Building Renovations Are Transforming the Office Market

CHICAGO—The leasing activity at most of the CBD’s new trophy towers has been quite strong, but with so many tenants moving out of older buildings, the downtown office market now has a lot of holes. But landlords can see this as an opportunity to refresh and revive their buildings and prepare for the coming decade, when tenants will definitely demand better amenities and less square footage. Hip lounges, rooftop terraces and modern lobbies are needed to attract new tenants. Even owners who made upgrades just a few years ago are looking again at how they can overhaul their space into appealing environments for millennial talent.

Wright Heerema Architects has designed many of these redevelopment projects, including 123 N. Wacker, where the Chicago Bears recently signed a new lease. The firm also designed the new amenity spaces and lobby at 1 N. Dearborn, which continues to draw new tenants, such as Euromonitor International. GlobeSt.com sat down with Roger Heerema, one of the firm’s principals, to discuss how these issues will impact the region’s office market.

As you talk with building owners who are planning redevelopments, what are their expected outcomes? Roger Heerema: Different starting points carry different expectations. When we look at a so-called “zombie building” that has upwards of 50-60% vacancy because it hasn’t been updated in decades, the owner has a much different expected outcome than we’d have for a core asset building in decent condition. A zombie building requires an entirely new narrative of the space, but a building in good-to-great condition isn’t as drastic a change. It’s enhancing the story, not redefining it, for these core assets. And building owners are looking further down the road to both keep marquee tenants and allow them to expand to more floors if needed, and also to attract new tenants.

It seems there is an amenities race underway as building owners strive to top each other with the coolest amenities. What are some of the most unique amenities you’ve seen recently? RH: Building owners are almost always competing with buildings that may generally look and feel the same, so it’s important for amenity spaces to stand out as unique and memorable. Recently, we designed a fitness space called “The Works” in the basement of 1 N. Dearborn, a 100-year-old building, that kept touches of the vintage, industrial aesthetic to create the atmosphere of a private club. The owner wanted to take advantage of this underutilized space—a tricky task with no natural light. The aesthetic was key to making it work. There’s also an integrated game and lounge area, and it’s become a popular destination for more than just fitness—it’s a gathering place as well.

For building owners with a limited budget, where should they focus their investment to get the most bang for their buck? RH: When we take on a project, we start where the tenant experience starts: at the curb. Assuming building systems and mechanical systems work, you still need to get people in the front door, so we look at the path they take into the building and see where it may be lacking or what needs to be enhanced. Owners should focus their dollars on what actually needs improvements and what will set their building apart from competition.

As architects, are there any amenities or features that you advise owners to stay away from—things that might sound appealing but simply aren’t practical? RH: We suggest avoiding inconsistency in amenities and design style. When a building is reckoning with completely different styles in the lobby, lounge and fitness center, it’s jarring to walk through it. We focus on creating a consistent experience through design and amenities, that flow well and match the tenants’ needs and style.

What are some of the biggest challenges you must overcome when redeveloping an older building? RH: The exciting part of redevelopment is turning the challenges and limitations of the building into opportunities to embrace the history of the space. The basement fitness center at 1 N. Dearborn is a great example. We incorporated a wide steam pipe and original electrical piping into our design, resulting in the cool, industrial vibe. No matter the space, the first thing we work through is understanding the infrastructure and gathering the history of the building—how it’s been altered up until the day we enter. Making sure the structure and electrical and plumbing systems are functional is one of the biggest challenges architecturally.

What are your tips for a successful redevelopment that truly differentiates a property? RH: Create broker buzz. Do something highly memorable that puts the building back on the radar of the brokerage community. They drive the traffic and future tenants to a building, so get them talking about your building’s new story. The building’s brand identity is just as important in a redevelopment as the design and the two need to work together to create “wake-up” moments: marquee elements that brokers and tenants remember. Also, don’t wait to start building buzz—you can talk about it before it’s complete. We recommend compartmentalizing the phases of the redevelopment. Work on one floor that’s maybe a lighter lift and it’ll get people talking about the redevelopment, and eventually galvanize interest in and support for the redevelopment.

What’s the next big thing you see in redevelopment? RH: Office buildings are becoming social places. It’s becoming a responsibility for the building owner to provide social experiences before, during and after the work day. Overall, office buildings will be operated more like hotels, increasingly hosting activities and events in the flexible, malleable spaces throughout the building. This service component will elevate and enhance the physical spaces we’re designing by catering to the tenant’s needs that go far beyond a desk and power outlet.