Q&A: Damla Gerhart tapped to lead Avison Young’s Chicago office, leaving CBRE

Damla Gerhart gained a new outlook on Chicago’s commercial real estate market on Monday.

She landed a new role as Toronto-based brokerage Avison Young’s principal and managing director for its Chicago office, a change that will have her working with investors and landlords as well as tenants, after a career that emphasized tenant representation, most recently as CBRE’s leader for occupier services in the area.

Her move comes at a pivotal moment for the city with the nation’s second-largest central business district, one pummeled by a pandemic finally waning after two years, giving landlords a chance to refill some of the record amount of commercial space abandoned during the health crisis. Gerhart’s paying close attention to the volume of workers returning to offices over the rest of this month, an indicator of leasing activity over the course of 2022.

“While the recovery has probably been slower than we would have wanted in some cases, I think it’s going to continue, even specifically in the office sector,” Gerhart said in an interview with The Real Deal. “A lot of companies are planning on April being the time when they start getting some of their people back in the office. Even in the next month, we’re going to see some of that recovery really take place.”

She’s filling a position recently held by Beth Phillips, who took the helm of Avison Young’s Chicago office in 2020 and left last year to join Caleb Hayes Enterprises, a real estate investment firm based in Wisconsin.

Read on for Gerhart’s take on how much longer tenants will hold an advantage in office leasing and the influence retail and amenities will have on drawing workers back to Chicago.

This interview has been condensed and edited for clarity.

As a broker previously on the occupier side of the business, just how strong of a tenant’s market is it right now?

It is still a very strong tenant’s market, from what I’ve heard. As this year continues, we will start to see some shifts, especially as people start coming back to the office. Some of these companies, their people have not stepped foot in their offices for two years. They’re going to come back into the same space they left and realize they have to make some tweaks.

Working remotely, people got used to having privacy whenever they wanted it. When you go back to the office, you’re not going to have that everywhere. There are certainly going to be changes made with how space is designed and what people need to be productive going forward. As that happens, I think companies make changes. They will move, reevaluate, reconfigure their space. When that demand picks up, certainly it’s going to soften from being strictly a tenants’ market.

What deals in the past year that you worked on demonstrate the office recovery is underway and why it will continue?

I won’t share the name, but we did have a client earlier in the pandemic out in the market looking for space, and they knew there were going to be changes with hybrid working. They actually lost out on the space they wanted. This was in Fulton Market, so it’s very competitive. Another company came in and took it.

When our client reentered the market and continued their search, they actually took on more space than they were initially looking for on the deal they lost. A lot of companies went really far across the pendulum, from thinking remote work will stay forever and we’ll do it frequently, to thinking we are going to grow and probably want people to spend some more time together than not.

Where did your career lead you before reaching Avison Young?

I was at CBRE for almost 10 years, and prior to that I was at JLL for almost seven. So I’ve made my way through some of the much larger organizations in our industry. Most recently at CBRE, I was the market leader for the occupier business. It’s a pretty critical time in our industry, so I felt like this was the perfect moment to take a leap.

How do you see hybrid schedules of just two to four days a week with employees in the office impacting retail?

The recovery for retail goes hand in hand with more return to the office. A lot of companies are saying they need to earn their people’s commute. If I’m going to have you come in, even if it’s only two or three days a week, I have to earn that because [employees] are giving up a lot by getting in the car and trekking all the way into the office. Retail is going to play a big role in that.

Will the competition between landlords to offer high-quality amenities continue as part of earning those commutes?

The flight to quality is real. If you look at the companies that did actually make moves in the last two years during the pandemic because they needed to, and their lease was up and they weren’t in a position to wait, they went to a nicer building.

How much trouble does that spell for older properties?

We’ll continue to see landlords and investors in some older buildings start to look at what they can do with those assets. Whether it makes sense to invest in an old office building and try to bring some life into it is up for debate. They might also consider, if they’re really trying to create more of the live, work, play scene in the Loop, that we all saw how much that died when the work went away. There wasn’t a lot of living or playing to do there. There might be opportunities to convert some of that into multifamily housing and some residential projects. Any smart investor is looking at their old assets to figure out what they can do to continue to compete.

How do you anticipate your duties changing as you move from CBRE’s market leader to overseeing Chicago for a different brokerage?

The occupier side of the business is where I spent the majority of my career so I know that really well. A big component of why I took the role is the chance to work more with investor clients and do some of that side of the business that I hadn’t had a chance to before. I’ve met some of the principals and a lot of the leadership team that I’ll be working with, so I’m thrilled with who I’ll be surrounded by.

A big initiative is continuing to work in a really nimble way, which I think is one of Avison Young’s strengths. We have to continue to innovate and keep on this growth trajectory we have been on. This is our moment, especially as we come out of this [pandemic] and the industry is continuing to be disrupted.

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