Avgeris Venture Plots Office-to-Industrial Play in Chicago Suburbs

Another suburban office complex is poised for industrial redevelopment, shedding light on the fall of one commercial sector and the rise of another.

Lombard-based Avgeris & Associates, in partnership with Missner Group and Wylie Capital, aims to redevelop the former American Hotel Register headquarters in Vernon Hills into a four-building, 900,000-square-foot distribution center, Crain’s reported.

A venture led by Avgeris bought the 70-acre site for less than $30 million earlier this month from an American Hotel Register affiliate. The developers plan to maintain a 258,000-square-foot warehouse on the property, while demolishing a five-story, 202,000-square-foot office building.

The development will span 1.1 million square feet at buildout, and its proximity to Interstate 94 makes it attractive for logistics and manufacturing, Avgeris’ Stewart Mills told the outlet.

The project mirrors other redevelopments in the Chicago suburbs, where demand for industrial space continues to grow due to an increase of e-commerce. On the flip side, demand for office space has plummeted to a historic low, with remote-work trends compounded by tight lending standards that make it tough for office landlords to refinance their assets and perform necessary renovations.

Notable office-to-industrial projects include Dermody Properties’ $232 million transformation of the former Allstate campus in Glenview into a 10-building, 3.2 million-square-foot logistics complex. Plus, Brennan Investment Group wants to replace a 485,000-square-foot office building in Rolling Meadows with a logistics campus.

While Chicagoland’s industrial sector experienced frenzied growth during the pandemic, the craze could be dying down. The industrial vacancy rate in the metropolitan area jumped from 4.6 to 5.2 in the third quarter of 2023, the outlet reported, citing data from Colliers International.

Demand is still there. Wylie received unsolicited inquiries from brokers and tenants while the property was still under contract, Wylie Capital founder Jason Simon said.

—Quinn Donoghue