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.

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.
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