Cheap Chicago Property Lures Buyers for Offices, Griffin's Condos
Chicago’s beleaguered downtown is finally getting a boost: Buildings are so cheap that they’re hard to resist.
Options exchange Cboe Global Markets Inc. sold its former headquarters in June at a 43% discount to its value just five years prior, helping to drive Chicago office building deals to the highest in almost a decade. Leasing also is picking up, with Coca-Cola Co. doubling its office space in the city.
And Ken Griffin’s multimillion-dollar apartments found a buyer after the billionaire’s move to Miami. His nemesis, Illinois Governor JB Pritzker, scored the properties for well below what the Citadel founder paid.
The deals signal the post-pandemic property slump that plagued Chicago and other cities across the country may be finally reaching a bottom. As employers including JPMorgan Chase & Co. and Boeing Co. mandate workers back to the office five days a week, companies are renewing or signing new leases. After a plunge in values, investor purchases are picking up from New York to San Francisco.
“We’ve turned a corner,” said Steven Bauer, a vice president at real estate firm Colliers International. “There are a lot of users looking for space. We are seeing a lot more companies saying ‘We have conviction that we’re going to come back, and we’re making decisions.’”
The pandemic hollowed out American downtowns, with a number of companies downsizing their footprint or going remote altogether. In Chicago, the Loop, as the city’s central business district is known, has also been struggling with persistent crime and the reputational blow of the relocation of Griffin’s Citadel to Miami in 2022.
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Deep Discounts
All in all, 19 office towers were sold in Chicago last year, the most since 2015, according to real estate firm Jones Lang LaSalle Inc. With the pandemic destroying the value of older buildings — some are simply selling for the cost of the land — the total value of the transactions was a meager $635 million. In 2015, 26 office towers traded hands for $6.6 billion.
“Being an owner of a office tower in a major American city, that’s a tough spot to be in,” said Greg Schementi, president of Cresa, a real estate firm that represents tenants.
Still, a sale improves chances of a building finding new tenants. That’s in part because it sends a signal to prospective renters that the new buyer will be investing in the asset, according to Schementi.