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BUILDING CHICAGO
As the country faces new building challenges—from adapting to evolving visions of office culture to supporting e-commerce space needs on an enormous scale— Chicago is establishing itself as a touchpoint for innovative development strategies. To get an of-the-moment snapshot of the state of development in the Windy City, Crain’s Content Studio asked three building and real estate experts to speak candidly about space shortages, supply chain issues, greener building standards, how the pandemic has affected development, and what they anticipate for Chicago’s future. Demand for building space continues to be at all-time highs across the country, for uses such as warehouses, industrial space, and lab and life science space. What does it look like in the Chicago area? Susan Bergdoll: Like industrial markets across the country, Chicago is experiencing high demand. In fact, industrial real estate is all we do at Duke Realty, and we experienced a record-breaking 2021 and are continuing the trend in 2022. Our portfolio of 17.4 million square feet is currently 100% leased. Just as soon as we announce new developments, we have interest from potential tenants. Leigh McMillen: Chicago is experiencing the same pressure to locate lab and life science space. Specifically, space for startups is very lean. The pandemic has put the life sciences industry into sharp focus, and locally, that has brought more attention to this long-standing issue. Our goal is to accommodate these companies—to keep them here in Illinois, versus allowing them to flee to the coasts. Traditional landlords and developers are looking for ways to creatively reposition office buildings and capitalize on this demand. In the industrial sector, competition is fierce. E-commerce giants are gobbling up land for warehouses and logistics centers, accelerating a trend we saw taking shape pre-pandemic.
that may require some internal design updates, such as dividers between workstations. Typically, the tenant takes care of those needs. Also, the pandemic accelerated the need for more logistics space to accommodate e-commerce growth and expanded restock inventory needs. Companies are desperate for modern warehouse and distribution space that can accommodate technology used in distribution facilities. Leigh McMillen: Across all sectors, I think architects and designers are being challenged to think more creatively about how spaces will be used and how they could be used. Building design trends used to have longer shelf lives—10 or 15 years. But with the constantly changing needs of today’s workforce, we need to be more intentional about how we design and build spaces. While people continue to speculate about the future state of office life, lab space design has remained relatively unchanged. To meet the demand for space, we are constantly searching for suitable spaces to retrofit. Another major trend emerging from the pandemic is a focus on healthy, high-performing workplaces. While some measures are operational (providing sit-tostand work setups, offering healthy snacks, etc.), many criteria are in fact structural. Elbert Walters: Retrofitted office spaces throughout Chicagoland are placing an emphasis on technological upgrades that will keep electrical costs
SUSAN BERGDOLL
Senior Vice President and Regional Leader for Chicago, Minneapolis and Indianapolis Duke Realty susan.bergdoll@dukerealty.com 847-232-5420
systems are specifically designed at set times throughout the day to circulate fresh air into the office and push old air out. This decreases the number
LEIGH MCMILLEN
Senior Vice President Leopardo Companies Inc lamcmillen@leopardo.com 630-330-0620
of harmful germs that can circulate throughout an office space. We’ve also seen enhanced UV lighting to eliminate germs, and thermal
ELBERT WALTERS III
Executive Director Powering Chicago ewalters@poweringchicago.com 312-989-0724
temperature scanners to ensure that everyone entering an office building is within a desired temperature range.
IT’S NOT A TRANSACTION. IT’S A RELATIONSHIP. Over the last 50 years, Duke Realty’s unwavering focus on our customers’ needs has earned us an impeccable reputation as a leading developer of industrial properties. Susan brings 25 years of expertise in helping
“WE PRIDE OURSELVES ON BEING MASTER COLLABORATORS AND STRIVE TO OPERATE ON THE COLLECTIVE INTELLIGENCE OF THE PROJECT TEAM.” — LEIGH MCMILLEN, LEOPARDO
Can you talk about one or two of the biggest impacts that the pandemic has had in terms of design or remodeled spaces on the Chicago building industry? Susan Bergdoll: We are finding that our tenants are implementing expanded health and safety protocols
low and ultimately keep employees safer as we all return to our offices. New and retrofitted office spaces have placed a premium on touchless components to reduce the spread of harmful germs. In addition to motion-activated lighting controls and automatic doors, building managers are looking to install new HVAC components that recirculate fresh air throughout the day. These
our partners achieve success. She and her team are reliable, they treat people fairly and care for our tenants like they’re one of our team members. With a long-term approach to partnerships, the experts at Duke Realty are committed to helping you achieve your goals. Find out how we can help at DukeRealty.com.
