Archive for the ‘Uncategorized’ Category

He Really Did Exist!

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In a previous blog, I described how the name of my firm, Willard Jones Real Estate, came about (Blog). While I did conduct a fair amount of research prior to filing the Articles of Incorporation with the State of Illinois, there admittedly have always been a few holes and questions surrounding the tale.

For example, I have never been able to firmly establish the exact boundaries of Willard Jones’ farm as it relates to present day downtown Chicago. Even worse, some versions of the cow path story list the land owner as “William” Jones instead of Willard. With all due respect to people named William, the name William Jones Real Estate just did not seem to have the same amount of pizzazz. What I didn’t know is that nearly 5 years after starting the company I would ultimately be able to fill in all of the gaps.

On a November afternoon right before Thanksgiving, I received a call out of the blue. A woman from Alaska named Marilyn left me a voice message requesting that I phone her back, but provided no details regarding the basis of the call. I figured it probably was some sort of telemarketing campaign, but on the off chance that she was in need of office space, I felt compelled to respond.

Much to my surprise, Marilyn from Alaska claimed to be the great great great granddaughter of Mr. Willard Jones himself. Her niece had done some online research and came across our company website. She mentioned this to Marilyn, who in turn reached out to me and shared that she recently completed a family genealogy project and dug up all sorts of information on Willard and his family. She offered to send me copies of the data, along with some pictures. I was still a bit skeptical and half expected a letter to follow asking me to pay an undisclosed sum of money to the family in order to keep using the name or face legal action. In the back of my mind, I was already dreading the prospect of developing a new name for the business. Nevertheless, Marilyn seemed like a nice enough person so I consented and told her to send it all over.

Sure enough, about a week later, a giant tube arrived at my office filled with a treasure trove of fascinating information, including a picture of Willard Jones himself from the 1830s and an 1833 map of Chicago which shed some light on where exactly the Jones farm was located (see below for pictures of both). Among the other relics included was a complete genealogy of the family featuring pictures and another version of the 100 West Monroe cow path story that I had never seen.

map

Willard Jones

All of this information was absolutely captivating and thankfully, confirmed the fable of Willard Jones. He really did exist, truly owned a good sized plot of land in the present day Central Loop, actually maintained a farm on the corner of Clark and Monroe, and played a direct role in the creation of the famed cow path. We even learned the reason why some of the stories contain the name William instead of Willard: William was Willard’s father and both lived in Chicago in 1833.

Marilyn and I have communicated several times since the package arrived. In fact, she has uncovered even more information on Willard that is in route to my office; I cannot wait to see what it contains. Of course, our new pen pal has a box of authentic Chicago treats coming her way as well.

In the end, as fantastic as it is to receive this information, I was equally heartened by Marilyn’s genuine act of kindness. Given the state of the world today, it is good to know that people like her still exist. I never could have imagined in my wildest dreams that my questions about Willard Jones, the man (and no longer the myth and the legend), would be answered by a random phone call from someone in Alaska. How wonderfully unpredictable life can be.

The 2017 Crystal Ball

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Here we go again. Another new year, another fresh set of predictions. Before we project what lies ahead for the next 12 months, let’s first see how we fared last year:

1)
Leasing activity will remain strong for the majority of 2016, but activity will start to show some very subtle signs of slowing down towards the end of the year. True.

2) 151 North Franklin will be the last new office building constructed in this development cycle. False, thanks to 625 West Adams.

3) Landlords will be forced to continue raising rents to account for the property tax increase. Generally true, although taxes are not the only reason for this.

4) Many tenants will be furious once they receive their pass through bills or net rent increases, thereby making life miserable for landlords, property managers and leasing agents. True for the most part, although the reaction has not been as bad as feared.

5) The tax increase will also have a direct impact on retail and residential real estate. Retailers will be forced to raise prices and apartment rents will rise, as Chicago will become one of the more expensive cities in America to conduct business. True.

