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Bank exodus leaves Financial District’s office market in flux

Three banks planning to leave the Central Loop will open up 1.9M sf of office space

Chicago Board of Trade Building (Credit: iStock)
Chicago Board of Trade Building (Credit: iStock)

Chicago’s Downtown office market has been humming along, absorbing millions of square feet of new inventory and seeing increasing tenant demand. But a number of major office relocations from the Financial District could test the market’s strength in the coming years, according to a new study.

Three banks — Bank of America, BMO Harris and Northern Trust — have plans to leave their Financial District offices for newer downtown buildings by 2022, a move that would leave 1.85 million square feet of office space in the area vacant, according to a market study by MBRE.

The relocations could shake up the Central Loop’s office market, where older buildings are now competing with brand-new, amenity rich towers in River North, the West Loop and elsewhere. To remain competitive, buildings in the area will have to adapt to the realities of the current office market, the MBRE study shows.

“Ownership of these properties will not only need to transform the buildings themselves with amenities and updated design, but will also need to reinvent the Central Loop’s identity,” the report said.

Bank of America is moving into the new office tower at 110 North Wacker when it is completed in 2020. The move will leave behind 827,000 square feet at 135 South LaSalle Street.

BMO Harris is looking to consolidate its Chicago footprint into Riverside Investment & Development’s planned Union Station office tower, leaving behind 356,900 square feet at 111 West Monroe Street and 417,000 square feet at 115 South LaSalle Street, according to MBRE.

Northern Trust also will be moving from LaSalle Street, ditching its 248,000 square-foot offices at 231 South LaSalle for Sterling Bay’s 333 South Wabash Street.

Those vacated offices represent about 5 percent of the Central Loop’s total office inventory, according to MBRE.

To fill the space, MBRE said office buildings in the Financial District will need to attract the tech and creative firms that have flocked to the West Loop and River North.

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Buildings in those neighborhoods have creative, open floor plans and are rich with amenities and close to restaurants and nightlife options. “The Financial District, on the other hand, has a more straightforward business image with very little in the way of nightlife and very few residents, millennial or otherwise,” the report reads.

A number of Financial District properties have shown there is a way forward, however.

One success story MBRE cites is One North LaSalle, which was recently sold to Bridge Investment Group for $113.5 million.

Its previous owner, Hilco, bought the building in 2016 for $82.5 million and invested $4 million into amenities like an outdoor terrace, tenant lounge and fitness center. After the improvements, occupancy in the building went from 72 percent to 87 percent in just 1½ years, according to MBRE.

Brian Tretinik, managing director of Bridge Investment Group, said his firm bought One North LaSalle — its first foray into the downtown office market — because the historic building is positioned to thrive into the future. He said the amenity upgrades made by the previous owner made it even more attractive.

“We think it’s extremely vital,” Tretinik said of such amenities in modern office buildings. “Everyone is competing for the the same talent. What we saw here is it did drive people to this building.”

Other changes to the Financial District are making it more attractive to both employers and employees.

The National building, 125 South Clark Street, successfully repositioned itself from the former headquarters of Chicago Public Schools to a diverse, Millennial-attracting tower. The inclusion of Revival Food Hall, a high-end, trendy food court on The National’s first floor, is credited with helping attract foot traffic and tenants, including a four-floor WeWork outpost. (The National building is currently for sale.)

Tretinik said other nearby buildings have successfully added hotels and have repurposed their space in the face of a changing market. His firm, too, has worked to transform space in One North LaSalle to make it feel more like the industrial, loft-like offices spaces seen in trendier areas.

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