Author Archives: Rhea Campbell - Bella Terra Partners


Howard Tullman was recently interviewed by and hits the nail on the head when he states,

“…. the space is rapidly evolving and they are now introducing more closed ‘traditional’ office spaces. We’re getting rid of the open-plan office concept – we’ve got video that indicates that when people wanted to do anything serious or were trying to concentrate they got up and moved. And when they wanted to meet as a group they moved because the other people shushed them – so they needed to have a space. So we’re going to have some open areas, but we’re going to have a lot more ‘identity areas’: closed areas, conference areas, phone rooms.”

Space must be configured to work for both heads down, focus-intensive work and open air collaboration. Firms that created entirely open spaces without huddle rooms for privacy are now having to make capital investments to reconfigure their offices to meet these needs.

In a comprehensive office space acquisition strategy including all of your employees in establishing design criteria is critical for successful office reconfiguration adoption.





When it comes time for office tenants to start previewing alternative spaces in which to place their businesses an often overlooked, and certainly undervalued concept, is the difference between “rentable” square footage, and “usable” square footage.  Unfortunately, not paying attention to this detail can be an expensive mistake.

Office buildings are essentially made up of two different categories of space; office area and common area.  Office area is the actual space occupied by the tenants of the building, while common area is every other square foot of the building.  Shared bathrooms, hallways, the building lobby, and electrical rooms are the most obvious examples of “common area” space.  One might think that having a big, gorgeous lobby is therefore a burden to the landlord because they could be using the lobby square footage as an additional office space to lease out, thereby creating revenue.  However, the landlord already is leasing that space out, and if you are in the building, you’re paying for it.

In Chicago, tenants pay for more square footage than they have the exclusive use of. They also pay for their share of the common areas of the building, based on the percentage of square footage they take up in relation to other tenants.  For example, if your company leases 5% of the total available office space in the property, you are paying for 5% of the lobby every month, as well as 5% of the bathrooms, hallways, electrical rooms, and all other shared areas.  Landlords do this by adding square footage to the lease, even though the square footage added is not exclusively used by your company.

This increase in square footage above what you call your own space is the “load factor”.  Knowing how to find a building with a lower “load factor” can save your company a lot of money.  Importantly, the more common area a property has, such as a large lobby, the more painful your 5% of that cost is going to be. This is because the landlord is adding more shared square footage to your lease than if the lobby was much smaller.  In fact, your 5% share of the common area may add between 10%-30% to your monthly rental payments.

For instance, a 10,000 square foot user with a 25% load factor has actual use of only 8,000 square feet.  If you are paying $50 per foot per year on a 5 year lease, you will pay $500,000 over the life of the lease for space that is not yours.

How are usable square footage, rentable square footage, and the load factor calculated? Usable square footage is fairly straightforward; it is the area you are able to exclusively occupy within your actual office space. There is a professional organization called BOMA ( that sets standards for these measurements, but you can come very close by taking a tape measure and sketching out your space wall to wall.  If every office tenant did this in a particular building, the resulting number would represent the total usable square footage in the project.

Rentable square footage is also determined by BOMA standards, and it is measured by taking the entirety of the building’s floorplates, exterior wall to exterior wall. There are caveats to allow for penetrations, such as stairwells and air ducts, but the idea is to capture the square footage of every floor if there were no interior improvements in place.  In other words, simply a blank canvas.

The difference between these numbers is the common area (i.e., hallways, bathrooms).  If you divide the common area for the building by the usable square footage of the building, the result is the load factor.  In the example above, a 10,000 square foot user is paying for 2,000 square feet of common area, which means they are paying a 25% premium (load factor) on top of their usable square footage. In this example, over five years, the tenant pays $500,000 extra in rent. That is a large number for not a very large tenant.

What can be done to control these costs?  Fortunately, this is an example of tenant cost that can be controlled, but only if it is dealt with before you choose a property. As I mention at the top of this post, these extra expenses are completely customary and accepted in the Chicago marketplace. There is no point in complaining to the landlord community, but there is a point to paying attention to these numbers when touring prospective buildings.  Every office building is laid out differently with different size bathrooms, hallways, and entryways. Therefore, every property has a different load factor and extra cost associated with your potential space.

Now that we have seen the math, it is simple to compute the load factor and determine an actual “cost per usable square foot” for each option on your tour list, as opposed to a “cost per rentable square foot,” which is the commonly quoted rental rate in Chicago.