6)
Sales activity will begin to decline in 2016. Because so many properties have changed hands over the past two years, there are simply not that many left to sell. True.

7) Firms not in dire need of expansion space will use the upcoming presidential election as a convenient excuse to put off decisions. With some exceptions, mostly False.

8) A notable technology firm will be the first to take the plunge and sign a significant lease in Goose Island, thereby laying the groundwork for this corridor to become the next growth market in downtown Chicago real estate. False. Still waiting.

9) A grocery store will sign a lease in the Loop this year to cater to the rapidly growing residential population in the central business district. False.

10) A combination of the tax increase, high crime rate and sustained issues with the police department and Chicago Public Schools will be cited as a key reason for a significant corporation pulling their headquarters out of downtown Chicago and relocating to either the suburbs or another part of the country. False, for now.

So, half of my predictions came true. Not bad for one of the most unpredictable industries out there. Let’s now see if I can improve upon my predictions in 2017:

1) With the increased supply caused by new construction and resulting shadow and sublease space, total vacancy will rise by approximately 1.5%.

2) Average rents will increase slightly in the first half of 2017, then begin to plateau for the second part of the year. Average tenant improvement allowances, rent abatement and other incentives will remain about the same as last year.

3) The Old Post Office will land a significant anchor tenant who will occupy over a quarter of the building. Other smaller tenants will commit as well over the course of 2017, as this notable redevelopment becomes a quick success.

4) The bloom will be off the Fulton Market rose just a bit, as several of the new office buildings either planned or under construction will struggle to fill space. This will lead to a slowdown of new development projects for a while.

5)
The sales market will remain quiet for most of 2017. In the fourth quarter, however, things will begin to loosen up just a bit and price expectations will be dialed back a notch. This will allow for some of the investors who had been sitting on the sidelines for the past few years to start getting back in the game.

6) Just when we thought Loop office development would be on hiatus for a few years, the market will be shocked by one more announcement: a new tower located on the General Growth site at 110 North Wacker Drive to be anchored by a well known, Fortune 500 tenant who will take occupancy in early 2021.

7) In spite of the planned redevelopment of the Tribune Tower, CIM Group will decide keep floors 3 – 7 for office use and sign WGN Radio to a long term lease. As part of the new deal, they will be forced to abandon their ground floor studio, which will be leased to a national retailer for $300 per square foot.

8) Leasing activity will remain slow in Goose Island. However, the city will announce a series of notable infrastructure improvements that will make this sector much more accessible to prospective users long term. Success will come, just not as fast as most hoped.

9) As part of the City of Chicago’s astonishing decision to legalizing sports gambling, plans will be announced to construct a land-based casino on the site of the former Michael Reese hospital, kicking off a billion dollar development which will include hotels, retail and housing.

10) Let’s try this one once more: A grocery store will sign a lease in the East Loop this year to cater to the rapidly growing residential population in the central business district.

To say the least, it will be interesting to see how this all plays out. Check back in a year to see how I fared. Best wishes to everyone reading for a happy, healthy and prosperous 2017!

The 2016 Top Ten Events in Downtown Chicago Commercial Real Estate

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With all of the other craziness that happened in 2016, it may be easy to forget some of the major events that occurred in commercial real estate. While not quite as frenzied as 2015, Downtown Chicago commercial real estate has remained quite active as the market continues to churn out deals at a healthy pace. Vacancy rates are historically low in some sectors, rental rates continue to climb, and sales keep closing at mind boggling numbers.

Now that we’re at the end of the 2016 saga, I decided to take a look back at the top 10 commercial real estate highlights from the past year:

10. Sustained Strength in the Leasing Market.
The beat went on in 2016, as vacancy continued to decline and rental rates increased. Downtown vacancy rate is currently hovering around 11%, which is historically low. River North continues to be the market with the most demand, but the West Loop/Fulton Market and Central Loop districts are close behind. Even the East Loop had a big year with several significant leases executed, highlighted by Wilson Sporting Goods’ planned relocation to the Prudential Building.

