Tom’s Recommended Reading for the Week

Check out the top news in Chicago commercial real estate before heading into the weekend!

1. GoHealth subleases River North building near HQ – In the latest real estate deal involving a fast-growing technology company, GoHealth LLC added space in River North in a building that backs up to its headquarters. GoHealth subleased a three-story, 42,000-square-foot loft building at 219 W. Superior St., said CBRE Inc., which represented the health care tech firm in the transaction. GoHealth accomplished a difficult feat in finding a larger block of space in River North, the city’s tightest office market. The area has 10.8 percent vacancy, well below 14.1 percent for all of downtown, according to Los Angeles-based CBRE… Crain’s Chicago
   
2. Sale clears obstacle for potential Wacker Drive tower – At five stories, the headquarters of General Growth Properties Inc. is a stump in the forest of office towers that stand tall on Wacker Drive. But the building’s owner has moved a step closer to replacing the stubby structure with a high-rise of its own. A venture of Howard Hughes Corp. paid $12.3 million for the 43,000-square-foot parcel beneath the building at 110 N. Wacker Drive, according to Cook County property records. Dallas-based Howard Hughes has said it wants to redevelop the property, a more attainable goal now that it owns both the building and land underneath it… Crain’s Chicago
   
3. The New Business Casual Is Still Uptight – Every workplace imposes certain behavioral standards on its workers — dress this way, talk that way, get lunch here and not there. Learning these standards is, we’re told, a big part of being successful. But what do we do if they’re constantly shifting, or if we’re not even sure what they are? At The Billfold, Megan Reynolds tackles one aspect of this question — the meaning of the word “professional.” As she notes, many of us have certain received ideas about what counts as professional — she mentions “pants that are not jeans” and “org charts… The New York Times 
   
4. With two LaSalle Street hotels already, Reschke comes back for thirds – After developing one hotel on LaSalle Street and starting another last year, Michael Reschke is laying plans for No. 3, the latest in a wave of new hotels planned for the city’s financial district. The Chicago developer plans to convert part of a vintage office building at 208 S. LaSalle St. into hotel rooms, according to an operating agreement for the property filed this month with the Cook County Recorder… Crain’s Chicago
   
5. Workspace Variety’s the Key – A mix of workspace options is essential improving worker productivity, CBRE Group suggests in a new report. Titled “The Evolving Workplace: How US Office Space is Changing,” the study suggests a direction for the future of office-using tenants. “Organizations that provide flexibility and choice will create greater office efficiencies and higher levels of employee satisfaction,” the report states. “By more intensely utilizing their assets, they are able to reinvest in technology and a suite of services that can make the new workplace environment a reality for their workforce… Globe St.

Tom’s Recommended Reading for the Week

Check out the top news in Chicago commercial real estate before heading into the weekend!

1. CBRE acquires Chicago’s U.S. Equities – Chicago boutique brokerage U.S. Equities Realty LLC has been acquired by CBRE Inc., the world’s largest commercial real estate firm, following months of rumors of a deal swirling in local real estate circles. Los Angeles-based CBRE today completed the deal for the U.S. business of the firm that was founded in 1978, the companies said. Terms of the deal were not disclosed. The deal does not include U.S. Equities’ Latin American business… Crain’s Chicago
   
2. Chicago slowly, but steadily, increasing construction activity – Although not as strong as the robust economic recoveries experienced in Texas and along the West Coast, Mathew R. Dougherty, P.E., executive vice president and regional manager –Midwest at McShane Construction Company, says Chicago and the Midwest Region has experienced a slow, but steady increase in construction activity over the past 12 months. “Most notably, two large market sectors, industrial and multi-family, comprise the majority of new construction activity,” he said. “Within the industrial market, there has been a shift over the past 18 months in supply and demand… RE Journals
   
3. Uncle Sam wants ideas for State Street buildings – The federal government is trying to figure out what to do with a stretch of State Street that’s not so great. The U.S. General Services Administration is seeking ideas for four vacant and vintage buildings it owns on the 200 block of South State Street, the beginning of a process that could lead to an opportunity for developers to revitalize a key Loop block that progress left behind. The GSA, which runs the Everett M. Dirksen Federal Office Building & Courthouse behind the buildings, took them over nearly a decade ago, thinking it might need the properties for a new office building… Crain’s Chicago
   