Delivering Excellence in Logistics Real Estate
Susan Bergdoll – Senior Vice President
BUILDING CHICAGO In recent years, the country has been experiencing supply chain challenges, material shortages, and rising fuel costs. What is the state of these issues now and how have they impacted the industry? Susan Bergdoll: Extremely tight supply with a challenging entitlement process for creating new logistics space, coupled with supply chain bottlenecks hampered by port congestion and shipping container, rail car and trucking shortages are driving rent increases and shipping chokeholds. Additionally, rising fuel prices and material shortages are adding to development costs and lead times. Finally, companies want readily available workers, and most markets that are seeing growth, including Chicago, are experiencing a shortage of skilled tradespeople needed to build projects. Our clients are seeing general labor shortages, as well. That is a concern, given that a large e-commerce facility may need to employ several thousand workers. Leigh McMillen: Supply chain challenges that include rising costs, long lead times and unavailability continue to impact building materials as well as equipment categories. Companies need to take a proactive approach to solving for the supply chain problem. At Leopardo we have an in-house procurement expert
who negotiates local, regional, and national buying agreements for premanufactured goods and materials. We closely monitor supply chains in an effort to maintain the pricing, timing, and quality of critical project materials and equipment. Getting the right materials in the right place at the right time requires capable planning, logistics, and transportation. While we are seeing the benefit of early involvement, we anticipate many of these challenges to last well into 2023. Restarting the global economies will take time and restocking inventories will be challenging while demand remains high. Elbert Walters: As with many industries, the unionized electrical industry of Chicago and Cook County has faced its own set of challenges over the last few years. Many of Powering Chicago’s member contractors specialize in highly technical installations where electronic chips are needed. Due to the global chip shortage, this has slightly altered the timelines of some ongoing projects, but our members continue to move projects forward by completing other components of the project while the chips are developed. One way to do this is through an increase in prefabricated work done off-site before or during a project timeline. Prefabricated work includes assembling a job’s key components, which leads to a smooth and rapid installation process.
How are lead times at the moment? What issues are most impacting those lead times? Susan Bergdoll: Construction labor and the process of developing a building, in general, has become increasingly difficult. It’s hard to maintain schedules due to a shortage of labor, materials, and material cost increases, along with delivery delays that have upended traditional timing expectations. It’s certainly more difficult to sit across the table from our customer and give them the timing clarity they are looking for. What used to take nine to 10 months to build can be a solid 15 months today if you don’t plan ahead. We’ve been able to use our size and scale as an advantage and make commitments on critical path items months ahead of starting a project to keep us on
equipment categories. The issues most impacting the lead times start at the manufacturers, where low raw material and component inventories, low finished inventories, labor shortages, transportation and logistics delays are a poor mix for the corresponding high demand. Elbert Walters: Many of the projects Powering Chicago members are working on have progressed on time and on budget with little to no impact. Since many of the unionized electrical contractors throughout Chicagoland have been around for decades, their skilled project managers and electrical estimators have adapted to external changes to ensure projects have realistic timelines that, once started, are completed in a timely and budget friendly manner.