9. Co-Working Spaces Kept (Co)Working.
The co-working craze has not slowed down, as WeWork and various competitors continue to occupy large amounts of space throughout the Loop. While WeWork seems to be tapping the breaks on expansion, many of their facilities are operating close to full occupancy and commanding healthy rents from not only individual practitioners, but larger corporations as well. Other co-working facilities making their presence known in Chicago this year include Assemble, Make Offices and Serendipity Labs.

8. Advances in Public Transportation.
At long last, the Loop Link bus service and the related Union Station Transit Center are fully operational and reducing travel times between the East Loop and commuter train stations. Construction of the Washington/Wabash “L” superstation is nearly complete and plans are actively being discussed for the remodel and redevelopment of Union Station, which incidentally might also include the creation of a two million square foot office tower.

7. The Lucas Museum Debacle.
Chicago missed out on a singular opportunity to land a key tourist and cultural attraction when the Friends of the Park blocked the city’s attempt to provide George Lucas with 17 acres of lakefront property between Soldier Field and McCormick Place to construct a museum. In addition to the negative economic impact of losing the bid, it is also a blow to the ongoing efforts to develop an entertainment and retail district in the nearby Motor Row corridor of the South Loop.

6. The Great Migration.
A considerable number of firms continued to abandon their suburban office campuses and relocate downtown in order to take advantage of the more diverse and talented labor pool. Corporations such as McDonald’s (more on them later), Beam Suntory, Wilson Sporting Goods, SC Johnson, and STATS have all signed noteworthy leases in 2016.

5. Shiny New Developments.
The imminent opening of new skyscrapers at 444 West Lake and 150 North Riverside–along with various sized towers under construction at 151 North Franklin, 625 West Adams, in Fulton Market and the Old Post Office redevelopment–will collectively be the first true test of market strength in several years. The rapid pace in which these new buildings are leasing up demonstrates how pent up the demand has been for new development. However, there is still a substantial amount of new supply that remains unaccounted for. While the relocations from suburban markets and other cities will help with absorption, there are now many more options for tenants to choose from which could potentially give them the upper hand once again.

4. The Amazing, Ongoing Transformation of Fulton Market.
There is no sector of the city with more activity than Fulton Market. Between the planned office buildings, hotels, entertainment venues, retail, restaurants and residential developments, it is hard to keep track of everything going on. No less than 43 developments are either underway or in the planning stages and there are no signs of this juggernaut slowing down. Sterling Bay continues to lead the charge but other local and national developers and investors such as Shapack Partners, R2, Madison Capital and Thor Equities have all gotten into the game as well. National retailers such as Anthropologie and Free People are also beginning to plant their roots.

3. The Sale of Tribune Tower.
After years of speculation, Tribune Media announced plans to sell the iconic Tribune Tower for $240 million to developer CIM Group. The rumor is that the landmark building will be redeveloped into a combination hotel, residential, and retail building. As a result of the sale, Tribune Media inked a 61,000 square foot lease at 303 East Wacker Drive.

2. The Sale of the Old Post Office.
Following a countless number of failed attempts, 601W Companies acquired the cumbersome Old Post Office and put forth a sensible redevelopment plan modeled after their successful renovation of the Starrett-Lehigh Building in Manhattan. The project–which will ultimately add office space, a rooftop park, and a river walk–has been approved by the City of Chicago and work is now underway.

1. McDonald’s Relocation to Fulton Market.
In arguably the most momentous transaction in decades, McDonald’s solidified Fulton Market’s long term importance in the future of downtown Chicago real estate when it announced plans to relocate from Oak Brook to the site formerly occupied by Harpo Studios, to be known as 1045 West Randolph. Their lease for 567,000 square feet is due to begin in 2018. A direct result of this transaction is Sterling Bay’s plan to construct a 360,000 square foot property at 210 North Carpenter, which is being eyed to accommodate several suppliers who regularly do business with McDonalds.

