Across submarkets, Millennials fueled the commercial office market’s robust performance in the second quarter.
As global companies continue to change the complexion of their workforce in favor of digital natives, Millennials are having an increasingly outsized influence on major expansions and headquarters relocations. In 2018 alone, international companies including Rio Tinto, Showpad and iam bank have expanded their Chicago-based North American headquarters. The reason? Illinois is the second-largest producer of computer science graduates in the country.
With Illinois graduates accounting for nearly 10 percent of U.S. computer science degrees last year but only modest tech wage growth locally, Bay Area tech firms and legacy employers alike are seeing Chicago as a necessary outpost, especially for highly technical positions. Most recently, that prompted Walgreens’ to plant its flag at the Old Post Office, establishing a 200,000-square-foot digital hub.
This war for talent has definitely made its way into the development pipeline, with 6.6 million square feet underway. While incremental vacancy increases are likely at this point in the cycle, we’re still seeing rent growth, strong absorption numbers and stable concessions.
Nobody’s building new in the suburbs, but redevelopment is the name of the game as a variety of submarkets work to emulate downtown’s live/work/play success. AveXis and Brightstar’s recent move-ins at Innovation Park, Lake County indicate a growing demand across the suburbs for campus environments that are a little more Silicon Valley, a little less Bell Labs circa 1960.
Speaking of Bell Labs, the minds behind the repositioning of its former New Jersey campus, Somerset Development, are in talks to acquire AT&T’s former campus locally. Somewhat of a turnaround specialist, Somerset created Bell Works, a “metroburb” in New Jersey and plans to do the same with “City Works” in Hoffman Estates.
Mega developments incorporating office, residential, hotel and retail represent a new lease on life for tired suburban campuses. Inspired by the success of Naperville’s reinvigorated downtown, forward-thinking investors like UrbanStreet Group and Franklin Partners are in the midst of large-scale repositionings at the fomer Motorola and OfficeMax campuses, respectively.
Transit-oriented, mixed-use projects will continue to drive activity in the suburbs for the foreseeable future. Millennials are migrating from downtown in increasing numbers and expect urban convenience in a suburban location. It’s never been a better time to be Metra.