What are some of the biggest green and sustainable building requests and practices you’re seeing right now? Susan Bergdoll: Our sustainability policies include pursuing 100 percent LEED certification for all new buildings, the use of energy efficient lighting across our portfolio, and sustainable building practices that help improve long-term asset value while offering our tenants efficient, cost-effective and sustainable workspaces. We are finding that more of our clients are focused on sustainability as well, especially large corporate clients. They have become more educated on technologies and innovations that can help reduce their carbon footprint and they look to us to implement those in our developments. In our facilities, we are
“WE ARE FINDING THAT MORE OF OUR CLIENTS ARE FOCUSED ON SUSTAINABILITY AS WELL, ESPECIALLY LARGE CORPORATE CLIENTS.” — SUSAN BERGDOLL, DUKE REALTY track. We have already placed orders for materials on most of our 2022 pipeline in an effort to ensure our start dates and minimize schedule disruptions. Leigh McMillen: We are currently experiencing longer lead times across numerous building materials and
Can you talk about a few specific building trends customers have been requesting recently? What do you think is driving these trends? Susan Bergdoll: There are many, but here’s one example. Given the supply chain disruptions we are seeing today, many of our clients are asking for increased trailer parking and site fencing so they can store additional products in trailers within the secured boundaries of the site. Leigh McMillen: One request we have from clients in the lab and life sciences space is flexibility. While the initial footprint requirement for these labs is small, 5,000 to 15,000 square feet, that need could easily double or triple quickly as the business scales. The challenge is that these lean startups are bootstrapped and lack the means—both in terms of funding and in-house expertise—needed to acquire such expensive turnkey spaces. Lab and life science clients need short term leases or traditional lease terms with flexibility to scale up. Elbert Walters: A recent trend with new and existing buildings has been the desire to install electric vehicle (EV) charging stations to meet the growing demand of EVs that consumers are purchasing, especially considering the tax breaks and incentives that the federal government and Illinois offers EV buyers. Powering Chicago has over 30 Electric Vehicle Infrastructure Training Program (EVITP) certified union electrical contractors and each of the IBEW Local 134 journeyperson electricians are specifically trained on renewable energy. This ensures a knowledgeable and skilled workforce ready to meet the EV infrastructure demand.
integrating several technologies, such as improved air filtration systems, integrated solar panels and battery storage, and smart metering systems that help us collect and record energy consumption data for analysis. Additionally, dock equipment sensors provide insight into loading/ unloading time, truck positioning and weight loads being transferred. This data can be analyzed to create additional efficiencies. Elbert Walters: There are several green and sustainable building requests popping up all over Chicagoland that will propel new and existing buildings toward a greener future. In addition to the increase in EV chargers within condo, apartment and office buildings, we’re seeing solar panel systems with battery storage capabilities that can store energy for periods of low or no sunlight, and automatic lighting controls that can brighten or dim lights depending on the time of day and amount of sunlight. This can significantly decrease energy consumption by not having each light at full brightness throughout the day. How do you work with local communities to thoughtfully develop in their towns? Susan Bergdoll: We work collaboratively with government officials and local communities to ensure the economic and environmental impacts are considered, and that the needs of tenants, cities and communities are addressed. Duke Realty implements mitigation measures during project design to streamline potential snags during the entitlement process, avoiding costly delays and getting product to the market more efficiently. Additionally, we consider aesthetics and building orientation—
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ABOUT THE PANELISTS our goal is to ensure that our facilities are a welcome addition to the community. At the end of the day, we want to be a good neighbor, and want to develop in areas where our type of development is wanted and appreciated. Leigh McMillen: It starts with a deep-rooted understanding of the community goals and long-term plans. Then we work hand in hand with dedicated public servants to bring that vision to life. At Leopardo, we pride ourselves on being master collaborators and strive to operate on the collective intelligence of the project team, from building engineer to architect and everyone in between. We know our projects are transforming the communities and the lives of those who live, work, and play in our buildings. For us, each project is personal, an opportunity to stimulate the local economy. We also make an effort to subcontract with local businesses and employ local tradespeople, and our community partners appreciate the passion we have for both what we do and who we serve. Elbert Walters: Powering Chicago’s member contractors are becoming more engaged and valued partners at the design table from the very beginning, to ensure a smooth process for their customers. Whether it’s working with local municipalities or global general contractors, union electrical contractors are involved from the beginning all the way through a project’s completion. Once the location and the overall project have been approved, union electrical contractors work with general contractors and other building trades to ensure a smooth and efficient project by delivering electrical blueprints on time, adapting to changes as they occur, and providing trained and experienced union electricians to handle the job.