So there you have it; what a fascinating year it has been. Now we have to wonder: What is in store for 2017? In my next blog, I’ll let you know what I think will happen and take a look back on how last year’s predictions fared.

It’s Awfully Frosty Down There

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Just when we thought we had seen it all, 2016 happened. The only thing that may be more shocking than the Cubs winning the World Series is Donald Trump getting elected president. These events got me thinking: what could happen in the world of downtown Chicago real estate that could rival these events on a relative level? Here are a few crazy thoughts:

1) Sears unveils a new brick and mortar store concept that will be the wave of the future for shopping. As part of the ramped-up effort, they announce plans to lease the largest contiguous office vacancy in the Willis Tower in order to regain building naming rights.

2) Not to be outdone by McDonald’s announcement to lease 500,000 square feet in Fulton Market, Burger King’s owner, Restaurant Brands International, leases all of the 210 North Carpenter development planned by Sterling Bay. Can a lease with Wendy’s corporate office be far behind?

3) The Old Post Office building is finally leased….to the United States Postal Service. Snail mail is apparently making a comeback.

4) In a massive consolidation effort to save money, the City of Chicago announces plans to vacate City Hall and lease space in a nearby building. City Hall then sells for $300 per square foot to the Trump Organization, who announces plans to convert it into a luxury hotel.

5) The State of Illinois sells the Thompson Center to Steve Wynn, who states that he will convert the building into the largest casino in the country that features a hotel and concert hall.

6) The era of consolidation continues in the real estate industry as CBRE and JLL express intent to merge their operations and create the largest commercial real estate firm on Earth. In similar news, Cushman & Wakefield announces plans to acquire Colliers, Avison Young and Savills Studley.

7) The Chicago Board of Trade shuts down and vacates their trading floors. WeWork immediately leases all of the space.

8) The Fordham Spire site is developed into the largest underground data center in the world.

9) Macy’s announces that it will close down its legendary State Street store. In a stunning about-face, George Lucas declares that he will bring the Lucas Museum to the space.

10) Documented evidence turns up of several lease deals being completed with no negotiating whatsoever.

Song Titles that Describe the Cold Call Process

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Ah, the days full of phone dial tones and unanswered voicemail messages. For salespeople and brokers alike, unfortunately–after all these years–cold calling is still part of the leasing process.

Especially when starting out, finding new clients takes some creativity and a lot of patience. It’s hardly ever fun so maybe the only way to feel better is to know that we’re in this together.

We put together a list of song titles that describe (some of) the cold calling cycle so we can sympathize together or at least have some music to keep us dancin’ in our seat until we get that next bite.

Alright, here we go. The day holds much promise.

They answer! Hey, that’s a lot better than going straight to voicemail.
https://www.youtube.com/watch?v=PdLIerfXuZ4

Okay, you’ve rehearsed your script just enough so you sound natural, give them your spiel…you heard they may be looking for new space…

Uninterested. Yes, in the early morning I love my coffee with a splash of dial tone.

Well, it’s the first call of the day and we’re off to a grand start.

Round 2…ring it up and….voicemail. Leave a message with as little desperation in your voice as possible and ask for a call back.

Alright just keep going through the prospect list. Keep the calls going.

Day in the life:

Alright, starting to sound like a broken record with the two words you’ve been saying (over and over and over) the most today…

Maybe we should attempt the “warm calling”. Tons of salespeople write about that in their blog. Yeah, that sounds good. Call up someone you have a connection with.

Not so bad. Turns out your friend from middle school who invited you to their annual summer barbecue six years ago remembers you.
https://www.youtube.com/watch?v=W83InivbUSQ

Well, you got an invite to their next barbecue but that’s about it. The votes are in: a “no” from someone you know doesn’t make it any easier.

Round 16…
Mission: charm the receptionist into not telling you the person you’re looking for is “out of the office”. AGAIN.
Receptionist picks up, “Hello this is Eileen who are you looking for?”

