What the O’Hare Office Market Can Learn from the CDA Lease?
The Chicago Department of Aviation’s (CDA) recent lease of 99,421 square feet at 8420 W. Bryn Mawr Ave. delivers a significant boost to the O’Hare office market and the broader Chicago suburban office landscape. While the office sector continues to battle record-high vacancies due to the rise of remote work, this deal illustrates that strategic, well-located office assets remain relevant in today’s evolving commercial real estate market.
O’Hare’s Strategic Edge: Location and Infrastructure
The O’Hare office submarket has consistently outperformed other Chicago suburban office areas, with a vacancy rate of 25% as of September 2024, compared to the 31.4% average across the suburbs. Much of this relative success is tied to O’Hare’s unparalleled access to highways, public transportation, and the airport itself—critical factors for tenants with logistics and travel needs. The CDA’s move underscores the importance of location and connectivity, particularly for organizations tied to large-scale infrastructure projects like O’Hare 21.
O’Hare 21, the ongoing modernization and expansion of O’Hare International Airport, has created ripple effects across the local real estate market. With thousands of jobs and increased economic activity tied to the project, demand for office space near the airport is likely to remain stable, even as remote work shifts overall office demand dynamics.
Long-Term Commitment: A Rare Win for Landlords
The CDA’s lease runs through 2033, providing long-term stability for the U.S. Cellular Plaza complex and its owner, FCA Partners. Amid an era where landlords are grappling with tenant downsizing, expiring leases, and refinancing challenges, a 10-year commitment from a high-profile tenant like the CDA is a rare and valuable asset. Moreover, FCA’s debt-free ownership and its recent $15 million capital investment have positioned the property as a competitive option in the market.
For investors and landlords, the lesson here is clear: properties with proactive ownership that prioritize upgrades and amenities can attract long-term tenants, even in a challenging market. FCA’s approach is a model for how suburban office properties can remain relevant by aligning their offerings with tenant needs.
Implications for the Chicago Office Market
This deal also provides broader insights into Chicago’s office market, where suburban submarkets, particularly those with strong transit links like O’Hare, are faring better than downtown Chicago. The CDA’s decision to move operations to a suburban location instead of downtown highlights a growing trend among tenants: the search for cost-effective, accessible office space outside the city core.
The O’Hare submarket’s relative success provides a roadmap for other suburban markets, such as Schaumburg and Northbrook, where major tenants like Medline Industries and Wheels have also recently committed to new leases. These markets offer a combination of affordability, accessibility, and quality infrastructure that tenants increasingly value in the post-pandemic landscape.
Lessons for Investors and Tenants
For investors, the CDA lease exemplifies the value of targeting submarkets with intrinsic advantages, such as proximity to major infrastructure. Properties near O’Hare have consistently attracted tenants tied to logistics, aviation, and infrastructure projects, providing a level of resilience in an otherwise volatile office market.
Tenants, on the other hand, can take away valuable insights into how office spaces can be leveraged to support business operations. The CDA’s decision to consolidate contractors in a single location is a strategic move that enhances efficiency and collaboration while maintaining proximity to O’Hare, a critical asset for the department’s operations.
The Path Forward for the O’Hare Office Market
While the CDA lease is a significant win, the O’Hare office market still faces challenges. With 25% of office space vacant, there is still work to be done to attract tenants and reduce oversupply. The success of properties like U.S. Cellular Plaza demonstrates that targeted investments, modern amenities, and strategic leasing strategies can make a difference.
For the broader Chicago office market, suburban submarkets like O’Hare will likely continue to play a pivotal role in stabilizing the sector. As downtown Chicago grapples with higher vacancies, investors and tenants may increasingly look to suburban areas that offer competitive pricing, accessibility, and high-quality facilities.
The CDA lease is a reminder that even in a challenging market, there are opportunities for growth and stability. For landlords, it’s a call to action to position their properties as indispensable assets to tenants. For investors, it’s a sign that submarkets like O’Hare remain a bright spot in Chicago’s complex real estate landscape.