Another way to deal with this issue on the front end is to make sure your space is measured in a fair way when compared to competitive space, or other spaces in the building.  Landlords can charge a different load factor to different tenants on a floor by floor, or space by space basis. This point is somewhat negotiable during the leasing process.  For instance, a tenant occupying an entire floor will not have shared hallways or shared bathrooms. They will have exclusive use of these items, and should therefore be charged a lower load factor than a tenant on a multi office floor. Of course, a full floor tenant still shares the building lobby and some other areas, but a cautious Tenant Representative should be on top of this concept and attempt to lower the load factor for his or her clients.

Our goal is not to direct our clients away from properties with high load factors.  Rather, we trying to educate them as to what costs to expect when they ultimately sign a lease and properly equalize the economic factors of each space solution offered so they can be compared equally on an apples-to-apples basis.

This is just one example of a simple concept in the process of choosing an office space that if not handled correctly can end up costing a tenant money.



Market Lens Newsletter Q3 2013


Space matters. It really matters.

Your space is an extension of your culture. It should give you a visual taste of the company’s culture.

Chicago Creative Space Introduction from ChicagoCreativeSpace on Vimeo.


Here’s a snapshot of some of the more notable leasing activity in the central business district. The market is fluid and ever changing.


  • Chicago Title and Trust is vacating the building and moving to 10 S LaSalle St.
  • Grant Thornton will be vacating 175 W Jackson and moving into 137,000 sf of former Chicago Title and Trust space at 161 N Clark St in 2015 and secured naming rights to the building. This puts occupancy at this building back up to 95%
  • With so few significant leases set to expire in the next couple of years and occupancy at 95%, Tishman sold the nearly 1.1 million sf tower for about $325 per sf ($348 million) to John Buck and South Korean investors.  This amount was unheard of when they purchased the building in 2007.


  • Google agreed to lease about 200,000 sf at 1000 W Fulton St (which is currently undergoing massive renovations) in 2016.  It currently occupies about 150,000 sf of office space at 20 W Kinzie. This is on the heels of the Motorola Mobility (now under the Google umbrella also) just completed at the Merchandise Mart for 572,000 sf.
  • The presence of Google in buildings just north of the Chicago River has boosted the area’s reputation as a technology hub.

 205 & 225 N MICHIGAN AVE

  • Recent relocations to the 1.9 million sf property include a 19,000 sf lease to Corbett Healthcare relocating from 111 E Chicago; a 51,000 sf lease to Energy BBDO from Chicago’s Wrigley Building; a 15,000 sf lease to TPN which relocated from 500 N Michigan Ave.; and a 15,000 sf lease to Resolutions Media relocating from 314 W Superior.  Energy BBDO, TPN , Corbett Healthcare and Resolutions Media are all members of Omnicom Group totaling 212,000 sf at 225 N Michigan. 


  • Google’s Motorola Mobility signed a 15-year lease for 572,000 sf at the Merchandise Mart last year and is currently working on building out the space.  In 2013, it added 32,000 sf to this deal.  It is planning on moving about 2,000 employees to this office from the suburbs.  However, Allscripts has filed a lawsuit claiming the build out is affecting their employees in a negative manner and has sent a Cease and Desist letter to no avail.
  • GoHealth, an insurance brokerage, subleased 93,800 sf of space from Career Education.  This is an expansion for them in the city. 
  • To make room for Google, The Merchandise Mart relocated many furniture and giftware showrooms within the building.  The tenant mix is now about 45% office space and 55% showrooms with overall occupancy around 96%.
  • High-tech uses, including the 1871 incubator, have made the Mart one of Chicago’s technology epicenters.


  • South Korean investors Mirae Asset Global Investments paid about $335 per sf for the 650,812 sf building at 225 W Wacker Dr.  They purchased this from an investment arm of JP Morgan Chase which paid $153 million ($235 per sf) for the tower in 2003. 
  • The building is well-leased (91%) even though one of its largest tenants, Kaplan Higher Education recently moved out.  AEP Energy subleased 2 of Kaplan’s floors for a combined total of 51,010 sf.  AEP moved its headquarters there from 363 E Erie St in 12/2012.  The other 25,505 sf floor was subleased to Call One which moved its headquarters there from 123 N Wacker Dr in 6/2013. 


  • After mulling a move, Trading Technologies decided to stay put in its West Loop headquarters, but reduced its space by about 1/3. The company, which produces software for electronic trading, renewed its lease for 5 years at 222 S Riverside Plaza, where it will have about 73,000 sf, down from about 108,000 sf. 


