Vacant suburban office property goes up for auction: The empty former Hewitt Associat
Vacant suburban office property goes up for auction: The empty former Hewitt Associates building in Lincolnshire stands to add to the list of outmoded suburban office properties selling at steep discounts
Ecker, Danny. Crain's Chicago Business; Chicago Vol. 46, Iss. 10, (Mar 6, 2023): 16.
The owner of an empty office building in Lincolnshire has put it up for auction, adding to a series of outdated suburban office properties in line to be sold off the discount rack as remote work continues to beat down demand for workspace.
The 318,043-square-foot building at 2 Overlook Point in the northern suburb is slated to be sold in an online auction that begins March 20, according to a marketing flyer from real estate services firm Jones Lang LaSalle. The five-story building, which was designed for and occupied by corporate consultant Hewitt Associates when it was completed in 1997, is part of the 330-acre Lincolnshire Corporate Center along the west side of Milwaukee Avenue.
There is no starting bid price listed for the property, but auctions of other vacant suburban office buildings suggest buyers will start low. The empty former CVS Caremark office building at 2211 Sanders Road in nearby Northbrook was sold via auction in December for just under $2.3 million, or less than $12 per square foot, according to Cook County property records.
Auctions are typically a last-resort option for sellers, often indicating the lack of investor interest in a deal that would otherwise be coordinated by a broker.
The decimated property values reflect the long-standing headaches for owners of outmoded office buildings in the suburbs, pain that was intensified by the COVID-19 pandemic. Companies slashing their office footprints have driven up vacancy to an all-time high, forcing building owners to ramp up both amenities and lease perks to lure or retain tenants.
For buildings like 2 Overlook Point that need dramatic investment to even start to compete for new users, investors are wary that pouring money into them may not be worth it, given the weak leasing market. About 70% of all new office move-ins in the suburbs last year were in top-tier, or Class A, office buildings, often by tenants moving from older or more outdated properties, according to JLL.
That's the quandary facing the venture of Stamford, Conn.,-based Twenty Lake Holdings, which paid just $4.4 million in 2019 for the vacant 2 Overlook Point building, property records show. Hewitt occupied the building for roughly a decade before subleasing it in 2007 to Walgreens, which later vacated the property. Hewitt was acquired in 2010 by insurance giant Aon, which has an office today at nearby 4 Overlook Point.
It's unclear why Twenty Lake is now looking to unload 2 Overlook Point, and a spokesman for the company did not respond to a request for comment. Twenty Lake is a commercial real estate-focused affiliate of controversial New York-based investment firm Alden Global Capital, known locally for the past several years as the parent company of the Chicago Tribune.
JLL is marketing the property as an opportunity for a buyer to add value by renovating it and bringing in one or more new office users. But people familiar with the offering also foresee industrial developers emerging to bid on the property with the intent to demolish it and replace it with a warehouse. Demand for such space to store and distribute goods bought online has soared since the pandemic began, and the Lincolnshire Corporate Center already includes warehouse space.
In the highest-profile office-to-warehouse conversion play in the area, a Nevada developer is turning the former Allstate corporate campus in Glenview into a fleet of industrial buildings. A Chicago industrial developer is working on a deal to do the same with the 101-acre Baxter International headquarters in Deerfield.
The 2 Overlook Point property is zoned for both office and light industrial uses, according to the JLL flyer.
Office vacancy in the suburbs ended the year at 27.9%, according to JLL research, up from 22.1% when the pandemic began.
The capital markets team in the JLL Chicago office is marketing the building on behalf of Twenty Lake. RealInsight Marketplace is conducting the online auction.
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