Fingers crossed…
https://youtu.be/KtBbyglq37E

She put you through! Annnnnnnnd it’s their voicemail.
https://www.youtube.com/watch?v=16yarf4ZCwA

Honestly.

You hit your calling limit and are scrolling through blogs about cold calling secrets when the phone rings–you got a call back!
https://www.youtube.com/watch?v=65ynRuXN7GI

They’re one of the nice ones who called you to tell you they’re not interested in moving spaces.

BUT knows somebody who is!
https://www.youtube.com/watch?v=QrY9eHkXTa4

At long last, a lead. And on that note, it’s time to go home.
https://www.youtube.com/watch?v=rfX0q1aNCos

Until tomorrow.

Stick To What You Know…Or Else Pay The Price

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As the saying goes, “stick to what you know best”. Especially now with Google at our fingertips, it can be incredibly empowering to do a quick search and instantly discover an abundance of new information. However, watching a YouTube video on how to replace a head gasket in your car does not make you a mechanic and entering your symptoms into WebMD does not automatically make you qualified to diagnose a medical condition or perform surgery. The same is true with finding office space.

While anyone can go online and pull up listings, there is so much more to the process in which only an experienced and knowledgeable real estate professional can provide guidance. Tenants who endeavor to conduct the search on their own often run into difficulties caused by mistaken assumptions.

Here are seven of the most common speculations I have witnessed firsthand, along with a few complimentary suggestions:

1) The quoted rental rate is all inclusive. Most people outside of the real estate industry do not know the difference between gross rents and net rents. I recently showed space to a prospect at a Class C building in my portfolio who boasted that he could get a cheaper deal at the Willis Tower as compared to this “dump of a building.” Little did he know, the rents at the Willis Tower (and most Class A and B buildings) are quoted on a net basis and do not include real estate taxes and operating expenses. Gross leases already factor these items into the rate. It is important to find out what other extra charges are included above and beyond the rent, such as heating, air conditioning, electricity and janitorial.

2) Heat and Air Conditioning is available 24/7. Most Loop buildings control the temperature and turn the systems on and off at a certain time each day. Often, Sundays have no service at all. After hours service is available, but at an additional charge which can sometimes be rather pricey. Conversely, many smaller sized buildings do offer tenants 24/7 use and control of heat and air conditioning, but at the tenant’s sole cost and expense. It is imperative to find this out during the site selection process and not after a lease is executed.

3) I can access my space anytime without restriction. While most buildings provide 24/7 access, it is not always as simple as walking right through the door and into your suite. Some properties lock off their lobbies to the outside public at night and on weekends/ holidays and limit access unless you have a key fob or make prior arrangements with the designated security company. If you are a business who sees clients during non-business hours, it is vital that you learn the building’s access policies in advance.

4) Phone and internet wires are already in the space, so it is plug and play. This might be the most common assumption made in error. More often than not, the low voltage wiring will need to be updated or at least modified, in order to get tenants exactly what they need. Before signing a lease, always have a qualified wiring contractor inspect the premises and determine what can be reused and what needs to be replaced. Next, find out exactly what the upgrade will cost. Having to spend thousands of dollars on rewiring could be the difference in choosing one space over another. As a related point, be certain to learn all of the phone and internet providers in the building beforehand, especially if you have an existing service contract that cannot be broken.

5) Alterations can be made to my space without restriction. Most leases spell out in very specific terms the exact procedure that tenants have to follow in order to make changes to their space. Nominal cosmetic alterations are typically fine, but if construction plans are more detailed and involve mechanical systems, the building will be heavily involved. Both your desired contractor and the plans that are drawn by an architect will have to be approved by the landlord; permits may also be required. There are often review and supervision fees involved, so make sure you have a good handle on these before moving forward if future changes are a possibility.