  • United Continental Holdings moved the rest of their headquarter operations to 233 S Wacker, taking an additional 205,000 sf.  This upped its total space in the high-rise to nearly 830,000 sf.   Its 240,000 sf of space at 77 W Wacker is up for sublease and 109,071 sf of it has already been taken.
  • ShopperTrak moved into about 52,000 sf in the tower.  It moved its headquarters from 200 W Monroe where it leased about 44,000 sf. 
  • Sales Empowerment Group leased 12,000 sf at 233 S Wacker Dr.  It is moving from 1,400 sf office at 351 W Hubbard St.
    • Law firm SNR Denton (now known as Dentons) signed a 15-year lease to move within the tower. It will shift as much as 144,000 sf within the building.


  • The 51-story, 959,000 sf tower, formerly known as the United Building, was recently renamed 77 West Wacker after United Continental Holdings moved its headquarters to 233 S Wacker Dr.  The building has a recently renovated fitness center, a new outdoor café, and a new penthouse conference center and is approximately 80% leased.
  • McGuireWoods signed a 10-year lease extension for 114,760 sf at 77 W Wacker Dr. The law firm dropped about 22,900 sf on the 47th floor, but will continue to occupy floors 41 through 45.
  • DTZ is subleasing 43,587 sf of the former United headquarters space at 77 W Wacker Dr until 2022.  It will move there in 3/2014 from 161 N Clark St where it had about 39,000 sf.
  • Capital One is subleasing 65,484 sf of the former United headquarters space.


  • Harbor Group International sold 111 W Washington for $94.63 million to an affiliate of the Shidler Group, Alliance Partners.  Harbor purchased the building in 2007 for $79.5 million.  During its tenure, Harbor attracted new tenants including GrubHub and the Tribeca Flashpoint Media Arts Academy, which occupy 59,469 sf and 102,387 sf.


  • Tishman Speyer agreed to pay about $265 per sf ($211 million) for 190 S LaSalle St.  CBRE Global Investors bought the 798,782 sf tower for $137 million in 2006, when less than half of the building was leased.
  • U.S. Bank recently expanded by 43,370 sf to relocate its employees from 550 W Washington.  This follows its 66,000 sf lease in March of 2011, and brings its total space leased to about 110,000 sf.  The building will be renamed the U.S. Bank Building. 


  • Prudential Plaza, downtown Chicago’s largest zombie office property received an injection of $100 million of capital from New York investors.  With this funding, the building will undergo redevelopment of retail space, renovation of One Prudential Plaza, and add a huge rooftop area and other amenities.  Concerns about a loan default loomed in 2012 as the building faced the loss of big tenants including Baker & McKenzie and Integrys Energy Group.  After Integrys leaves next year, the property will be about 40% vacant, mostly in One Prudential, with blocks of up to 350,000 sf available. 
    • Schuyler Roche & Crisham added space and combined offices in a 37,000 sf lease at Two Prudential Plaza (180 N Stetson Ave) in a new, long-term lease.  The law firm brought together smaller offices in that building and One Prudential Plaza, where it had been a tenant since the building opened in 1955.
    • Ryan Specialty Group signed an 11-year lease to shift its headquarters to 180 N Stetson Ave from 200 E Randolph St.  They are moving into 18,007 sf on the 46th floor.


  • Hearn acquired 856,000 sf of office space and 710-car parking deck at 875 N Michigan.  The price was near $145 million.  They are planning new outdoor gathering areas, aesthetic improvements, tenant improvements, and all-new mechanicals.  The building’s office space is about 92 % leased, but expiring leases in the next couple of years will drop that to around 82 %.
  • Draft FBC is set to move its Chicago offices from One East Erie to 875 N Michigan Ave in January 2014.  It will occupy about 185,000 sf.
  • Interpublic companies, GolinHarris & Weber Shandwick, recently moved its offices into 875 N Michigan Ave and is now occupying a total of about 140,000 sf there.


  • TIER REIT sold 10 and 120 S Riverside Plaza to the Canadian firm Ivanhoe Cambridge for about $260 per sf.  The buildings, which have just over 1.4 million sf combined were about 98 % leased.
  • 10 S Riverside stands to lose Zurich American Insurance as a tenant in 2014.  It is leaving about 100,000 sf when it moves to 300 S Riverside Plaza.  Zurich is taking a portion of the space being vacated by AIG whose lease for nearly 200,000 sf expires in mid-2014.  AIG plans to move to 500 W Monroe St, where it will take just 75,000 sf.
    • Plante Moran is moving all 350 of its downtown employees into new offices at 10 S Riverside in 2014.  It will occupy about 85,600 sf on 2 floors.   Plante Moran is moving from 225 W Washington.
    • Belvedere Trading recently started a new lease at 10 S Riverside for 37,000 sf.

