WeWork hits the summit of Downtown Chicago’s office landscape

After renovating the amenities floor a few years ago at 515 North State Street, landlord Beacon Capital Partners noticed the space was sparsely used.

Then WeWork took five floors in the building.

“Before WeWork moved in, it was always a little empty,” Beacon Capital’s Greg O’Neal said at a recent co-working forum. “Then WeWork moved in and it’s been animated down there. It just feels like a whole new experience.”

The co-working giant’s impact on the city’s office landscape has grown dramatically since it first entered the market in 2015. Now it’s poised to become Downtown Chicago’s biggest tenant.

WeWork’s local footprint soon will soon stand at 930,000 square feet across 11 locations, it said. That follows the announcement in early April that the company would open two new locations totaling over 190,000 square feet.

That eventually will put WeWork — the office arm of We Company — neck-and-neck with Bank of America, which currently leases 1.2 million square feet of office space Downtown but will consolidate its footprint to about 930,000 square feet when it moves into 110 North Wacker Drive in late 2020, according to MB Real Estate.

A number of major corporations have office footprints larger than WeWork and Bank of America, but all of those firms own at least part of the space they occupy.

That includes financial institution Northern Trust, which has a whopping 2.4 million square feet of office space in Downtown Chicago, according to MB Real Estate. The firm is moving next year to 333 South Wabash Avenue, and in the process will pare down its footprint to 1.3 million square feet. A portion of that is in its 540,000-square-foot headquarters it owns at 50 South LaSalle, meaning it leases just under 805,000 square feet, according to MB Real Estate data.

Blue Cross Blue Shield has a local office footprint of 1.2 million square feet, but over 880,000 square feet is in the building it owns at 300 East Randolph Street, according to MB Real Estate. Chase occupies 1.8 million square feet in the office tower it owns at 21 South Clark Street. The Real Deal did not include owner-occupied spaces in its ranking of the biggest office tenants in Downtown Chicago.

The city’s biggest single-space tenant, United Airlines, renewed its lease for 850,000 square feet in the Willis Tower. United will add a 30,000-square foot cafeteria and roof deck to its Willis Tower offices, but it does not appear to be taking on extra space.

After signing a 500,00-square-foot lease at the to-be-developed Wolf Point South tower, tech giant Salesforce will control about 770,000 square-feet in the central business district, according to data compiled by commercial brokerage Bradford Allen. That put Salesforce about even with WeWork before the co-working firm announced the two new locations.

WeWork is already the biggest private office tenant in New York, with 50 locations totaling 5.3 millions square feet in Manhattan. It is also the biggest tenant in London and Washington, D.C.

In Chicago, its rise has been boosted by the trend of major corporations paring down their footprints. Meanwhile, the co-working company doesn’t appear to be slowing down.

WeWork has secured a building permit to renovate three floors at 2 North LaSalle Street. It has not confirmed plans for that building, but a new location in the space would officially push the company past Bank of America as the biggest office tenant Downtown.

Despite its major presence Downtown, WeWork controls just a fraction of the overall city co-working market. Shared space providers have tripled their footprint since 2014, but still account for only 2 percent of the overall market.

The rise of WeWork has had an immense impact on the local office market. Increasingly, large corporate office tenants view WeWork or similar co-working offices as a new kind of building amenity, JLL broker Bill Rogers said.

“Tenants, the larger ones especially, want co-working in the building to accommodate short-term projects or just the flexibility to grow into a WeWork in the case the building is 100 percent leased and can’t accommodate their further growth,” Rogers said at the recent co-working forum hosted at a WeWork location. “It’s definitely becoming almost a ‘got-to-have’.”

WeWork’s growth has been fueled by a resurgent economy, especially in Chicago, where major corporate relocations have added thousands of jobs Downtown.

The relationship with the economy is symbiotic, in that the availability of flexible working space allows companies to more easily set up shop in town, said David Burden, office broker with Colliers International.

“It’s created an opportunity for new companies to come into town and get a toehold in the market quicker,” Burden said. “We’ve had some clients that started out in Chicago in co-working spaces to get a foothold in the market and then, a year later, they’re out looking for their own space.”