Commercial real estate services firm JLL is cutting back the office space it occupies in the greater Chicago area, according to the Real Deal, by putting more than 20% of a 67,000-square-foot building in the suburb of Westmont up for sublease.
The plan came to light when a $14.7 million loan for the Sidra Capital-owned building at 700 Oakmont Lane was watchlisted by its lender in November, the Real Deal reported, referencing debt servicer notes compiled by DBRS Morningstar. JLL has been the anchor tenant of the building since 2019 and takes up nearly 75% of the building, which it has leased through October 2030.
JLL told the Real Deal it is subleasing the space to bring its teams “closer together” after assessing its area office usage. The move comes as organizations have been offloading office space in Chicago. The city recently hit a near-historic high of 101 million square feet in available office space, reflecting an increase of roughly 25 million square feet from the first quarter of 2020.
“Just as we’re helping clients with their workplace transformations, we continuously do the same at our own JLL offices — ensuring they are properly positioned as the central hub of where our people work each day,” a JLL spokesperson told the Real Deal. “While the way we work has changed, and flexibility is here to stay, the office remains the most critical aspect of the work ecosystem to reinforce culture, drive collaboration and innovation, and enable professional growth.”
While how much of its total Chicago-area space JLL plans to rent on the secondhand market remains unclear, the firm previously announced plans to sublease more than 61,000 square feet of space across two floors of its Aon Center headquarters in downtown Chicago, according to Crain’s Chicago Business. That’s almost a third of its 202,000 square feet of space in the 83-story tower.
“Following a detailed analysis and feedback from JLL employees of how our Chicago headquarters at the Aon Center is being used, we identified opportunities to optimize our workspace and bring our teams closer together, which has resulted in a decision to sublease a portion of our office space,” a JLL spokesperson told Crain’s when it first reported the Aon Center cuts in August 2023.
Chicago has been posting consecutive quarters of negative net absorption, with the majority of companies signing new leases over the past two years choosing to shrink their footprints, according to JLL’s Q3 2023 Chicago Downtown Office Insight report.
JLL said that future absorption levels in the city — which account for the change in occupancy due to vacated space and newly constructed office space — may continue to trend lower, as in-demand office towers in the Fulton Market have been almost entirely occupied, with minimal new construction expected. In addition, it stated that the total leasing volume in the third quarter of 2023 was the lowest in 10 quarters.
Despite those declines, the city’s office sector is showing some signs of recovery, with lease transaction volume up 5.2%, according to Savill’s Downtown Chicago 2023 Q4 Office report. The report echoed that the size of the downtown market is expected to contract in 2024, with several buildings earmarked for conversion to residential space.
JLL noted in its third quarter report that future leasing activity will “depend on the health of the economy and the ability for firms to execute and enforce return-to-office plans.”