 444 W LAKE ST

  • Ivanhoe Cambridge is investing in the development of a new, 900,000 sf office tower at 444 W Lake St called River Point.  They are mainly building it “on spec” and broke ground in early 2013. 
  • McDermott Will & Emery agreed to lease 225,000 sf at 444 W Lake.  It will move from their current space at 227 W Monroe in March 2017.  It currently occupies about 237,315 sf at 227 W Monroe.
  • DLA Piper agreed to lease about 200,000 sf at 444 W Lake.  It currently occupies about 200,000 sf at 203 N LaSalle St.


  • SmithBucklin moved from 401 N Michigan to about 111,000 sf at 330 N Wabash.
  • A Eicoff & Co renewed its lease for about 24,000 sf.
  • The University of Chicago renewed about 42,000 sf of its space at 401 N Michigan.
  • Kraft Foods Group is in advanced talks to open a 30,000 sf office on the top 2 floors of 401 N Michigan.


  • Sterling Bay acquired 111 N Canal in 2012 when it was 70% leased.   They proceeded to make multiple improvements including a redesigned lobby and extensive rooftop amenity areas.
  • The U.S. Army Corps of Engineers moved its Chicago headquarters from 111 N Canal to 231 S LaSalle St where it now occupies 67,600 sf.
  • FieldAware, a software company, is opening a downtown Chicago office at 111 N Canal. It expects this office to grow to 80 coworkers by the end of 2013. 
  • In-flight internet provider Gogo is finalizing a lease for more than 230,000 sf at 111 N Canal St.  It will shift more than 500 workers from Itasca.  


In a recent article written by Eric Jaffe of The Atlantic titled: Google’s New Chicago Home Isn’t More Transit-Friendly, But It Is More Highway-Friendly Eric cites a study done by Lauren Ames Fischer, who lived in Chicago before coming to Columbia University as an urban planning doctoral student, where she disputes the notion that Google’s move was driven by the new transit hub at the Morgan Street Station.

In fact, Fischer ran a transit anlaysis and found her hunch backs up the idea that transit did not play the role everyone, including Mayor Emmanuel, has touted. Although Google’s new location at 1000 W. Fulton Street does have strong transit access its old location on Kinzie Street did too.  Her study concludes the new headquarter loses on transit criteria or at best ties.

Fisher says,

“I think there’s enough to celebrate in just saying that firms are choosing to stay in urban locations — and particularly with the West Loop, urban locations that are up-and-coming and not necessarily fully established as employment centers,” says Fischer. “We don’t have to take the next step and say that transit causes this.”


For a sneak peak at Google’s new headquarters have a look at Fulton 1K’s marketing video.



151 North Franklin from REA on Vimeo.


Market Lens Newsletter Q2 2013 by BellaTerraPartners


World Business Chicago does an excellent job of summarizing the key economic indicators of the Federal Reserve’s Beige Book survey.

“Chicago District Beige Book Highlights (March 2013):

  • Growth in consumer spending decreased, and some contacts suggested that the end of the payroll tax holiday was having an increasingly negative effect. Lingering winter weather prevented retailers from selling spring-related merchandise, which drove up inventories. Regardless, sales during the Easter holiday mostly followed expectations.
  • Business spending was up as inventories increased slightly, and spending on software, equipment, and structures increased. The labor market showed modest improvement, and contacts indicated that demand for highly skilled profession and manufacturing positions continued to outpace supply. Opportunities for recent college graduates were up, and employers saw greater competition to fill internships.
  • Construction and real estate activity improved; residential construction increased as demand for multi-family housing remained strong, and single-family grew. Increases in non-residential construction remained moderate, but commercial real estate conditions improved as rents increased and vacancy rates decreased.
  • Growth in manufacturing slowed, with some contacts speculating that it was hampered by uncertainty surrounding the federal budget sequestration – however, they reported little evidence of this is their shipments. Demand for steel was flat, mining activity was down, and both the energy and heavy equipment sectors were mixed. The auto industry continued to be strong.
  • Credit conditions remained favorable, as credit spreads and market volatility remained low. Banking contacts reported increases in business, real estate, and consumer lending. Recent rises in equity and home prices were thought to be boosting consumer confidence and spending.
  • Cost pressures were mostly unchanged. Commodity prices were down, and scrap metal continued to decline. Energy prices remained elevated, and contacts noted upward price pressure on raw materials such as chemicals, lumber, and concrete. Wholesale price increases were modest, as were wage pressures.
  • Agriculture – cold weather delayed field work, but contacts doubted that planting would be seriously delayed. Corn and soybean prices dropped with expectations of larger crops this year. Milk and hog prices were down as well, while cattle prices remained unchanged.:”

Keeping up to date on macro and micro economic trends is a critical element of any space occupancy strategy.