their logistics facilities and supply chain network. The need to get more products to consumers in a 24- to 48-hour window is driving the need for larger, well-positioned, state-ofthe-art facilities. Leigh McMillen: For industrial clients, the most important factors are affordability of large tracts of land and proximity to major highways. Of course, it also needs to be located within a municipality that is friendly to industrial development. When it comes to last-mile delivery for e-commerce, the trucks who drop off at the final address, logistics centers are being relocated to available retail centers. Elbert Walters: What we’re hearing from customers is that they’re looking for spaces that they can futureproof. For example, EV chargers, solar, building automation and touchless components are all part of new building designs. This ensures that offices or residential spaces meet the needs of tenants and residents by providing key technologies. Where do you see the future of building in Chicago headed? What can customers do now to futureproof their office suite or building? Leigh McMillen: With limited land supply and increased focus on historic preservation (versus teardowns), we will continue to see an increase in adaptive reuse. With such a large focus on existing buildings, we expect to see more projects focused on improving energy efficiency, whether through weatherization and insulation, addition of renewables, or replacement and retrofit of mechanical and electrical equipment. The global and stratospheric rise of Environment Social Governance programs in the
SUSAN BERGDOLL, Regional Senior Vice President of Duke Realty, is responsible for the operations, personnel, and investments made in the Chicago, Indianapolis, and Minneapolis markets. Bergdoll joined Duke in 1997 and has helped double the size of its portfolio to over 17 million square feet. An Indiana University alum, she currently serves as president of the Chicago chapter of the National Association of Industrial and Office Properties (NAIOP) and an active member in CREW Chicago, the Association of Industrial Real Estate Brokers, and the Advisory Board of IWIRE Chicago.
LEIGH MCMILLEN, senior vice president, is responsible for the oversight and direction of Leopardo’s corporate community group as well as the in-house virtual build design team and technology infrastructure. She is also a licensed architect and LEED Accredited Professional. McMillen graduated from the University of Illinois with double master’s degrees in architecture and construction management, and is an active member with the Illinois Association of Chiefs of Police, Illinois Fire Chiefs Association, Illinois City/County Management Association and the Illinois Parks and Recreation Association.
ELBERT WALTERS III is the executive director of Powering Chicago, an electrical industry labor-management partnership between IBEW Local 134 and the Electrical Contractors’ Association of Chicago and Cook County. Walters leads Powering Chicago’s 100+ philanthropic and community impact initiatives each year and plays a key role in its daily operations. A Local 134 electrician himself, Walters began his career in the trades as an electrical apprentice at the IBEW-NECA Technical Institute, where he received the Apprentice of the Year award before becoming a journeyman electrician.
Elbert Walters: Just like new buildings looking to install components for a greener tomorrow, existing buildings can do the same. The trends show us that EVs are the
way of the future, and buildings must provide charging points for tenants and residents. There’s also a push for new sustainability and energy efficient components such as solar panels
and automatic lighting controls. It’s an exciting time in the building and construction industry.
“RETROFITTED OFFICE SPACES THROUGHOUT CHICAGOLAND ARE PLACING AN EMPHASIS ON TECHNOLOGICAL UPGRADES THAT WILL KEEP ELECTRICAL COSTS LOW AND EMPLOYEES SAFER.” — ELBERT WALTERS, POWERING CHICAGO
What are companies in Chicago most looking for when finding a place to build? How difficult is that to find? Susan Bergdoll: Tenants want warehouses in communities with a robust labor pool, proximity to population centers, major thoroughfares, and airports, all while maintaining reasonable project costs. All retailers and consumer products companies are investing hundreds of millions of dollars to upgrade
last several years has also attracted a wave of new green building clients. As firms look for ways to demonstrate their commitment to corporate and social responsibility, one of their first steps will be taking responsibility for the environmental impacts of their own assets. Our in-house LEED Fellow has been watching the Chicago Climate Action Plan along with the Chicago Decarbonization Plan. These two measures, when fully released and approved, are going to have a significant impact on future design and construction of buildings in Chicago.
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