Chicago Office 5 Years Post-COVID

From “How the COVID-19 Pandemic Changed Chicago” – Crain’s Chicago Business

The Commercial Real Estate Properties That Survived to Thrive

No piece of the commercial property landscape is still feeling the pandemic fallout like the office sector.

“We’ve moved on from a period of uncertainty to a period of conviction” among companies assessing their post-pandemic workspace needs, says Jim Adler, executive vice president at real estate services firm NAI Hiffman. “And what they want is an environment that’s alive.”

Companies’ long-term leases continue to burn off, and new work patterns are pushing the majority to shrink their footprints. This has driven vacancy to a record high and saddled Chicago with a deep pool of distressed properties, hampering downtown’s recovery.

Even with President Donald Trump and corporate giants like Amazon pushing for a return to more regular in-person work, most companies today are committing to a flexible work structure.

“We’ve moved on from a period of uncertainty to a period of conviction” among companies assessing their post-pandemic workspace needs, says Jim Adler, executive vice president at real estate services firm NAI Hiffman. “And what they want is an environment that’s alive.”

Additional thoughts from Adler:

• Owners who are capable are continuing to invest in building improvements and experiences, as well as Tenant concession packages. Its very competitive out there and they know they need a building that’s alive in order to win Tenants.
• The eye test in the suburbs is full parking lots. Almost always, those are filled with companies who signed leases in the past 5 years. There are still some large corporate empty campuses and spaces that need to be dealt with, either through redevelopment or reinvestment, but that will take time.
• 2024 experienced high interest rates, high inflation, and typical election year sluggishness in the office market. But we are seeing the recapitalization of some of those troubled loans, which is also representative of the conviction investors have in high quality real estate. The re-set in the office sector isn’t happing overnight, but it is happening, which is a good thing for overall market health.
• As we sit here 5 years later, I would say we would say the glass is half-full.

Other property types have staged big comebacks a half-decade after the crisis thumped them.

Hotel owners that shut their doors in 2020 and didn’t welcome back large gatherings for about 15 months regained their footing with so-called revenge tourism.

Some products of the pandemic era are now the norm, like widespread use of technology for guest check-in. Yet practices that faded during the crisis, like daily housekeeping, are coming back. And while hotel revenues are up, so are expenses from higher labor and materials costs.

Apartment landlords – which slingshotted from bust to boom during the first year of the pandemic – are now enjoying high rents and strong demand as elevated interest rates make it hard for renters to buy homes.

Those same high borrowing costs have held back new development, creating a lack of new supply in 2025 that is likely to push rents higher.

Another group riding high after five years: warehouse owners. The pandemic ushered in a golden age for industrial real estate as companies bolstered supply chains to serve more online shopping.

Demand has slowed, but lasting consumer behaviors are keeping vacancy near a record low and rents pushing higher. New tariffs could also give industrial landlords a boost if they push more companies to onshore or reshore operations.

The shopping shift that lifted warehouse demand has also left a mark on the retail sector. Consumers have shown retailers they still want stores, even if they have smaller footprints, says John Vance, principal of Chicago-based retail brokerage Stone Real Estate.

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.