Top women leaders from Commercial Real Estate Industry Fireside Chat

Chicago Commercial Real Estate Chat Recap from Industry Leaders at ULI CHICAGO’s 5th Signature Event

April 6th was a highlight for the Chicago commercial real estate industry where we enjoyed a fireside chat with two of our industry leaders, Kim Adams and Mary Ludgin. They shared their career progression with key takeaways on rejection, perseverance and what to expect on performance in various asset classes. Not only was the featured speaker, Mary Ludgin, phenomenal but, wow, what amazing talent in moderating by Kim Adams! The mutual respect and genuine desire for each other to succeed from these two competitors was inspirational.

On rejection and perseverance, Mary shared that she was a political science major with no real job prospects. While she hoped to work in commercial real estate, she was met with rejection. From there Mary went to work for Harold Washington. Upon his death, she finished her dissertation and took a job she loved at Dominick’s ensuring that she remained near commercial real estate while continuing to strive for an industry position. A year into her job, JMB, surprisingly called her back with an offer for her dream job in research and investment. By embracing each of her bosses’ jobs as they left, Mary climbed the ranks of JMB which is now Heitman.

 A few valuable insights she shared on asset classes is to expect storage and apartments to perform well given the nature of their short-term leases which will outperform in an inflationary environment. Mary saw this trend in 1996 and now has 15% of their core fund invested in medical office and storage with an additional large percentage invested in multi-family real estate. Recognizing the opportunity in niche asset classes beyond the major categories earlier than most of the industry was a key “win” for Mary. However, Mary’s unique humility shined through as she also admitted to not anticipating the hot industrial asset class due to its historical poor ROI. She taught us that experience can be wisdom as well as create a blind spot.

So, who are the other winners? Surprising to many, physical retail is a winner due to the fulfillment trend to buy online and pickup in store. Last year showed more store openings than closings. Trophy office is a winner seeing low cap rates and strong leasing with great examples being 110 N Wacker and the Old Post Office building. The main loser “soul sucking 70’s and 80’s buildings”. These will no longer be office buildings going forward. On LaSalle Street, operating expenses are higher than the net operating income. The City of Chicago has been advised to use its TIF to support redevelopment as solutions are expensive and returns are minimal making underwriting of these projects nearly impossible.

Valuable Advice for Commercial Real Estate professionals

Mary’s practical advice… Be credible. Admit if you don’t know something and come back after you know. Be accountable. Have humility and own your “bad calls.” Each of us makes a mistake or two at points in a storied career. Listen to younger colleagues. Bring your whole self to work. Be authentic.

Kim ended us with Frank Lloyd Wright’s, “The good building is not one that hurts the landscape, but one which makes the landscape more beautiful than it was before the building was built.”

Office Space and what will bring employees back…

CoeoSpace provides its “take” on Cohesion’s blog titled “Want to improve your building’s indoor air quality? We’ve got the solution.”  CoeoSpace then further explores what will bring office tenants back to their office space.

Learn more here about how to bring employees back to enjoy the workplace!

Is commercial office space for lease “dead”? What will allow employees to feel safe?

At CoeoSpace, we are seeing tenants making indoor air quality or “IAQ” a key consideration in determining which commercial office space to rent. Because air quality will impact when employees will feel safe enough to return to their workplace, this is critical. Cohesion, a leading-edge company, headquartered in the Windy City of Chicago, that provides a smart building platform for commercial real estate, discusses in How to Improve Air Quality the importance of indoor air quality (IAQ) for office workers.

We agree 100% that a building’s air quality is an important topic. Because, it concerns every worker. Solutions range from the old-fashioned method of opening the windows to new technologies for air flow and circulation.  Returning employees are also interested in other wellness and sanitation features. Specifically employees are now focused on:

  • The cleaning schedules for the lobby, elevators, shared tenant spaces.
  • The property’s social distancing policies.
  • Touchless doors, elevator cars.
  • Population control in high traffic and high visitor areas such as the lobby or fitness center and regular reporting so trends can be understood.

These new policies and technologies focused on the health and wellness of a building and a space have become paramount. However, we anticipate that future occupants still hold a high priority for:

  • Outdoor space.
  • Natural light.
  • Fitness Centers.
  • Indoor parking and convenient or free parking.
  • Café’s and shared tenant areas.
  • And perhaps even basketball courts, bowling alleys and recording studios.
A Fantastic Example of Office Space for Lease in Chicago

One fresh delivery in Chicago’s West Loop CoeoSpace – Find Space. Share Space. Promote Space is 1201 West Lake Street. Because of all it offers, CoeoSpace’s Co-Factor gives this building a Platinum rating. In addition to premium amenities and quality, the property is in an amazing location. This office building offers exceptional options on every level from ground floor retail space to many office space choices. From a beautifully done, move-in ready office suite for 70 -80 people to spaces to design and build your own space for up to 24,000 square feet can be found here. So, it’s a great find for someone looking for state of the art space, top air quality, best in class management, and many amenities.

Hybrid Office Space?

