UPDATED March 28, 2022, 5:50 p.m.: Single-story office buildings, once regarded as less appealing options for tenants, are increasingly sought after as companies are willing to pay more for less crowded space during the pandemic.
Leasing activity rose to 1 million square feet for the single-story office market in suburban Chicago at the end of 2021, from the previous year’s 991,000 square feet, according to NAI Hiffman. The vacancy rate for the 22 million single-story office buildings in Chicago’s suburbs at the end of 2021 was 15.9 percent, compared with the overall suburban market of 23.6 percent during the same period.
“Single-story has never been the sexiest space, but Covid has made it shine,” said Steve Chrastka, NAI Hiffman executive vice president. “There are going to be groups and people that don’t want to be in elevator buildings anymore.’’
While suburban offices were among the hardest hit by the pandemic, single-story properties held their own as features such as control over HVAC systems, direct entrance to workspaces, less crowded lobbies, and no elevators appealed to tenants, raising the profile of these low-slung properties.
Occupancy at Concourse Chicago, a 165,000-square-foot single-story office building at 8601 West Bryn Mawr Avenue near O’Hare Airport rose to more than 90 percent this year from 60 percent when the pandemic struck in 2020.
The Ministry of Foreign Affairs of El Salvador and engineering firm GEI Consultants, the latest tenants that signed leases at Concourse Chicago, paid about $27 per square foot, a 50 percent increase from about $18 per square foot in 2018, said Jonathan Berger, founder of Berger Asset Management that bought the property four years ago.
In the long-term, landlords of single-story offices that are usually brown brick buildings with relatively low rent face a task of upgrading amenities to lure tenants. Class A buildings that were in high-demand over the past two years provided updated ventilation systems, large common areas, outdoor lounges, and fitness centers to allow social distancing and give employees incentives to come to offices.
Suburban single-story offices at prime locations with close proximity to airports, highways, and easy access to public transportation pushed up rents. Tenants paid more than $35 per-square-foot to rent Class A space in the O’Hare submarket last year, according to Colliers International.
“As long as you have owners willing to invest in the sites, I think single-story offices, depending on their location, will continue to pull tenants out of higher-end office buildings or midtier office buildings that are not amenitized,” said Chrastka.
Read more
Commercial
Chicago
Nevada warehouse developer in talks to buy Allstate’s Chicago HQ
[Bisnow] – Connie Kim
CORRECTION: An earlier version of this story misidentified the source of data in the second paragraph. It was from NAI Hiffman.