6) When vacating, anything can be left behind without recourse. If you are planning on leaving furniture or other items behind when you move out, do not expect to receive your entire security deposit back. Some, or all, could be used towards properly disposing of the items so the landlord can begin to prepare the premises for the next tenant.

7) The space can be sublet to anyone of my choosing. While the vast majority of leases do permit subleasing or assigning to another user, there are rules that must be followed. Landlords will usually have specific criteria in which they can approve or reject a proposed subtenant. Additionally, fees often need to be paid for a landlord’s attorney to review sublease documents. Know these fees in advance so you can plan accordingly.

It is impossible to plan for everything, but having a qualified and experienced team of real estate advisors on your side while searching for space will limit the chances of falling into the pitfalls listed above. If you determine and clearly communicate your needs and expectations in advance, life will be so much easier moving forward. Be an expert in your own field. Leave the rest to those in the know.

5 Signs It’s Time For New Office Space

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Your cube farm is starting to look like an actual farm
What started out as 4-5 people in the open space has grown to increasingly more cramped quarters. Employees who don’t have enough space to work efficiently may find themselves distracted, disengaged, and less excited to come into the office.

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Song titles that describe the process of moving to a new office

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Finding new office space is rarely described as an entirely enjoyable activity. It can start out fun–it’s a chance to see what kinds of different spaces are out there–but can often turn in to an overwhelming, time-consuming process.

How does the whole search usually go? We put together some song titles that (we think) describe it from start to finish; beginning with the decision of whether or not you want to move, all the way to the feeling of relief when you find what you’re looking for.

If anything, it makes a pretty good work playlist.

Here’s how the story goes:

Something has to change; your office space just isn’t working anymore. Could you make it through with a simple reconfiguration or is it time to see what options are out there?
Should I Stay Or Should I Go? – The Clash

(more…)

Remembering 9/11/01

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Can we really be coming up on the 15 year anniversary of the September 11, 2001 terrorist attacks? It still seems so fresh in my mind, almost like it was yesterday. While many Chicagoans (especially me) are looking forward to the start of another Bears season on Sunday, I feel compelled to take a moment to reflect on that horrific day.

Many of us remember exactly where we were and what we were doing when we found out what had happened. The day started out like any other Tuesday…

My morning ritual was to arrive at my 100 West Monroe office at 7:00 AM sharp, flip my radio onto WCKG-FM to listen to the Howard Stern Show and feverously try to get caught up on my work and prepare for the upcoming day. Howard was in the middle of a riveting conversation with his staff about Pamela Anderson when he suddenly switched gears and mentioned that an airplane had crashed into the World Trade Center in New York. The immediate reaction was that this had to be some kind of small, single engine plane being operated by a one man pilot who somehow got off course. When the building engineer came into my office and shed more light on the situation, I was completely stunned. The internet was still in the early days of streaming but I was able to get a live feed on CNN.com to watch the events unfold. As my colleagues came into the office, we all sat in front of my monitor in utter shock as the second plane hit, followed by the Pentagon and then the towers collapsing.

Meanwhile in Chicago, the rumors immediately ran out of control. Planes were believed to be heading towards several downtown buildings; one person who I knew in the then Sears Tower was told by a member of the building staff that some type of attack was imminent and everyone needed to evacuate post haste.

When I finally departed from my office around 2:00 PM, it was an absolute ghost town outside. I had never seen downtown Chicago so empty in the middle of a work day. The few individuals who remained walked around with blank looks on their faces. My only moment of levity came as I started walking towards my bus stop and a police car driving down Clark Street (the only car on the street at that time) pulled up next to me. A loud voice came over the speaker and told me to step slowly towards the vehicle with my hands up. When the window rolled down, it turned out to be a good friend from high school. He told me that everything was safe and secure in Chicago, which might have been the only good news of the day.

Like most Americans, the next few days were filled with a combination of sadness, fear and rage. Most businesses stayed closed and no one really felt much like working. Before that day, whenever I would hear news of a terror attack in the Middle East or somewhere else around the world, I thought that it could never occur in America. September 11, 2001 marked the end of our innocence. Life for everyone changed forever.

