Office Users On Why They Are Comfortable Signing Leases Again

The quick turnaround in the city’s public health metrics means it is decision time for Chicago office users. The emptying out of the downtown over the past year, and the uncertainty over when the crisis would end, led many companies to put off signing new leases. But with the pace of vaccinations ramping up starting in February, plans to move or extend leases can now be dusted off.

Some observers wondered last year if the office environment was on the verge of profound change, with companies deciding to perhaps shrink their footprints or abandon the office entirely even after the pandemic, since many companies found workers were just as productive at home, thanks to technology.

There’s little relevant data available, as for much of Q1 the downtown was still quiet as office workers typed away and held Zoom calls on home computers. But more firms are dipping their toes in the water, taking downtown tours, and a few have already signed new leases.

Leasing activity is likely to ramp up if coronavirus infections continue to fall and companies start opening up and begin making plans, according to Cresa Managing Principal Allen Rogoway. But making plans won’t be easy, as every firm will go through a trial-and-error period when they figure out how to balance the need to rebuild their office culture while allowing some workers to stay home.

“The only silver lining in all this is that companies will have to make decisions based on what is most productive and helps boost performance versus the old way of just mandating people be present for a certain number of hours every day in a physical office,” Rogoway said.

“I’m not hearing too many people saying, ‘Zoom is great, so we don’t need any space,’” he added. “And I don’t think companies are coming into this thinking that they will definitely shrink so much as finding different ways to operate.”

Bisnow spoke to several firms that inked deals in the past couple of months for new office space in downtown Chicago. Each is keeping an open mind about finding the right mix between in-office and work-from-home strategies. Another thing they have in common is that concerns about the coronavirus were just one factor among many in their leasing decisions. The other factors were the same most office users considered in the pre-pandemic era, especially how certain neighborhoods like Fulton Market or building amenities were more likely to help attract talent.  

The pandemic delayed but did not derail long-held plans by Calamos Investments to establish another office. The Naperville, Illinois-based asset manager was examining options before the coronavirus hit, and like many firms before the crisis, it eventually decided to tap into the downtown talent pool and give employees the option of working in the city’s central business district.

Calamos Senior Vice President Kenneth Witkowski, who directs the firm’s real estate portfolio, said he believes that after the coronavirus recedes, younger recruits will still want to live in neighborhoods close to downtown. That focused the company’s attention on possible sites in Fulton Market, River North and the Loop.

But Fulton Market’s mix of new construction and historic industrial structures provided the atmosphere Calamos thought would attract talent, Witkowski said. The company signed a lease earlier this year for the top floors of Fulton East, a building just opened at 215 North Peoria St. in Chicago's Fulton Market area, which it expects to occupy between the end of 2021 and Q1 2022. The firm will keep its Naperville headquarters.

It isn’t as if the pandemic had no impact on the company’s choice. Witkowski said Fulton East was appealing due to its boutique scale, as well as its advanced health and safety features. The building is 12 stories, so any employees worried about packing themselves into an elevator could take the stairs instead. And Fulton East developer Parkside Realty spent much of last year outfitting the tower with advanced air filtration systems, a hands-free system that allows users to summon elevators by pressing buttons with their feet and a touch-free key access system. In addition, each floor includes an outdoor balcony, so fresh air and space to social distance are available.

“They are doing a lot of the right things to make associates comfortable as we integrate back into the work environment,” Witkowski said.

Getting a lease signed while the pandemic was still a concern also made financial sense, he added. As the company searched the city for new space, landlords were, in general, more generous with proposed rental rates and concessions.

“If you’re looking for opportunities in the city or suburbs, this is a time when good-credit [tenants] have the ability to be more aggressive as they look for a real estate deal,” he said. “It’s definitely an aggressive market for anyone looking for space.”

Law firm Ice Miller also found affordable deals as it searched for new downtown space, according to Managing Partner John Burke. The firm recently doubled in size to 44 attorneys and began its search for a bigger office just before the pandemic-related shutdown. The coronavirus delayed the search, but when a space opened up just above its 35th-floor office at 200 West Madison St., the firm decided to stay and sign a long-term lease extension and expansion with owner BentallGreenOak. The deal will increase its current 23K SF to 36K SF.

“I would definitely say we got a fair deal for the space,” Burke said.

But cost wasn’t the only factor that led Ice Miller to pull the trigger on securing new space. Although the firm had a partial work-from-home strategy even before the pandemic, with some people choosing to work from home several days a week, Burke said it needs an office to promote collegiality. Its new space on the 36th floor has a cafeteria, and unlike many other firms, the people at Ice Miller traditionally gather at lunch to share a meal.

“It’s a nice way to break up the day and check in with people,” Burke said.

The need to promote collegiality and maintain a corporate culture is also why Sammons Financial Group felt comfortable committing to a new space, according to Steve Palmitier, president and chief operating officer of its life division. It recently signed a new lease for 10K SF at The Old Post Office, directly across the street from its present location at 525 West Van Buren St., and anticipates taking occupancy in early 2022.   

“We’re a company with a very strong culture, and we felt it was important for a majority of our employees to be back at work,” he said.

Palmitier said it was important for him and other leaders to sit around a conference table, brainstorming ideas with staff members, especially with those who themselves could be future leaders. That’s the only way to gauge their personality and see how they interact with co-workers, he said.

“You don’t see that on a Zoom call, it doesn’t come out in the same way,” he said.

Palmitier added that Sammons won’t rush things. It is still considering a hybrid strategy, with some spending time at home while others come back.

“It‘s going to take a while to move completely out of Zoom,” he said.     

Some attorneys and support staff at Ice Miller began returning to work a few weeks into the shutdown, at least for several days per week, Burke said. Their numbers have steadily increased as more get vaccinated.

“Some people haven’t come back at all, but the trend is moving upward,” he said. “We encourage them to come in if they’re comfortable.”

Like many other firms now trying to strike a balance between in-office and work-from-home strategies, Burke said Ice Miller will have to feel its way forward as more of its people can return. But the new, expanded office will give it the flexibility to adapt to whatever works best.

“We’ll be in a good position if it goes back to the way it was before the pandemic or if people just come in once or twice a week,” he said.   

The firm also has a task force looking at possible designs for the new space, but Burke said he isn’t sure how the layout will change as a result of the coronavirus. Ice Miller was already planning to turn corner offices into collaborative spaces open to everyone, but the pandemic did highlight the need to allow employees their own private spaces.

“The idea of a lot of open space in the Covid era doesn’t seem as appetizing as it did two years ago,” Burke said.

The switch to Zoom hearings by the courts could result in other permanent changes to office design for law firms. Burke said Ice Miller will likely set aside special offices where attorneys can attend court via Zoom, as judges have found the technology an efficient way to handle court appearances and are unlikely to go back to the old ways even after the pandemic subsides.  

“I don’t think we’ll ever have to see 12 lawyers have to cram themselves into an elevator at the Daley Center again,” he said.

At the same time, Burke said the firm doesn’t want to overreact and completely overhaul its office space. The spread of effective vaccinations means the coronavirus could end up being considered a one-time crisis.

“If there is another Covid outbreak, we have protocols in place so people can work from home again, but we’re not going to build around a pandemic; we’re going to build for the future.”