New office leases inked in West, East Loop. No, really.

Article Provided by Crain’s Chicago Business | Danny Ecker

The deals are a welcome sight for landlords, perhaps signaling an end to the COVID-induced drought.

A trio of companies have recently signed up for new or expanded office space downtown, a sign of tenants preparing to return to offices as COVID-19 vaccinations pick up speed. In a new addition to the West Loop, Lactalis Heritage Dairy subleased 35,000 square feet at 540 W. Madison St., where it will open its first Chicago office. In the East Loop, Lake Forest-based business service and technology provider Impact Networking leased another 31,335 square feet at 150 N. Michigan Ave., bringing its footprint to over 50,000 square feet at an office it has occupied since 2014. And in the Fulton Market District, furniture company Teknion leased nearly 22,000 square feet at a new office building at 800 W. Fulton Market.

The trickle of deals looks like a flood compared to the past year, during which new office leasing activity was at a near-standstill amid the uncertainty of the pandemic and companies recalculating their workspace needs after adjusting to employees operating remotely.Tenants downtown are still collectively shedding more office space than they're taking, as the first three months of the year marked the worst quarter for demand in 11 years, according to brokerage CBRE. But the new leases—combined with a high-profile Fulton Market office deal announced last week by Kimberly-Clark—are much-needed good news for landlords and could be early examples of companies returning to the market and making new commitments to real estate as the COVID fog begins to subside.

Lactalis began hunting for downtown offices last year after it acquired Kraft Heinz's natural cheese business in a $3.2 billion deal slated to close later this year. The Laval, Francebased company ultimately settled on space that cloud software company iManage left behind when it moved to a larger office at 71 S. Wacker Drive. The subleased third-floor space will house about 100 Lactalis employees after the Kraft deal closes, said Pierre Lorieau, Lactalis' chief legal officer of the Americas, and the company plans to hire another 50 across an array of roles during the first year after the acquisition is complete.

Lorieau said the company was looking for move-in-ready space near Union Station and Ogilvie Transportation Center to appeal to its new Chicago employees, roughly a third of whom live in the western or northern suburbs. He also stressed the need for employees to have office space to collaborate rather than operating remotely—"There's a lot of teamwork and we want the teams ultimately to be together," he said—but acknowledged the company's footprint could change as people adjust to post-pandemic life.

"We don't know what we're going to need in 10 years, on the other hand we didn't want a one-year lease," he said. "I think where we landed, it's giving us some flexibility to grow and then see—if we're happy in the building—if there's the ability to expand."

Lorieau declined to share terms of the company's new deal, but iManage's lease in the building runs through July 2029 with a potential option to terminate the deal sooner than that, according to a marketing flyer for the space. Lisa Davidson of brokerage Savills represented Lactalis in its sublease.

On Michigan Avenue, Impact Networking took on more space at the 41-story tower overlooking Millennium Park "to accommodate its rapid growth," the firm said in a statement. Impact will now occupy the building's top three floors on a lease running through 2031, and the expansion space will allow Impact's branding and marketing agency, ES99, to consolidate from two offices into one. It was not immediately clear how much space ES99 will vacate at its current 125 S. Clark St. office in connection with the move.

While Impact employees have mostly worked from home during the pandemic, "coming together in person to collaborate and build community is core to Impact's culture and is a critical part of our future," Impact CEO Frank Cucco said in the statement.

Seth Tuscher and Kelsey Scheive of CBRE represented 150 N. Michigan owner CBRE Global Investors in the lease expansion.

IMPACT NETWORKING WAS REPRESENTED BY RYAN HARDING OF NEWMARK AND KYLE HARDING AND ANDY STRAND OF JLL.

Toronto-based Teknion, which designs office furniture, leased its new space on the seventh floor at 800 W. Fulton Market in a win for the property's developers, New York-based Thor Equities and Vancouver-based QuadReal.

Teknion, which also leases showroom space at theMart, couldn't be reached for comment. But Thor Chairman Joe Sitt framed it as a sign of the value of office space despite employees' COVID-induced adjustments. "It has become apparent that employees need space to interact and engage safely," Sitt said in a statement.

The Teknion deal and a recent move by anchor tenant Aspen Dental to expand its footprint to nearly 200,000 square feet brought the building to 50 percent leased, according to a Thor spokeswoman. The developers also announced a deal with Zeppola Bakery to open a location on the ground floor.