Willard Says...

December 19, 2023

Do The Evolution

By Jonathan Zimmerman

As 2023 disappears in our collective rearview mirrors, there is finally enough evidence at hand to reasonably project what the future of the office will look like. After analyzing the trends and attitudes of the post-pandemic workforce, it has become abundantly clear that the era of spending five days per week in the office has gone the way of the fax machine, VHS player and car phone. Times change, technology progresses and people evolve. This is, and always has been, the way of the world. Should we really be all that surprised that office use is now following the same pattern?

The truth is that a hybrid work model was bound to happen eventually. When the COVID lightning bolt struck, it simply sped up the inevitable. The main culprit enabling this is the advancement of technology. Things like smart phones, laptops, wireless internet, hot spots, cloud computing and video conferencing empower remote work. The seeds were already there, but the pandemic-induced shut down proved to us that it could be done. Just image if COVID would have hit in 1995 instead of 2020. There is no possible way so many people could have worked remotely because the technology was light years behind today. It would have been an absolute disaster on so many levels.

The forced evacuation from the office also served as an epiphany, making people realize how much they detested their commute. Furthermore, after dealing with what seems like an entire life wasted in traffic, or squeezing into an excruciatingly crowded bus or train, the reward is sitting down in your 80 square foot “workstation” that practically is on top of 15 co-workers who you probably have no desire to see. As a related point, good luck staying healthy as the germs fly in between these ridiculously close quarters. Can you really blame someone for preferring to remain in hiding inside the comforts of their own home?

We also must acknowledge the fact that present tense downtown Chicago is not the same as pre-pandemic times. There are more safety concerns than in the past, both on the CTA and the streets, and there are a staggering number of vacant storefronts and struggling buildings. The undeniable energy which once pulsated through the Loop on a daily basis still picks up from time to time, but it is no longer a consistent presence. The customary excitement associated with coming downtown is, at best, in hibernation.

Indeed, it is time to accept that the air of immortality surrounding the office is no more. Fortunately, there is some good news shrouded in this spinning black circle of doom, for we have also learned that permanent remote work is not an effective solution for many businesses. There are plenty of times where co-workers need to gather and be together. It can be for organization meetings, planning, brainstorming sessions, training, mentorship and even comradery, or simply needing a quiet place to escape to if the house is hectic. None of these things can be accomplished over Zoom.

So, fellow real estate professionals, just breathe. There is still, and will continue to be, a need for office space. Hybrid work changes how much space is needed and how it is utilized, but it is still essential for most businesses. There are numerous occasions where if you are simply trying to get work done, it doesn’t really matter if you are in the office, at a coffee shop or sitting at your kitchen table. From a management standpoint, here is yet another example of technology evolving as new software and company-provided electronic devices enable remote employees to be monitored to make sure they are doing their jobs. It is simply a different form of supervision.

As the “Zoomers” begin moving into management roles and starting up their own businesses, they will know nothing other than hybrid work. They can sit back and listen to nostalgic tales of from their parents and grandparents about what it was like to spend 50 hours per week at your desk. This will become the new version of the “in my day I had to walk 15 miles in the snow to get to school” lecture. Fortunately, television shows like The Office and Mad Men are around to remind us of that foregone era. This is how things evolve and is for the best, whether or not we want to admit it.

As the office evolution becomes more crystalized, there is another evolution of utmost importance which has to transpire next. The City of Chicago must get serious about the urgent need to revitalize downtown and its rapidly growing stock of distressed office buildings. As we are painfully aware, statistically this is the worst office leasing market ever when factoring in the amount of vacant space, sublease space and shadow space in play. Piling on, the headaches associated with the staggering number of suffering properties and sky-high property taxes have basically frozen the sales market. There now are dire situations where owners have copious amounts of vacant space, yet no capital to do new deals. Of course, given how comatose demand has been for most non-trophy assets, it might not even matter.

Taking a deep dive into the data, there are two markets in Chicago right now: the haves and the have nots. The haves are the new construction (just about everything in Fulton Market, Bank of America Tower, 320 South Canal to name a few) and the massively renovated (like the Old Post Office). These are very alive and holding their own rather nicely, as the market is tighter at the top. However, once you drop down to the B and C class buildings, there is a dramatic difference. While there are sporadic success stories here and there, by and large there is mostly pain and insignificance.

The first step toward a renaissance is to reduce the supply of office space. Downtown Chicago has a glorious stock of vintage buildings. Sadly, many of these have become functionally obsolete and have no future under present configurations. Renovating these for continued office use is simply not practical, as it will cost a fortune and there is limited demand to fill this space. Therefore, alternative uses need to be considered.

The jury is out as to whether residential use is the fixer, but it is undeniable that there is a housing crisis in this country. The new mayoral administration, at least so far, has shown indifference towards moving forward with the LaSalle Street Reimagined initiative and retrofitting only five buildings might not make that big of an impact. However, with a coordinated effort, the hope is that there will be a chain reaction where this initial group of properties experiences success, leading to a copycat effect with more buildings following suit. Retail space will then need to adapt and become more service oriented, so things like grocery stores, dry cleaners and pet supply stores will be required. This is the dream outcome that would bring a smile to even the dissidents out there.

On the downside, the costs associated with renovating office buildings and converting to residential use are astronomical in many cases. It might very well be cheaper to demolish and build from scratch, but who knows if the new buildings ever get constructed? The last thing downtown Chicago needs is a bunch of empty lots that could remain empty for seemingly light years (see the northwest corner of Washington & Franklin, going 22 years and counting). Fortunately, there are some innovative ideas being implemented right now in other cities involving the use of prefabricated materials built ahead of time in factories and then installed in the buildings. By cutting back on construction costs, more of these proposals suddenly become feasible. Other municipalities, such as Calgary for example ( have figured out practical ways to incentivize adaptive reuse. Perhaps Chicago can follow in their footsteps and replicate some of these programs.

There always will be a need for affordable office space. Not every business can afford to lease in higher class properties, no matter how much they downsize. It might shock some to learn that there are people out there who do not need or care about lavish amenities. Their wish list simply consists of a well located, efficient and cost-effective place to congregate at a reasonable price. Yes, the “flight to quality” is real, but it doesn’t apply to everyone. By scaling back on the supply, a very robust Class C market can emerge and have an extremely bright future. This is how we move the market forward.

Hey, who ever said change would be easy? Better buckle up because there is no quick escape, but amongst the waves of distress, brighter days truly are around the bend. The sooner everyone acknowledges that office space usage has evolved right before our very eyes, the sooner businesses can start to create new habits and thrive in their new routines. As a clear vision emerges of how much space is needed, the city will hopefully get serious about developing a sensible approach to absorb the excess office space and recalibrate it in a manner which benefits all current and future residents. It’s evolution, baby.