Tesla Nears Big Downtown Chicago Service Center Lease

Tesla is nearing a deal to open a large downtown Chicago service center just southwest of the Loop.

The electric car giant led by Elon Musk is close to finalizing a roughly 100,000-square-foot lease at 717 South Desplaines Street, a property owned by prominent real estate player 601W Cos., Crain’s reported.

If the deal closes, Tesla would likely convert an existing industrial building on the site into its second service and maintenance facility in the city as the potential redevelopment highlights a recent surge of investment activity in the area.

The deal would be a boon for 601W, the developer behind the transformation of the Old Post Office into a modern office building. After buying the Desplaines Street property for $34 million in 2018, 601W’s lease to Tesla would bring a high-profile brand to a location where previous owners considered building a data center.

The deal also comes as the area is experiencing heightened foot traffic as its proximity to the nearly fully leased Old Post Office and the newly developed BMO Tower further underscores the area’s transformation into a corporate hub.

The Desplaines Street property has changed hands several times over the past decade. Chicago developer Sterling Bay bought it in late 2012 for $23.5 million, with plans to convert the 4.5-acre site into a data center. Sterling Bay sold the property to St. Louis-based data center developer Ascent shortly thereafter, the outlet reported. But its plans to build there never came to fruition as the developer ran into connectivity issues with the property.

Tesla’s move aligns with its national expansion of service centers, with six already established in the Chicago suburbs.

The negotiations coincide with 601W’s efforts to secure office tenants for another nearby property at 801 South Canal Street, where the developer is converting a former Northern Trust office building into an updated, multi-tenant office space known as Canal Station.

— Quinn Donoghue