The deal continues a corporate suburban-to-urban trend that flooded downtown with office demand before the COVID-19 pandemic and is still helping boost office landlords in the city as remote work now fuels record-high office vacancy. Zoro joins a long list of suburban-based businesses that have moved their workspace downtown to help tap into a deep pool of young talent that wants to live and work in the city. McDonald’s, Kraft Heinz and Mondelez International were among the big corporations that made the jump before the public health crisis, while other names including Cisco Systems, Havi Group and Vizient have kept the movement going since the pandemic began.
Zoro had a broader decision to make about its workspace with its existing leases due to expire in early 2024, ultimately concluding that having one office would be more effective for its local workforce than two, and that a downtown space would give it the best shot to continue growing its team, said Zoro President Kevin Weadick.
Splitting workers between downtown and the suburbs and having some interact virtually “detracts from this ability to create energy and excitement around being together,” said Weadick, whose company has added more than 400 employees locally over the past five years, including roughly 100 this year. Zoro’s Chicago-area headcount is now around 650, and many of the jobs it has hired for over the past couple years are tech-savvy roles such as software developers and data engineers, Weadick said.
“Downtown was pretty attractive for where we think the talent might be,” he said, adding that the downtown office’s location next to both Ogilvie Transportation Center and Union Station trains make suburban commutes more palatable.
Zoro’s lease also stands out as a long-term commitment to offices at a time when many companies aren’t sure how they’ll use workspace in the future. That uncertainty has hampered office leasing overall since 2020, and a trend of companies shrinking their office footprints as more people work from home has been a huge headache for landlords.
Weadick said the new space will be designed to accommodate around 550 people—smaller than its headcount today—but that some 150 customer service employees are entirely remote workers and that most employees will be in the office just two or three days per week.
“There is value in coming together from a collaboration standpoint, but I think we recognize that a lot of our collaboration tools allow us to be productive and not come in every single day,” he said.
Zoro was founded in 2011 and is a wholly-owned subsidiary of Lake Forest-based Grainger. Zoro, which primarily markets its collection of more than 10 million products to small businesses, reported generating a little more than $780 million in revenue during the first nine months of 2022 and expects to top $1 billion in sales by the end of the year, Weadick said.
The new lease is a victory for Newport Beach, Calif.-based KBS Realty Advisors, which has owned the 1.4 million-square-foot Madison Street office tower since 2013. It also marks the return of a Grainger-related office to the building: Grainger itself had a 60,000-square-foot office in the building before it inked a deal in 2018 to consolidate multiple downtown offices into a new space at the Merchandise Mart.
Accenture is the largest tenant in the tower with more than 225,000 square feet under a deal it signed in 2019 that included naming rights to the building. Prior to the Zoro deal, the property was about 91% leased, according to real estate information company CoStar Group. That is far higher than the 79% average for downtown office buildings at the end of the third quarter.
Tyler and Paul Reaumond of CBRE negotiated the lease on behalf of Zoro. Matt Lerner and Wendy Katz of Stream Realty Partners oversee leasing at 500 W. Madison for KBS.