Bank Of America To Move To Wacker Drive Office Project
As seen in Crain’s
The developers of a planned 51-story office tower on the Chicago River have moved a big step closer to breaking ground after landing their first tenant: Bank of America.
The bank is in talks to lease about 500,000 square feet in the proposed 1.35 million square-foot high-rise at 110 N. Wacker Drive, according to people familiar with the lender’s plans. Bank of America recently decided to commit to the project, one of three buildings on its short list for a new Chicago office, the people said.
The lease, one of the biggest in downtown Chicago in recent years, is believed to be large enough for the project’s developers, Chicago-based Riverside Investment & Development and Howard Hughes, a Dallas-based investment firm, to begin construction. They plan to tear down the existing low-rise building on the site, currently the headquarters of GGP, the mall owner, to make way for the new tower, which the City Council approved last month.
Though another trophy office building would be a sign of progress for the city, it won’t be universally welcomed in a downtown office market that’s starting to soften amid a construction boom. Demand for office space remains strong, with some companies expanding and others, like McDonald’s, moving their offices downtown. But it’s not keeping up with supply, which will increase further with another development getting underway.
Bank of America picked the Wacker project over two other buildings it had considered: Willis Tower, about four blocks south, and a 51-story high-rise about a block east proposed by New York-based Tishman Speyer.
A Bank of America spokeswoman declined to comment, as did executives at Jones Lang LaSalle, the Chicago-based real estate firm advising the bank on its space search. A Riverside executive also declined to comment, and a Howard Hughes spokeswoman did not return phone calls.
The Charlotte, N.C.-based bank plans to move employees to the new building as part of a broader consolidation of its Chicago operations. Bank of America currently rents 827,000 square feet at 135 S. LaSalle St. under a lease that expires in July 2020, according to CoStar Group. It also leases 322,000 square feet at 540 W. Madison Ave. under a deal that ends in December 2022, according to CoStar. It’s unclear how those buildings would be affected by the Wacker Drive lease.
Designed by Chicago-based Goettsch Partners, the Wacker tower would rise across the river and a block south of a brand new 1.2-million-square-foot office high-rise also designed by Goettsch and developed by Riverside. When it opened recently, the building at 150 N. Riverside Plaza was about 85 percent leased.
The problem is that new developments often pull tenants out of existing buildings, creating big chunks of space that need to be filled after the tenants move. With the Riverside project and another new 1.1 million square-foot building a block north, the downtown office market has added 2.3 million square feet, pushing up its vacancy rate to 13.1 percent in the first quarter, its highest level in two years, according to CBRE.
Still, the Wacker project will create an opportunity for another landlord or developer by displacing GGP, a real estate investment trust that must now find a new home. The company, formerly known as General Growth Properties, is looking for about 150,000 square feet and has hired JLL to conduct its search, according to people familiar with its plans.