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10 things to know now about the Downtown Chicago market

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From tenant amenities to buildings with big floor plates, and the Fulton Market frenzy. Here are the 10 things to know now about the Downtown Chicago office market.

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10 things to know now about the Downtown Chicago market

  1. 1. tenthings to know now about the downtown Chicago market 1. Tenant amenities pay off Over 25 million square feet of downtown Chicago office buildings have been renovated since 2011. Recently completed renovations prove that companies are willing to relocate to amenity-rich buildings to cultivate a productive environment and attract future workers. At 200 W. Jackson, a stunning four-season hospitality lounge dubbed “The Notch” is in what was once a Class C office building. And, Nielsen just signed a 215,000-square-foot lease, relocating its suburban operations later this year. 2. PMD zoning emerging submarkets The case is currently under review by the City of Chicago to reverse the PMD zoning to DX-5 mixed-use on Goose Island and the Clybourn Corridor. While the decision remains uncertain, Sterling Bay purchased another two riverside properties just north of the Home Depot on North Avenue earlier this year. The 2.2-acre parcel adds to their existing portfolio, which includes the massive 28-acre site of the former A. Finkl & Sons property. They aren’t the only developer, either. R2 Companies has several planned projects on Goose Island, including a new high-tech multi-office complex on N. Branch Street. If the City should decide to reverse the PMD zoning regulation, we could be looking at two of Chicago’s newest emerging submarkets. 3. The great corporate migration The past four months saw the announcement of two headquarter relocation plans and one suburban migration. Hickory Farms relocated its headquarters to Downtown Chicago from Ohio, following the footsteps of EXP, relocating from a Toronto, Canada suburb. Nielsen is also consolidating suburban operations to downtown into 215,000 square feet at 200 W. Jackson. All were announced in early 2017, leaving many to wonder what other companies will soon follow suit. 4. Elevating old office building game Renovations are underway at some of Chicago’s dated office buildings to make them competitive again. One N. Dearborn, 123 N. Wacker and Two N. LaSalle are creating new tenant experiences through building modernization and amenity-rich offerings. Perhaps the most ambitious and expensive repositioning is the redevelopment of Willis Tower—the $500-million renovation aims to transform the iconic 43-year-old tower into the Loop’s next great destination. 5. Development update All office projects under construction cluster in the west. Two Class A office towers are underway in the West Loop, and further south is the massive renovation of the Old Post Office. Fulton Market has five office projects underway, including the new McDonald’s global headquarters. Another Sterling Bay office project, 210 N. Carpenter, broke ground on March 31, adding 224,200 square feet by late 2018. It also happens to be Fulton Market’s first spec. building. As the saying goes, “If you build it, they will come.” 6. Tech leasing ticks up New entrants and home-grown tech have even more to offer to the office market. Reaching a rapid growth stage in January, Outcome Health inked a 385,000-square-foot lease at 515 N. State. Plus, recent expansion leases from HomeChef (29,000 s.f. at the Wrigley Building) and SpotHero (28,000 s.f. at The National) show the strength of Chicago’s tech scene. Not all of the recent tech leasing is organic; new entrants are also choosing to establish a presence here. Both Glassdoor and Climate Corporation are moving into Fulton West for a combined 75,000 square feet this summer. 7. Fulton Market frenzy Within the past year, McDonald’s announced plans to build its new 600,000-square-foot global headquarters. Glassdoor, Dyson and Climate Corporation will open offices this summer at Fulton West, about three blocks west of Google. Average gross asking rents for office space range between $30 for Class B office lofts to $43 per square foot for new construction. Recently announced, 210 N. Carpenter will add 224,500 square feet of Class A office by late 2018. Two to three other similar projects are likely to break ground this year. All eyes are on this trendy area. 8. Buildings with big floorplates Big floor plates have become Chicago’s most desirable office space. Buildings with 60,000- to 100,000-square-foot floor plates now have an average occupancy of 94.0 percent, with gross asking rents fetching as high as $45.00 per square foot. Compared to 2012, rents have ballooned by 64.0 percent—triple the rent growth of the balance of the CBD market. Owners can send thank you notes to tech companies. 9. Sublease market status Many oversubscribed tenants have started shedding excess space, and real estate- conscious tenants are gravitating toward this second-generation space. Demand will continue to trend up as firms look to limit capital exposure, become more efficient and focus on profitability. Through the first quarter, there were 1547 sublease spaces totaling 3.5 million available square feet—slightly up from the 154 spaces totaling 3.4 million square feet at year-end 2016, but below the market peak of 191 subleases totaling 3.7 m.s.f. in Q4 2015. 10. Influx of educated millennial talent As the number one city in which educated millennials are choosing to move downtown over the suburbs, Chicago has seen a 15.3-percent growth of educated millennials in its downtown core in the past five years. The influx of millennials has altered the demographics of the city, as 79.0 percent of Chicagoans living downtown now have a bachelor’s degree or higher. Chicago is a competitive option to attract and retain this crop of top talent when compared to its expensive coastal peers, San Francisco and New York. ©2017 Jones Lang LaSalle IP, Inc. All rights reserved.

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