CHICAGO—As reported in Crain's, ConAgra is expected to leave its space in Naperville and lease 200,000 square feet in the Merchandise Mart, and become the latest major corporation to make the decision to migrate from the suburbs to the CBD. And as the downtown prepares for the opening of several new office towers beginning in late 2016, leasing experts say that the trend will probably accelerate.
“These companies are all looking to attract the young workers who have no intention of moving to Lisle,” Eric Myers, a principal with Avison Young, tells GlobeSt.com. He specializes in landlord representation and was not involved in the ConAgra transaction. “And they are not doing this to keep up with the Jones'; for many of them moving downtown has become a necessity.”
And although Motorola Mobility, which left north suburban Libertyville in 2014 for 604,000 square feet in the Merchandise Mart, is probably the most notable company to recently vacate suburban office space in favor of the city, Myers says this is not primarily a tech phenomenon. Instead, it's a cross-section of firms that want to use spaces in ways popularized by tech-oriented companies. That means more open spaces organized in a cooperative manner, and with access to outdoor amenities and close to public transportation.
A healthier economy means that many of the suburbs' major corporations can plan on growing 10% to 20% over the next three years, he adds. “They are not going to be hiring many 40 to 50-year-old engineers; they are going to be hiring a lot of twenty-somethings.”
And with giant projects like Hines' River Point tower at 444 W. Lake St. enticing existing downtown tenants, other landlords in the CBD are looking to the suburbs as a rich source of new corporate tenants to refill these vacancies. In the last ten years, Myers points out, many of the downtown's most important leases have been signed by law firms, “but most owners would gladly replace them with a Fortune 500 company.”
“The market is super active right now,” he adds, comparable to the frenzy that accompanied the dot.com boom at the turn of the century. “But although those companies generated a lot of activity and seemed to have a lot of cash, they were gone in about 10 months.” What sets this new era apart is that it's driven primarily by companies like ConAgra “that have real balance sheets. Every metric suggests that this trend is here to stay.”
And CBD landlords are ready to take advantage of this movement. Myers points to 311 W. Monroe and the Prudential Building, among many others, as great examples of older properties that are getting full makeovers that will make them appealing to the new generation of office users.
As reported in GlobeSt.com, eight months after acquiring 311 W. Monroe, GlenStar Properties is ready to kick-off a major re-development of the 380,000 square-foot office tower. The West Loop property was built in 1969 as the headquarters for BMO Harris Bank. But the bank departed in December, leaving the building 18% leased to a mix of short-term tenants. The company plans a full-gut renovation, including an expansion of the lobby. Most dramatically, the company plans to re-skin the building with a new, energy efficient glass envelope that will give new tenants floor-to-ceiling windows. In addition, the building will get a new fitness center, a video conferencing center and other amenities now considered standard for a class A property.
"Owners are taking a very hard look at their buildings and spending real money," Myers says.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
