April 2025
Amenities Key to Wooing Workers Back to Office
Leasing Picks Up
Even as they return to the office, many companies continue cutting real estate costs, and nearly 30% of downtown office space was either empty or available for rent in the first quarter, a record high, according to commercial real estate firm Savills.
But tenants also signed a flurry of leases, taking 2.8 million square feet, a 43.4% increase over the same period last year. And nine of the 10 largest leases were in Class A buildings, including the newest trophy towers such as the 17-story 167 N. Green St. in Fulton Market.
Older properties fare the worst, especially in the Central Loop, which had a 34.6% availability rate, compared to 24.1% in the Far West Loop and Fulton Market.
“The Class A buildings are getting good amounts of activity because companies now seek the best quality offices for their employees,” rather than the most affordable, said Jim Adler, executive vice president of commercial real estate firm NAI Hiffman.
The first quarter flurry followed a strong fourth quarter. Downtown companies signed deals for 2.6 million square feet, more than double the leasing activity during the fourth quarter of 2023, according to commercial real estate firm Bradford Allen.
“Toward the second-half of last year, we saw some good leasing momentum throughout the market, both big and small deals,” said Bradford Allen Managing Director Justin Kessler. “I think people are just getting comfortable with the current state of things and are now interested in trying to make some moves.”
Many suburban Class A properties are also doing well, even though the suburban market is in the doldrums.
Schaumburg Corporate Center, a one-million-square-foot, three-building complex near Woodfield Mall, secured nearly 200,000 square feet in new leases last year, bringing it to 78% leased, said Adam Parritz, a director of Glenstar, which manages the property, owned by Affinius Capital. Glenstar also in 2024 recapitalized with a new investor Presidents Plaza, a two-tower complex near O’Hare International Airport. The complex recently underwent a $34 million renovation, and includes a refurbished three-story atrium lobby and three-level health club.
The northwest suburban vacancy rate was more than 33% at the end of 2024, according to commercial real estate firm Colliers.
Many Schaumburg Corporate Center employees now come in three to four days a week, packing by mid-week a 17,000-square-foot glass-and-steel atrium, a big change from the pandemic’s early days.
“If you were going into the office then, you were the only one at the lunch table,” Parritz said.
Deep Trouble
Finding attractive offices is not easy, even with so much vacancy. Dozens of downtown buildings are in deep financial trouble and carry debt loads greater than their current value, with owners unlikely to pay for new amenities or needed renovations.
“Most of them have to answer to a lender, and that puts a limit on what they can spend,” Adler said.
But some troubled buildings are getting sold at deep discounts to new owners who can spend money on frills and upgrades, said Dougal Jeppe, executive vice president of Colliers, who represents downtown office tenants. Nearly two-dozen buildings changed hands in 2024, including seven in the last quarter.
“I think there are going to be more building sales (in 2025) and it will ultimately help the market,” he said.
Recent sales include the 707,000-square-foot building at 230 W. Monroe St., bought by Menashe Properties for $45 million in 2023, a little more than one-third its 2014 sale price, and 70 W. Madison St., a 1.4 million-square foot tower, bought in late 2024 for $85 million, a steep discount from its $374 million sale in 2014.
Boston-based Beacon Capital Partners last year bought 333 W. Wacker Drive, the iconic curved glass tower on the Chicago River for $125 million, and launched several improvements, including a rooftop deck, conference center and lounge.
“In that case you had a well-capitalized owner that was able to get the property for well-below market value and improve the building enough to attract tenants,” said Robert Groholski of Dykema, a national law firm.
Glenstar and an investment partner picked up early this year the 767,000-square-foot building at 200 S. Wacker Drive for about $68 million, and plan $30 million in improvements.
“We are excited to plant a flag in the West Loop,” Parritz said.
But office workers can’t count on seeing renovations if their building gets sold, Groholski said. Some new owners don’t have enough capital, and high interest rates and the recent economic uncertainty around tariffs makes many banks leery of lending money.
“They’re looking for owners to put in large amounts of equity, and that might not be economically feasible,” he said. “And obviously, what’s happened in the past few days could have a chilling effect on lending.”
Click here to read the full story from The Chicago Tribune.
About Hiffman National:
Based in the Chicago area, with an additional five regional hubs and 30 satellite offices, Hiffman National provides superior property management, project services and accounting services to a diverse portfolio including office, medical office, retail and industrial properties nationally. The firm’s comprehensive property management platform and attentive approach to service contributes to client NOI and has helped the firm to more than double in size in five years. Hiffman National is an award-winning company with more than 250 employees strategically located throughout North America.
About NAI Hiffman:
NAI Hiffman is one of the largest independent commercial real estate services firms in the US, with a primary focus on metropolitan Chicago, and part of the NAI Global network. We provide institutional and private leasing, property management, tenant representation, capital markets, project services, research, and marketing services for owners and occupiers of commercial real estate. To meet our clients’ growing needs outside of our exclusive NAI Hiffman territory, we launched Hiffman National, our dedicated property solutions division, which provides property management, project services, and property accounting services across the country. NAI Hiffman | Hiffman National is and award winning company headquartered in suburban Chicago, with more than 250 employees strategically located throughout North America.
