The Power is Now

Roundtable on Commercial Real Estate – Crain’s Chicago Business

As the pandemic continues, employees are headed back to the workplace in some form—whether in-office, work-from-home or a combination. Whatever the arrangement, each option has its own unique design and other challenges. Three local executives involved with the future of Chicagoland’s workplace shared their current insights with Crain’s Content Studio.

How is your organization involved with the future of Chicagoland workplaces?

Elbert Walters III: Powering Chicago is committed to providing a safe workplace for all Chicagoland residents when the return to office is right. As we continue to grapple with the effects of COVID-19, our union electricians and contractors have begun installing contactless office components to ensure a safer working environment—components such as UV lighting, air purification systems, automatic lighting, touchless soap dispensers and faucets, and thermal temperature scanners. These contactless office features help reduce the spread of COVID-19 and other contagions.

Rick DuPraw: As a general contractor, Leopardo is involved in many different ways. We work directly for end-user clients as well as landlords and building owners on base-building upgrades and improvements to amenity spaces. As a construction manager, we do ground-up construction as well as large renovation projects. Either way, our preconstruction, cost-modeling and design-assist expertise is often called on as we help owners, developers, brokers and architects in the design stages. And when it comes time to build, no one takes more pride in helping shape the ever-changing Chicago skyline.

Karl Camillucci: Taft Law is a full-service law firm with real estate, corporate and employment law groups, among others. We counsel employers about a wide range of workplace issues. I focus primarily on real estate development, which provides a window into workplace trends. We can see what kinds of workplaces are being built and what kinds are not, as well as how underutilized types of workplaces are being adapted for other uses. We also see the places that are relatively hot and those that are not. New developments and redevelopments often require zoning approvals, financing and incentives that we help clients obtain. The approval processes can reveal how communities view different types of developments and workplaces.

What’s the number one workplace issue or concern you’re hearing from your clients/customers?

DuPraw: Our clients are concerned about building the office of the future, meaning that they need help understanding that it will be employee-centric with features around health, wellness and technology, and incorporating features to create environments where employees feel comfortable engaging collectively in person or via virtual meetings. This is a great opportunity for us, in that we have a portfolio of sustainable and healthy, high-performance projects mixed with unparalleled experience integrating hospitality and technology into spaces.

Walters: Our downtown office customers are concerned about providing a comfortable, safe working environment for their employees. Our contractors and electricians will continue to work hand in hand with our customers to meet their needs and provide contactless office tools for a smooth transition back into the workplace. This ultimately means providing the right types of touchless tools to ensure that there’s no unnecessary spread of COVID-19.

Camillucci: One of the most critical issues is uncertainty regarding the future of commercial office, retail, and restaurant uses. In the commercial office setting, both employers and employees are struggling with the extent to which employees will return to the office or work from home. Some employers have already had many employees return to the office at least some of the time, while others have had very few return. Certain employers that planned a return to the office in the fall have delayed those plans due to the spread of the COVID Delta variant. In the retail and restaurant settings, many workplaces have re-opened, but businesses are having trouble hiring enough workers. The resurgence of COVID introduces uncertainty about future consumer demand and the types of restrictions that may apply, such as masking, vaccination, occupancy limits or even temporary shutdowns.

What industries/sectors are doing relatively well?

Camillucci: Industrial, warehousing and data center uses are expanding rapidly. Consumer demand for fast and even same-day delivery by e-commerce businesses has driven insatiable hunger for warehousing space located close to where people live. In addition to massive fulfillment centers, so-called “last-mile” delivery properties have become extremely important. E-commerce and use of social media and cloud-based media has also created an imperative to build as many data centers as possible. These trends have led to lots of speculative development of large warehouses and data centers in suburbs and exurbs on underutilized industrial property and farmland. Adaptive re-use of vacant strip malls, offices and parking structures for last-mile delivery and related uses is also hot and growing hotter. Unrelated to warehousing and data centers, development activity connected to adult-use cannabis is about to take off because Illinois recently awarded many new facility licenses.

DuPraw: Health care has been doing well in general, and for us in particular. Part of the reason is related to an aging population that the health care market has been reacting to for a number of years. But now, it’s dramatically increasing as a lot of projects that initially got put on hold due to COVID are coming online. Mix that in with all the new work that’s ongoing naturally, and you’ve got a boom. In addition, we’re seeing future growth being focused on life sciences, labs, senior living facilities and affordable housing. Although those are all separate markets, I believe the growth is for similar reasons as health care, and either way, we’re certainly benefitting as those are all strong markets for us.

What industries/sectors are facing the biggest challenges?

