The Downtown market finished 2000 with record low vacancy rates, but most experts expected that to change with the finishing of several buildings under construction. The beginning of the year then saw ABN/Amro unveil substantive plans for up to 2.5 million sf of space in the West Loop area, which will create about one million sf of "shadow space" in four Downtown buildings beginning in 2003. That was followed by a report John Buck Co. plans to build a 60-story office tower on Wacker Drive, where new buildings are under construction. Now, Beitler reportedly is involved in a joint venture with Cigna Corp. to build a $225-million tower that would be a twin of the building at 161 N. Clark St.
"I really don't think the market can support another spec office building right now," Lori G. Brown, SIOR and manager of Binswanger Advisory Group's Midwest operations tells GlobeSt.com. It will help, she adds, if a significant portion of the building is pre-leased, and it includes multiple uses in addition to the proposed 800 parking spaces, such as retail or residential. "If he has a 50% pre-lease, it's a go."
Even Beitler, who was not available for comment on the 181 N. Clark St. report, conceded recently it remains to be seen which of the several development proposals being floated will come to fruition. "I think there's a game of "chicken" going on right now," said Beitler at the recent Urban Land Institute Chicago District Council's annual economic forecast. "Who's going to be the next to build? We'll see."
Some see the "game" as tying up a property and floating development ideas, perhaps in the hope of drumming up interest from potential tenants. If so, the winner will be the developer who can do the best job of pre-leasing the new space they are creating to those leasing prospects. "I don't know of a lender today who'll give you $225 million to go spec," Philip W. Palmer, Grubb & Ellis senior vice president tells GlobeSt.com, "It'll be interesting to see what happens."
"The economy's really shifted right now," Brown says, pointing to a more conservative approach dictated by Wall Street. "Clearly things have slowed down."
Beitler recently polled attendees at the ULI forecast, asking them whether they thought construction would be complete in six years for the Pritzker family and Prime Group Trust Realty joint venture at the northeast corner of Wacker and Monroe Street, the Buck Co. proposal for the southeast corner of the same intersection or a third, then-announced plan. The greatest number of attendees opted for the Pritzker-Prime Group Realty Trust proposal, while the unannounced plan, which turned out to be Beitler's, trumped Buck Co.
Brown says the "good news" about Beitler's plan was its size of 750,000 sf. "Unlike New York, we don't have tenants here taking down 400,000 sf," Brown said. "One-hundred-thousand sf is a big tenant here.
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