4. Publisher books suburbs’ second-largest office lease of 2014 – Textbook publisher Houghton Mifflin Harcourt Co. leased 106,000 square feet in Itasca, the second-largest office lease this year in the Chicago suburbs. The Boston-based publisher and educational content producer signed a 12-year deal at 1 Pierce Place in the west suburb and plans to move 340 employees there from Rolling Meadows in October 2015, a company spokeswoman said. The employees, who work in product development, research, sales, marketing and customer service, will move from 110,000 square feet Houghton Mifflin leases in the Atrium Corporate Center, 3800 Golf Road in Rolling Meadows, the spokeswoman said… Crain’s Chicago
   
5. Sterling Bay Expanding Into Midwest – As reported yesterday in GlobeSt.com, Sterling Bay Companies just entered into a partnership with New York-based J.P. Morgan Asset Management that makes the latter a co-developer of the many Near West Side buildings Sterling has bought since 2012. And today Sterling principal John Gavin tells GlobeSt.com that such a partnership was essential. Renovating the more than 20 assets, which includes the giant Fulton Market Cold Storage building at 1000 W. Fulton and Fulton West, a portfolio of existing and partially completed office, retail and parking facilities, would run up about $750 million in project costs, far beyond Sterling’s capacity if it were to go it alone… Globe St.

The technology scene is witnessing tremendous growth. According to Built in Chicago, funding to Chicago start-ups has increased 169% from 2012 to 2013. This additional funding has the best of the best go from fledging idea to growing company in no time. With the growth, operational challenges start to multiply as well. Perhaps the biggest of these challenges involves real estate, which is one of the largest line items on a company’s balance sheet.

In a recovering economy where office space is getting tighter, the challenges are heightened. The right space at the right price can foster a culture to help you attract the talent necessary for success. The wrong location or a lease under dubious terms could undermine the very viability of a business.

Major company relocations from the suburbs to downtown by Motorola Mobility and Gogo, as well as expansions by kCura, Fieldglass, Vivid Seats and Punchkick Interactive illustrate that the pendulum is beginning to swing in favor of the landlords, especially in the River North submarke

The competitive office conditions may be particularly acute for smaller, entrepreneurial companies that often focus narrowly on the brick and timber loft buildings common in River North. With a total inventory of just over 17 million square feet, the River North submarket continues to record positive net absorption, which helped keep the vacancy rate at only 9.4% at the end of the first quarter

While landing the right space is tough, here are a few considerations that can help companies stay nimble and successfully navigate through the commercial office space market in downtown Chicago…

Read Full Report

Tom’s Recommended Reading for the Week

Check out the top news in Chicago commercial real estate before heading into the weekend!

1. KBS Closes $850 Sale of 300 N LaSalle – Officials from KBS Real Estate Investment Trust II said yesterday that they had closed on the sale, first announced in May, of the 300 N. LaSalle building to the Newport Beach, CA-based Irvine Company for $850 million, the most ever paid for a Chicago office building. The deal was also the third-largest office building transaction in the US this year, according to CoStar. KBS paid $655 million for the 60-story, 1.3-million-square-foot tower on the Chicago River back in 2010… Globe St.
   
2. LaSalle Investment Management to buy 101 N Wacker – LaSalle Investment Management has agreed to pay $210 million for a 24-story office tower on Wacker Drive, another sign of the frothy downtown office sales market.The deal for 101 N. Wacker Drive continues the flow of foreign money into downtown office properties, including recent acquisitions by Japanese and Chinese ventures. LaSalle is buying the building from Hines Interests L.P. on behalf of German investors, according to people familiar with the transaction… Crain’s Chicago
   
3. More New York Companies Experiment With Innovative Office Space – Alexander Saint-Amand admits he used his old desk to store his stuff: extra neckties, books and water bottles. As of last week, that became impossible because Mr. Saint-Amand no longer has a permanent desk at Gerson Lehrman Group Inc., the company he leads as chief executive. Like everyone else in the 250-person office, Mr. Saint-Amand is now assigned only a laptop, a headset and a locker. GLG’s new office design offers an array of workspaces—from comfortable couches to high stools at a barista-staffed coffee bar to single-occupancy glass booths… Wall Street Journal
   