I have made numerous trips to New York since 2001 and every single time, I have felt compelled to visit the World Trade Center site, museum, tribute center, and the memorial. It is almost like reliving that day over and over again. I cannot explain why, but something continues to draw me there. It could be because I work in real estate; maybe it is because I could envision myself working in a building just like one of the Twin Towers; perhaps there was a victim I was destined to meet but would never get the opportunity.

Each time I have gone back, I have seen more life breathed into the city. Today, beautiful new buildings have risen up and Lower Manhattan is bursting with activity again. It is as though New York and America have made it back and better than ever. As much as I love Chicago architecture, I have to say that the new One World Trade Center tower that symbolically rises 1,776 feet into the sky, is one of the most magnificent and commanding edifices ever created.

This Sunday, as we huddle in front of the TV for a far different reason than we did 15 years ago, let’s take a moment to remember our blessings on the anniversary of the day we will never forget.

Only the Shadow Knows

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Not a day goes by without someone asking me the question, how is the leasing market?

The short, easy answer: it’s a matter of perspective.

Presently, it is quite good if you are a landlord. There is as much activity as I can ever remember and rents are at all time highs. The rapid expansion of tech businesses, rise of co-working space, continued suburban migration downtown and a generally strong economy have contributed substantially to this growth.

Determining whether it is a tenant or a landlord market is relatively simple. However, that question is often followed up with another, more difficult question: how much longer will this last? If I possessed superhuman powers to see into the future, I would be in Las Vegas right now, sliding large stacks of blue, green, and black chips across a green felt poker table.

While I work on those superhuman powers, the best thing I can do to predict how long this market will last is to look at past trends and signs of change.

One telltale sign of what might lie ahead is the concept of shadow space. Shadow space is defined as blocks of currently leased space that will be vacated upon lease expiration and are actively being marketed. The speed in which shadow space leases is a genuine indicator of market strength. If it leases quickly, that is a sign of the landlord market being here to stay but if the spaces sit empty for a while, it is an indicator that we are returning to equilibrium or potentially shifting back to a tenant market.

Currently, there are approximately 6 million square feet of shadow space on the market in downtown Chicago. 333 South Wabash takes the title for the most shadow space with 759,000 square feet, due to CNA’s planned relocation to 151 North Franklin in 2018 where they will be downsizing to 275,000 square feet.

Trailing Big Red is The Franklin complex at 222 West Adams/227 West Monroe, which will have 442,000 square feet of shadow space in play when McDermott, Will & Emory head to 444 West Lake and William Blair to 150 North Riverside. Hyatt is heading there as well, leaving their namesake tower at 71 South Wacker after only 12 years.

Though the spaces being vacated are spectacular in their own right, the truth is that it is difficult to compete with new construction. The new space is often more efficiently designed, thereby enabling tenants to lease less square footage and in the process, save money.

Because of companies like CNA and William Blair that take part in the “out with the old and in with the new” school of thought, old buildings, even with their added shiny amenity packages, are often left behind for new development: the factor most responsible for creating shadow space.

For example, two of the office towers presently under construction, 444 West Lake and 150 North Riverside, are coming out of the ground nearly 80% occupied with tenants relocating from A class buildings nearby.

Collectively, these new towers demonstrate the strength of the market and how much pent up demand there has been for new buildings; so much demand that while multiple towers are still on their way up, developers are actively pushing several other sites for new buildings. As more are built, shadow space will continue to increase and tenants may see the market turn in their favor.

Future deal terms negotiated by many tenants will be directly influenced by the speed in which the shadow space leases, as will owners deciding whether or not to sell, and developers determining whether or not to proceed with new construction. And so the cycle goes.

There’s the long answer.

My prediction for what’s to come? All I know is that it promises to be a wild ride as we witness the latest chapter in downtown Chicago real estate.