Blue Ops Triples Chicago Office Lease to 28K SF

A mergers and acquisitions consulting firm is tripling its Chicago office footprint, tallying a rare win for a real estate sector grappling with record-high vacancies and distress symptoms.

Blue Ops has leased about 28,000 square feet at 200 South Michigan Avenue, a 22-story office building owned by California-based Stanton Road Capital, Crain’s reported. Blue Ops, a subsidiary of Minneapolis-based Xerxes Global, will relocate from the downtown building at 20 South Clark Street.

The company’s new space in the East Loop will accommodate its growing workforce, as it plans to hire an additional 10 to 15 workers this year. Its employee headcount in Chicago currently stands at 40, said Xerxes Global executive Emily Callahan, who attributed the company’s Chicago growth to its large client base in the area.

The lease bucks the trends of companies slashing office space in light of the remote work-era, which has contributed to record-high vacancies in 12 of the last 14 quarters. Chicago’s vacancy rate exceeded 25 percent for the first time ever in the first quarter, according to CBRE.

Stanton Road Capital bought a leasehold interest in the 371,500-square-foot building for $33 million in 2019, the outlet reported. The property’s occupant rate has dropped from 80 to 67 percent since Stanton acquired it.

Class B properties, including 200 South Michigan, have struggled to maintain high occupancy levels since the pandemic sparked the flight-to-quality trend, in which companies favor updated, amenity-filled office space in hopes of enticing workers to return to the office.

Meanwhile, Blue Ops’ planned departure from 20 South Clark will pose a slight challenge for its owner, Toronto-based Slate Office REIT. Although a 9,000-square-foot void is minimal compared to the massive holes that other office landlords are scrambling to fill.

Law firm Winston & Strawn, for instance, is ditching its 257,000-square-foot lease at 35 West Wacker Drive, in a move to a 150,000-square-foot space at 300 North LaSalle Street.

It’s not all doom and gloom for Chicago’s office market, though. Earlier this month, trading firm Aquatic Capital Management and law firm Norton Rose Fulbright roughly doubled their Chicago office leases.

Broker Brian Nelson of Winthrop Commercial negotiated Blue Ops’ lease on behalf of the tenant, and JLL’s Craig Coupe and Ellen Trager represented Stanton Road.

—Quinn Donoghue