CHICAGO—As reported in GlobeSt.com last week, Lincoln International, a global investment bank, just closed a renegotiation of a long-term lease for its space at the 42-story Citigroup Center, 500 West Madison St. And officials from KBS Real Estate Investment Trust III, which acquired the building in December for about $425 million, say they have just signed another set of leases, with a total of 71,043-square-feet, bringing the occupancy level to 92%.
“Given the new ownership, enhanced marketing efforts, and the planned renovations, we have a great amount of energy and momentum with our leasing efforts,” Brett Merz, a senior vice president with KBS, tells GlobeSt.com.
Last week, Lisa Davidson, executive managing director of Savills Studley, who helped represent Lincoln in its lease, told GlobeSt.com that the West Loop was not “a landlord's market,” since “we're still seeing healthy concessions and we're still getting healthy rent abatements.” But due to the scarcity of available space, especially in class A property like 500 W. Madison, “we are also seeing increases in the actual rental rates.”
Like Davidson, Merz does not reveal any details of these new leases, but he seems to agree with her assessment of the submarket. “While there is still total vacancy in excess of 10% in the West Loop, when you get into direct, class A space in prestigious buildings with views, the options for any tenant over 20,000-square-feet are extremely limited,” he says. “And tenants have responded by paying a premium for such space.”
Michael Lirtzman and Courtney Baratz of Transwestern represented KBS REIT III in each transaction. Davidson and Tiffany Winne, also of Savills Studley, represented Lincoln, while Todd Lippman and James Whalen of CBRE represented Here North America in its 12,214-square-foot expansion. In addition, Jonathan Gordon and Jordan Mellovitz of Cushman & Wakefield represented Inventus, a new tenant, in a 9,925-square-foot lease and Jesse Slack of MB Real Estate brokered a 1,481-square-foot extension for Alliance Tech Group.
The 1.46-million-square-foot office tower sits above the Ogilvie Transportation Center, one of two main suburban train stations connecting the Chicago suburbs with downtown, and provides direct access to city trains, buses and expressways. And the tower's first two levels contain nearly 64,000-square-feet of retail space with 45 stores and restaurants.
Although new office towers will begin opening nearby in 2017, Merz says he remains confident that 500 W. Madison will compete successfully for tenants. “The one thing the new developments will never be able to replicate is the location of 500, the direct access to the train station, and the massive amenity base that 500 has.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