DuPraw: Retail and hospitality are facing the biggest challenges due to the pandemic and the growth of the Delta variant. The unpredictability of what the winter is going to bring has put many clients’ future growth plans on hold.

Camillucci: On the real estate side, commercial office, retail and restaurant property owners face challenges for the reasons mentioned previously. Besides restaurants, other hospitality and travel-related businesses—including hotels, airlines and cruises—also face headwinds as COVID continues.

What differences are you observing between the downtown and suburban office markets?

Camillucci: Pre-COVID, many businesses favored downtown offices, in part because millennial and Gen Z employees wanted to live and work in the city. During the height of COVID, people who worked in suburban offices may have had advantages returning to work, as people may have perceived the risk of exposure at a suburban office as less than the risk of going downtown. The continuing spread of COVID, including the potential for additional mutation and variants that may require continued or additional public health precautions, creates a great deal of uncertainty. People of all generations are rethinking the ways that they want to live and work. That could lead to greater interest in suburban office locations. They may be perceived as safer and more compatible with employees’ desire to stay close to home, even when at the office.

Walters: From our perspective, we’re not seeing a lot of differences between the two markets. There’s a desire among all office tenants—regardless of how many of their employees are returning to the office—to provide a safe working environment by installing contactless office components like UV lighting, air purification systems and touchless card readers that automatically allow entrance into an office suite.

DuPraw: In general, the downtown market has been slow, with over 7 million square feet of sublet space currently available. Although we’ve seen an uptick in architectural design and repositioning of spaces, most corporate tenants—unless obligated—are slow to invest. In the suburbs, activity has increased due to the many flexible work policies being implemented and individuals that prefer that their office is closer to where they live.

What steps can employers and building managers take to ensure that workers have a safe environment to return to when coming back to the office?

Walters: There are several key steps employers and building managers can take to ensure a safer working environment for their employees. Touchless entry and exit points can decrease the spread of germs across door handles and motion-sensor lighting can limit the number of times a light switch needs to be touched. UV lighting can eliminate viruses and bacteria in the air and can even be installed within central air filtration systems to ensure that purified air is being evenly distributed throughout a building. Finally, thermal scanners can be installed within a building’s lobby to read the temperatures of all individuals entering the building and alert building staff if an individual enters with a temperature that’s deemed too high.

DuPraw: There are many conversations currently about mandating vaccinations and employees submitting proof that they’ve been vaccinated. Several high-profile architecture, engineering and construction companies as well as real estate companies have already put these requirements in place. It’s also becoming the requirements of many of our customers, especially in the health care industry. I don’t think this debate is going away any time soon. But specific to construction, we’re identifying our own team members that are vaccinated so we can readily supply our customers with the needed workforce so when they reconfigure their layouts to consider social distancing protocols and other health and wellness measures or are improving or adding to their audio/visual conferencing capabilities, we’re prepared.

Camillucci: Based on our collective experience with COVID so far it seems safe to say that vaccines, masks, distancing, and similar precautions appear to make everybody safer.

What role does technology play in adapting the changing CRE and workplace environment?

Camillucci: COVID has accelerated the trend toward using e-commerce to purchase a wide range of products. That in turn has shaped the commercial real estate market by driving demand for warehousing, trucking and logistics facilities. E-commerce, social media, cloud-based computing and related technology have also created a massive need for data capacity, which has shaped the real estate market through the development of many new data centers. Also, as more restaurants seek to focus on delivery and pickup using apps and other platforms, we see a proliferation of shared kitchens, cloud kitchens and pickup-only restaurants. Obviously, the many video conferencing and workflow management applications available today allow office workers to be productive while working remotely. That’s allowed many businesses to survive the pandemic and contemplate a future hybrid workplace.

Walters: Whether it’s increased data speeds to connect with remote workers or enhanced safety measures to keep workers safe, cutting-edge electrical technology plays a critical role in our changing workplace. We’re continually installing new safety technology for a contactless work environment and those tools will be critical to the success of the new Chicago workplace.

DuPraw: Companies are using technology to facilitate a hybrid work-from-home model and ensure a safe environment for their employees. For example, we’re seeing more hoteling where even old-line companies are using scheduling software to allow employees to book offices or other conference spaces independently based on schedule and workload. Touch-free environments and the ability to have social distancing are still very important to employees. This also means there’s been a big increase in audio/video conferencing technologies, both in quality and quantity.

What’s your outlook for the corporate office sector in general?

DuPraw: As Chicago moved into Phase 5, we began seeing more activity and momentum, especially in the Fulton Market neighborhood and an uptick in planning from architectural and design firms. Multi-floor tenants in general are looking at options to give back space or reposition their existing space. Sublease space is still high but leveling off and with the Delta variant becoming more prevalent there’s caution in moving forward too quickly.

