It wasn’t too long ago that Chicago’s downtown office market was booming.
Leasing activity had climbed to new heights as the growing ranks of office workers increasingly opted to live near their jobs, and investors and developers were sinking big money into mixed-use skyscrapers throughout the Loop and adjoining areas.
But Covid-19 and civil unrest that was unleashed in the wake of the death of George Floyd in police custody has changed the market outlook.
“A 20 to 25 percent drop in (users of) the downtown office market has titanic implications for the character of our city,” Joe Schwieterman, director of DePaul University’s Chaddick Institute for Metropolitan Development, told Crain’s. “If you diminish the size of the corporate workforce, that ripples through just about everything.”
There are already plenty of examples of the market slipping.
Steven Galanis, the CEO of celebrity video shoutout company Cameo, in mid-March was a day away from signing a 10-year office lease in Fulton Market. But he held off due to the pandemic, and now has zero plans to sign any leases anywhere.
“I didn’t believe that people could be effective from home,” Galanis told Crain’s. “But I’ve been pleasantly surprised by the output of my team and how well people are working. I’ve even come to enjoy it.”
Local tech companies will also have less incentive to sign traditional office leases. Narrative Science just put its Loop office space on the sublet market.
“We are now much more open than we have been in the past to hiring remote employees,” CEO Stuart Frankel told the outlet.
The increase in work-from-home could permanently change the dynamics that allowed for downtown’s incredible rise, Joel Kotkin, an urban studies expert at Chapman University said. He told Crain’s he foresees “hybridization,” in which workers still go to downtown offices for work, but will do so less often. It would be a hit for downtowns, which largely require a critical mass to survive.
“I think this trend we had for about 20 years where there was a lot of pressure to move people into the core of the city, that’s pretty well stopped,” he said. [Crain’s] — James Kleimann