4. Office Lags Outside Energy, Tech Markets – For office markets with strong concentrations of energy or tech tenants, the recovery in demand has been equally strong. Outside of those markets, however, it’s considerably less robust, Albert Lindeman, SVP with Sperry Van Ness, tells GlobeSt.com. “The coasts are doing very well,” says Lindeman, citing New York City and San Francisco. “When you get into the energy sector, Denver and the Texas markets are growing dramatically.” In secondary markets such as Charlotte as well as Lindeman’s home base of Chicago, the expansion of tech tenants is contributing to growth… Globe St.
   
5. Sterling Bay Companies and IPDNA Companies to revamp Chicago’s historic old Main Post Office – The rumors have been put to rest about Chicago’s old Main Post Office building. Officials from Sterling Bay Companies came forth recently announcing a partnership with Chair of International Property Developers North America (IPDNA), owner Bill Davies, to redevelop the property. Andy Gloor, managing principal of Sterling, told Illinois Real Estate Journal, that IPDNA has done an enormous amount of due diligence on the property in the last five years… RE Journals

Tom’s Recommended Reading for the Week

Check out the top news in Chicago commercial real estate before heading into the weekend!

1. DRW scraps plan for 17-story hotel on Fulton Market – Trader Don Wilson filed plans with the city for a Brooklyn Bowl bowling alley and nightclub on West Fulton Market, with one major omission: a 17-story hotel. The development arm of Mr. Wilson’s Chicago-based DRW Holdings LLC filed an application with the city June 25 to change the zoning for the property at 832-856 W. Fulton Market, where DRW plans the bowling alley from New York-based Brooklyn Bowl. But the application limits the development to three stories and makes no mention of the hotel that had been included in previous plans. The building would have stood 17 stories with many as 200 rooms. In the plan filed with the city, maximum height would be 50 feet… Crain’s Chicago
   
2. Engagement Is Open Space’s Driving Force – Different degrees of open space in an office environment are acceptable to different firms, and it’s the design team’s job to determine the which degree matches the clients’ needs best, Heidi Hendy, founding principal of H. Hendy Associates, tells GlobeSt.com. But a uniting force behind all degrees of open-space work environments is the need for engagement among staff members. As GlobeSt.com reported in May, the locally based interior architecture firm has completed the construction of Monster Energy’s new headquarters building at 1010 Railroad St. in Corona, CA… Globe St.
   
3. GE spinoff moving to Loop office complex – The owner of a 60-story Loop office complex brought in a General Electric Capital Corp. subsidiary to help offset the future loss of its two largest tenants. Retail Finance International Holdings Inc., a consumer finance unit of Norwalk, Connecticut-based GE Capital, signed a 76,000-square-foot lease at 227 W. Monroe St. in Franklin Center, according to a person familiar with the deal. The lease closed in the second quarter, and the GE unit is moving from office space the company occupies at nearby 500 W. Monroe St., the person said… Crain’s Chicago
   
4. The Roll of the Office Cycle – In many ways, the office sector’s position along the real estate cycle resembles that of the 2005/2006 period. The market is rising at a steady pace, as it did in 2005 and 2006: average national vacancies, which have fallen for four years straight, are under 12 percent and closely aligned with 2005 levels. Investors are once again underwriting strong income growth, as rents signed at the bottom of the market will receive mark-ups when they roll to market rate—at least at the better-quality assets. Liquidity is strong, with trading volume well above historical averages and nearly back to 2007 peaks (when the assets of the former Equity Office Properties portfolio ping-ponged between investors)… NREI
   
5. Office Recovery Spreads Across US – During the second quarter, the US office sector reached a milestone on its road to a true recovery, according to a new research by JLL. Although office users and landlords reported a lot of activity, it was perhaps more significant that increased velocity was seen in markets far beyond the gateway cities and areas like New York, San Francisco and Silicon Valley. “First and foremost, we saw in the second quarter about 14-million-square-feet of net absorption,” John Sikaitis, JLL’s managing director for local markets and office research, tells GlobeSt.com, a boost of about 38% from the second quarter of last year. Overall, tenants leased 61.9-million-square-feet of space during the second quarter… Globe St.