The parent company of Blue Cross & Blue Shield of Illinois has signed the largest new suburban office lease since the start of the COVID-19 pandemic, a move that notches a crucial win for one Downers Grove landlord and creates a big headache for another.
In a deal that will shrink its office footprint in the western suburb by nearly 25%, Chicago-based Health Care Service Corp. signed on for more than 133,077 square feet at 3500 Lacey Road, the company confirmed. HCSC's Blue Cross & Blue Shield office will relocate to the building along with hundreds of employees from its longtime Downers Grove home at 1020 31st St., where its lease for roughly 177,000 square feet expires at the end of this year.
The move is in line with the COVID-era trend of companies recommitting to offices but cutting back on space as they adapt to the rise of remote work. HCSC is also upgrading to a newer and more recently renovated building, another common theme during the public health crisis as companies seek to compel employees to show up to the office rather than work from home.
A spokesman for HCSC said in a statement that the company "embraces a hybrid approach to remote work" and that it will have shared seating—commonly known as "hoteling"—in the new office to "provide increased flexibility for collaboration among teams located in Downers Grove." Blue Cross & Blue Shield has about 625 employees working a flexible in-office and remote schedule at the Downers Grove office, plus another 400 workers affiliated with the office that will primarily work remotely, the statement said.
The softer overall demand and flight to higher-quality buildings has widened the gap between the haves and have-nots in the suburban office market, where vacancy reached an all-time high of 26.9% at the end of 2021, according to data from brokerage Jones Lang LaSalle. With many tenants like HCSC shedding space, the suburbs endured a net loss of 2.8 million square feet of tenants in 2020 and 2021 combined, JLL data show.
It's been a problem for any landlord with lots of available space to fill. But buildings like 3500 Lacey—also known as Esplanade II—that have been spruced up with tenant amenities have had more success leasing up their vacant space.
HCSC's lease is a big one for 3500 Lacey owner Kore Investments, the Denver-based firm that bought the 13-story building in late 2019 for $129 million. The property, which sits on 20 acres next to Morton Arboretum, was 97% leased at the time.
But Kore took a hit at the property late last year when its largest tenant, supply-chain management company Havi Group, inked a deal to move its headquarters from Downers Grove to the Fulton Market District downtown. Havi executed an option to terminate its lease for 27% of the Downers Grove office building at the end of August 2022, sending Kore on a hunt to backfill the space amid weak demand.
Without Havi, the 584,000-square-foot building was just 62% leased, according to a Bloomberg report tied to Kore's nearly $86 million loan on the property. The mortgage was packaged with other loans and sold off to commercial mortgage-backed securities investors, making much of the building's finances public.
But it only took a few months for Kore to snag HCSC to fill the majority of Havi's space, which now brings the building back to 95% leased, according to real estate services company Cushman & Wakefield, whose brokers represented both the company and Kore in negotiating the deal.
“We are seeing businesses welcome employees back to the office with a focus on providing high-quality dynamic workplaces that cannot be replicated at home,” Cushman leasing agent Dan Svachula said in a statement, adding that Kore "has done an exemplary job in setting the scene for corporate occupiers like Health Care Service Corporation and its employees."
Esplanade II has proven to be resilient after losing tenants. The building was previously home to Sara Lee before the consumer goods company uprooted and relocated its Hillshire Brands spinoff to the West Loop in 2012. But the building was back to 86% leased two years later after landing new leases with Havi Group, investment manager Invesco and sports nutrition company Glanbia Performance Nutrition.
The latest leasing musical chairs now creates a challenge for Blue Cross & Blue Shield's current landlord, a venture of Hallandale Beach, Fla.-based Accesso Partners. The insurance company currently occupies almost 82% of the 218,000-square-foot property, which is one of two buildings in the Highland Oaks office park that Accesso bought in 2014 for $46 million. Accesso financed that acquisition with a nearly $35 million loan that was also sold off to CMBS investors.
Accesso is "working aggressively with leasing (agents) to identify new tenants" and is considering renovation work to try to appeal to new users amid weak demand, according to a Bloomberg report tied to the mortgage. The loan is due to mature in November 2024.
An Accesso spokesperson did not provide a comment.
The office market in Downers Grove and its neighboring suburbs is in better shape than the Chicago suburbs at large, with average vacancy of 22.3% at the end of 2021, according to JLL data. Vacancy among the highest-quality—or Class A—buildings in the submarket was just 20.3%, the lowest of all suburban submarkets tracked by JLL.
Other companies and real estate investors have made recent new commitments to the area, including tech consulting firm BDO Digital signing the first office lease at the revamped former McDonald's headquarters campus in Oak Brook. New York-based real estate firm Group RMC also paid close to $100 million for four Downers Grove office buildings, including the Highland Landmark III property across the street from Accesso's Highland Oaks buildings.
HCSC is the nation's seventh-largest health insurer and owns Blue Cross & Blue Shield plans in Illinois, Texas, Oklahoma, Montana and New Mexico. The company's net income jumped by 75% in 2020 to nearly $4 billion, driven up by more people enrolling in HCSC health insurance plans.
Blue Cross & Blue Shield of Illinois is based downtown, but has 870 workers based in Naperville and another 150 based in Waukegan, in addition to the Downers Grove office.
Cushman's Svachula and Kevin Clifton are part of the team that oversees leasing at 3500 Lacey. Cushman brokers Dan Maslauski and Michael Sessa negotiated the new lease on behalf of HCSC.
"cros" - Google News
March 21, 2022 at 09:18PM
https://ift.tt/HheDLi5
Blue Cross parent moving Downers Grove office - Crain's Chicago Business
"cros" - Google News
https://ift.tt/dogkJlr
https://ift.tt/kwpYgaI
Bagikan Berita Ini
0 Response to "Blue Cross parent moving Downers Grove office - Crain's Chicago Business"
Post a Comment