CRE developers struggle to adapt to an evolving market

Chicago commercial real estate developers have likely been paying careful attention to the rise in popularity of mixed-use office buildings and co-working arrangements. New York-based WeWork was formed in 2010, and the popularity of its workspace sharing solutions has fueled spectacular growth. The company is now valued at more than $16 billion, and the owners of some landmark buildings in America's busiest metropolitan areas are beginning to take notice.

Even large companies like General Electric, Merck and KPMG have begun to seek out temporary office space for their workers, and the traditional commercial real estate model of glass-clad office towers with imposing marble lobbies and strict security is increasingly being eschewed in favor of more casual spaces that feature dining and shopping amenities. Many of these changes are being made to cater to a new generation of business owners and office workers who are willing to sacrifice a prestigious address for an informal atmosphere and greater convenience.

The owners of office buildings in major U.S. cities that were considered cutting edge just a few years ago are now spending millions on upgrades and renovations to attract this new kind of tenant. A 41 story luxury glass and steel tower in lower Manhattan is currently undergoing a $28 million renovation that will add amenities including a state-of-the-art fitness facility and a luxurious conference room.

Obtaining the permits necessary to begin renovations can sometimes be a challenge. Construction usually causes a degree of upheaval and inconvenience for those who live and work nearby, and it may be difficult for developers to justify greater traffic congestion and noise pollution simply to improve a building that is already standing. Experienced real estate attorneys may be familiar with these challenges, and they could suggest a proactive approach that focuses on the long-term benefits that the neighborhood concerned will enjoy as well as the new jobs that the project will provide.

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