Suburban Chicago office owners are feeling the pain
It was more of the same headache that has plagued suburban office building owners throughout the COVID-19 pandemic, with the rise of remote working causing many businesses to rethink their office space needs. job. Those who have had the opportunity to reconfigure their office space over the past two years have greatly reduced their footprint. The result: Suburbs have now suffered a net loss of 2.8 million square feet of tenants over the past two years, according to JLL data. The vacancy rate has increased over this period to reach its current level, from just 22% at the end of 2019.
It’s still unclear when this attrition will stop, though some owners might find comfort in a small sign of improvement in the fourth quarter. Net absorption in the suburbs, which measures the change in the amount of space rented and occupied compared to the previous period, fell by about 51,000 square feet in the last three months of the year, according to JLL data. Although this was the eighth consecutive quarter of negative net absorption in the suburbs, it was by far the smallest loss during this period.
This glimmer of good — or perhaps less bad — news comes as more companies move forward with plans for new offices despite the upsurge in cases of the omicron variant, said Jim Rose, vice president. principal of JLL, which represents tenants in the suburbs. Small and medium-sized businesses, in particular, are much more convinced of the amount of office space they need today than they were a year ago, which helps to close deals. One example: Technology consultancy BDO Digital in November leased 28,000 square feet in Hamburger University’s former training facility on McDonald’s former corporate campus in Oak Brook, where it will move this year his office in a neighboring building.
Companies “are more comfortable moving forward with a real estate strategy,” Rose said. “The thaw is underway, that’s for sure.”
But the thawing process may take some time. Many large companies are still considering their return-to-office plans and post-COVID workspace needs, but some may ultimately give up large swathes of workspace and flood the market with more vacancies.
Allstate exemplified this potential impact with its decision to sell its massive Northbrook headquarters campus, although the Nevada developer buying it plans to redevelop the property into warehouses.
In Schaumburg, a large new vacancy recently appeared at 1600 McConnor Parkway, a 300,000 square foot office building fully leased by Optum, a subsidiary of healthcare and insurance company UnitedHealth Group. In November, the owner of the building suddenly started advertising that the whole building was available. Sources familiar with the offer said it came after Optum informed Utah-based property owner Bridge Investment Group that it planned to vacate the building with an upcoming option to end the deal. his lease. Spokespersons for Optum and Bridge could not be reached.