CoeoSpace is hearing that the “hybrid” workplace will be the new world order. Because, employees are seeking “choice” or the freedom to work where they feel they can be the most productive. However, the details of how this will work is still unclear to most business leaders.  So, workplace design will and should now be focused on health and wellness elements. This will allow their employees to feel safe and supported. 

Gensler Statistics from survey on back to work and office space, air quality

Over 80% of office workers want to get back to their office space.

Most humans that CoeoSpace has spoken with do not believe that complete remote working is an effective long-term strategy. Because “people need people” to collaborate and be creative and isolation hurts companies growth potential. So, the five day a week commute into the office seems to be a thing of the past for most companies.

The CoeoSpace prediction on back to the office.

We predict that in addition to office buildings becoming wellness oriented, that tenant workspace and design will evolve to support a company’s culture, brand, and employee engagement goals. Office space will now be created to meet employees “where they are and where they want to be.” So, we envision tenant spaces of the future will incorporate amenities such as a meditation room, socially distanced collaboration rooms, employee lounges and even sanitation stations for IT equipment. And, perhaps even a “mudroom”! As mudrooms are commonly cherished in many homes as the place to leave the dirty items until they are cleaned.

No one really knows what the office will look like post-pandemic. So, now is the opportunity to reimagine how space and buildings can evolve to maximize productivity. Also, how the office can improve an employee’s quality of life and ability to choose how and where they work. I believe the possibilities are boundless.

And that’s our take at CoeoSpace. Thank you Cohesion for opening the space for this important and timely discussion.

How To Improve Air Quality for Back to Office Space by Cohesion

Industrial Space for Lease 2020 Review & Outlook 2021

Industrial Space for Lease Is in Hot Demand

Despite the extraordinary challenges of 2020 including the global pandemic, the election and the economic uncertainty that came from both, industrial property sector fundamentals are encouraging. Industrial space for lease is in extremely high demand. According to Statistca Research Department the national vacancy is at near historic lows and the lowest of the commercial asset classes with a 10% vacancy rate. E-commerce is the most significant driver of demand. This demand has surged since the beginning of the pandemic. CoeoSpace predicts that this demand will only increase in 2021. Therefore, this is amazing news for industrial owners and investors!

Why is Industrial so solid now?

Even on smaller industrial assets tracked by the National Association of Realtors (NAR/REALTORS®), as reported in their Commercial Real Estate Trends & Outlook, July 2020 Report, the industrial market is the strongest of the commercial real estate sectors given the expected continued and constant growth in e-commerce. The trend toward online shopping and delivery is not likely to end anytime soon or ever.

The “Amazon effect” is often credited for the strength of industrial real estate and has become well known terminology. What is the Amazon Effect you ask?Well, Investopedia defines The “Amazon effect” as the impact created by the online, e-commerce or digital marketplace on the traditional brick and mortar business model due to the change in shopping patterns, customer expectations, and a new competitive landscape. So, Amazon delivery has become a new normal for a significant portion of American households. As a result, the Amazon effect has fundamentally and permanently changed how consumers buy product and their expectations for delivery which is “why wait?”. I love to buy product immediately when I need it. I’m sure you do too!

The pandemic has also led online grocery to explode as many households who had never before ordered online, now use it regularly. So, this trend is expected to continue post-pandemic.  CBRE estimates that cold storage facilities alone are likely to grow by as much as 100 million square feet by 2025 which is a 47% increase from the current 214 million square feet (NAIOP, The Cold Storage Market is Heating Up, Spring 2020 Issue).

What is BOPIS for industrial space for lease?

In addition to e-commerce, the pandemic has led to a burst of BOPIS (buy online, pick up in-store). BOPIS will become a well-known acronym. As consumers become more familiar with the ease and convenience of this delivery method, they will demand BOPIS.

Through our own CoeoSpace database, we have seen significant industrial product get leased in the past 6 months. This is amplified in strong industrial markets including Chicago, Houston & Dallas. The largest industrial markets including Inland Empire, California and Eastern Pennsylvania/Southern New Jersey continue to grow. These markets are completing record new constructions projects.

2020 Year End Projection

2020 year-end absorption is likely to be 200 million square feet. Because, new product delivery is at an anticipated all time high. This is likely to reach just over 100 million square feet based on most major industry players’ research. There is plenty of new construction underway. And the demand for well-located, well-built industrial space is currently almost keeping up with this supply. This balance will be important to watch.

2021 Outlook and Beyond

It seems clear that we will continue to see the growth of e-commerce and direct-to-consumer delivery channels for the foreseeable future. As depicted below, JLL projects growth of over 1 billion square feet of industrial space by 2025 as developers and investors are ready and eager to meet the continued demand.

These new construction projects will be state of the art, high tech industrial space. This will allow occupants to leverage artificial intelligence, machine learning, robotics, and drones which will allow them to maximize all links in the supply chain.

Industrial commercial real estate is clearly the asset class to watch…

Sources: JLL, CBRE Global, Cushman & Wakefield, NAIOP, Statistca, National Association of Realtors (NAR)

Written By: Sheila Samii Matuscak