Commercial real estate giant JLL is scaling back its own office space in Chicagoland, this time in the suburbs about 20 miles from its corporate headquarters in the East Loop, where it’s also aiming to shed a big chunk of its office lease.
The latest sublease offering by the world’s second-largest commercial real estate brokerage came to light when a $14.7 million loan for the Sidra Capital-owned building at 700 Oakmont Lane in suburban Westmont was watchlisted by its lender last month. The lender is an entity backed by bondholders in the debt that was originated by Goldman Sachs in 2021 and then sold off to investors as securities.
The creditors rang the alarm after JLL, its anchor tenant, listed more than 20 percent of its 67,000-square-foot space in the building for sublease, according to debt servicer notes compiled by DBRS Morningstar. It is unclear how much of JLL’s total space the firm plans to rent out on the secondhand market.
The offering from a company in the business of selling other tenants on the benefits of commercial real estate stands out while office landlords struggle to retain tenants at their current footprints, as many are downsizing with fewer workers in the office every day.
Chicago-based JLL confirmed it’s marketing the space for sublease in order to “bring our teams closer together” following an analysis of its area office usage, a spokesperson said. But the company declined to specify the size of the offering.
“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,” a JLL spokesperson said. “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.”
The brokerage signed its lease with the Westmont property’s former owner Ryan Companies in 2019. It took up 75 percent of the space available in the building while most of the rest of the property was occupied by Ryan. JLL’s lease is set to expire in October 2030.
The offering in Westmont follows JLL in July putting more than 61,000 square feet up for sublease across the 47th and 48th floors in its Aon Center headquarters at 200 East Randolph Street in Chicago’s East Loop. That’s about 30 percent of JLL’s total 201,000-square-foot footprint in the 83-story tower.
JLL, as well as its competitors, has been working to cut costs amid the commercial real estate downturn brought on by the pandemic sapping demand for office space and rising interest rates squeezing borrowers, thus cutting transactional revenue across all brokerages. JLL has made plans for headcount reductions, and finding takers for its offices could help further slice its real estate costs.
When JLL signed its lease in Westmont in 2019, it was validation for Minnesota-based Ryan Companies, which had been planning to pour $50 million into overhauling an 18-acre office campus that includes the building at 700 Oakmont Lane.
It is unclear how much of Ryan’s initial plans have been executed so far, however it sold at least one building on the campus — the medical office property at 750 Oakmont Lane — to Chicago-based Harrison Street Real Estate Capital for a little more than $19 million in 2022, public records show. That deal was part of a portfolio sale of 11 medical office buildings across six states — Florida, Illinois, Minnesota, North Carolina, North Dakota and Wisconsin — from Ryan to Harrison.
Ryan paid $5 million for the Oakmont Lane property in 2017 and demolished the middle portion of the property to create two separate buildings, one of which JLL now occupies and the other of which is now owned by Harrison.
Ryan listed the building that houses JLL for sale in 2021. Instead of finding a new buyer, Sidra Capital, which previously owned a portion of the property, bought out Ryan’s share of it for $21.7 million.
The building is considered 91 percent occupied but could tumble if JLL can’t find a taker for its excess space and decides to terminate its lease early. That normally comes with a hefty fee paid to the landlord. It’s unclear if JLL is contemplating such a move.
Sidra and Ryan Companies did not respond immediately to requests for comment.
Other firms have been scaling back on office space in Chicago and the surrounding suburbs. Suburban office sublease availability increased by 22 percent in the third quarter to nearly 3.9 million square feet on the market, and in downtown Chicago’s central business district, there’s a record-high 8.3 million square feet of secondhand inventory, according to brokerage data.
Even the city’s buzziest office market, Fulton Market, has seen large scale subleases hit the market in recent months.
Food-packing company Hazel Technologies listed its entire 57,000 square-foot office at 320 North Sangamon Street for sublease earlier this month.
Editor’s note: This story was updated to add a statement from JLL.
Read more
Commercial
Chicago
JLL looks to slash East Loop footprint by 30%
Commercial
Chicago
Hazel Technologies pulls back on Fulton Market offices with sublease offer
Commercial
Chicago
Commercial real estate firm Ryan moves into West Loop office building