Camillucci: In the near term, the outlook is uncertain. Over the long term, I believe much demand will return. We can’t predict with confidence how long COVID will interfere with large-scale re-entry to the office. If we get Delta under control and other disruptive variants fail to emerge, maybe back to office plans will resume by winter or spring. But, if Delta sticks around or another variant emerges, the office sector could be in limbo for longer, especially given the politicization of public health measures. That said, despite the hullabaloo about working from home, I believe many people will eventually go back to the office at least some of the time. Large companies have sent that signal. For me, returning to the office three days per week has been a welcome change compared to working exclusively at home.

Is the hybrid work model here to stay?

DuPraw: Yes, but it will be a “work from office first” model, rather than a “work from home first” model. Many sectors including law firms, banking, institutional and old-line businesses have embraced the hybrid work model, which will reduce the office footprint and offer new design options for the future office. Having said all of that, there will never be a complete substitution for in-person collaboration and brainstorming.

Camillucci: For many employers and employees, a hybrid approach in some form will strike the right balance. COVID taught us that workplaces don’t have to be rigid about when and where people work, so long as work gets done well and on time. Working from home can be efficient by eliminating commutes and interruptions by colleagues. Still, working at an office provides benefits, too. Co-workers identify with each other and their employers more strongly when they have opportunities to interact in person. Employers want to build that sense of identity, and, over time, many employees will miss it. As nice as it is to work at home some days, it also feels good to be connected to a team with a common purpose. It can also be stressful to work at home with kids, pets and household responsibilities always lurking.

Walters: While some workers won’t return to the office full-time, those who spend even part-time in the office will need contactless components as well as increased data connection reliability. Our member electricians and contractors have been trained to recommend and install the best options for high-speed data connectivity to ensure remote workers are able to seamlessly get their work done.

What emerging or cutting-edge trends will likely affect the future workplace?

Walters: While a hybrid work model may keep many workers from entering their offices every day, they’ll still need to feel safe when they do come in. UV air filtration technology creates healthier air quality circulated into office suites at scheduled times throughout the day to ensure bacteria, mold and viruses are eliminated from the air. Radio-frequency identification readers can ensure that those entering an office building can pass through security with the swipe of an ID badge rather than touching any door handles, and UV lighting can be placed within a building’s escalator to disinfect the railings each time around.

Camillucci: Many large retail malls will be redeveloped and adaptively re-used as mixed-use developments that incorporate retail, dining, entertainment, multi-family residential, hotel, commercial office and last-mile fulfillment uses. These mini cities will attempt to create symbiotic relationships among the various uses so that each will be more commercially sustainable than any would be alone. The trend began before COVID and may have temporarily stalled, but many malls won’t be able to survive without thinking creatively about how to reinvent themselves as full-service communities.

DuPraw: The emerging trends will revolve around health, wellness, safety and sustainability. Employees will expect to work for organizations that not only make this a priority but invest in the physicality of space to achieve these goals. For example, our own downtown office is WELL and LEED-certified and incorporates additional fresh air intake, circadian lighting systems, healthy foods and snacks for employees and a recycling program for waste. Although we started this process way before the pandemic, COVID-19 has certainly put more focus on these issues.

What’s your advice for businesses looking to navigate this uncertain environment?

Camillucci: For businesses and investors with capital, opportunities may exist to acquire properties in struggling sectors at a good price and to redevelop or adapt them for new uses that show greater promise. At a more general level, all businesses can contribute to shortening the period of uncertainty created by COVID by requiring their employees and customers to abide by common-sense public health precautions that will reduce the spread of COVID, reduce the likelihood of new variants and allow all of us to get back to business as usual—whatever that means.

DuPraw: Pay attention to the supply chain, as it’s often a problem—and it changes weekly. For example, the availability and pricing of copper changes daily, so the more you can pre-order and plan upfront and lock in prices and schedule commitments, the better. The problem is that even with commitments, we’re still seeing delays receiving material and products. However, we’ve been able to mitigate these problems greatly via our on-staff procurement specialist who navigates these issues and is able to prevent the bulk of them.

Walters: Finding solutions to control the spread of COVID-19 is the only way we can get back to some semblance of normal. If you’re a building manager or employer looking to bring workers back into the office, please consider consulting with one of our expert electrical contractors to assess what your contactless needs are. Together, a proper evaluation will determine what technology will best fit, whether its RFID integration, UV HVAC upgrades or other tools. Our member electricians and contractors are standing by to help ensure the safest possible return to work for Chicagoland residents.



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