flexible office providers like WeWork use to show which workstations are occupied and which are vacant. This model, he surmised, could be tweaked to display when these stations were last sanitized.
“Property management teams play such an important role communicating to tenants about what’s being done and what is possible,” Brown said. “Being transparent is more important than ever.”