Shorenstein Lists Struggling Chicago Office Building

The next heavily discounted office sale may be on the horizon in downtown Chicago, as Shorenstein Properties looks to unload a vacancy-plagued property.

San Francisco-based Shorenstein has hired JLL brokers to sell the historic 16-story building at 1 North State Street, excluding the separately-owned retail portion on the first two floors, CoStar reported.

The property is 58 percent vacant, far below the city average of about 25 percent, which marked a record high in the first quarter. Older office buildings, such as 1 North State Street, have especially struggled since the pandemic triggered the remote-work era, as companies opt for new or renovated office buildings instead.

Late last year, Shorenstein sold the Aon Center in Los Angeles for $153.5 million, a substantial loss from the $268.5 million it paid in 2014. In addition, the firm surrendered the Capella Tower in Minneapolis to its lender after failing to sell it and repay the loan from its $225 million purchase in 2018.

While an asking price has not been revealed for the State Street building, it’s likely to sell for less than the $80 million that Shorenstein paid in 2016. Numerous office properties in Chicago have sold for far less than their previous trade in recent years amid historically low demand for office space, high interest rates and a tight lending climate that’s made it tough for landlords to refinance their assets.

In January, R2 bought the 41-story building at 150 North Michigan Avenue for $60 million, down 50 percent from its previous sale price in 2017. Brog Properties more recently paid $2.6 million for the 185,000-square-foot building at 216 West Jackson Boulevard via auction, marking a 90 percent discount from its last trade in 2013.

Shorenstein financed the State Street purchase with a $68 million loan from U.S. Bank, which has been modified five times, most recently in April 2023, requiring a principal paydown to $35.8 million. The firm has spent $36.5 million on renovations since acquiring the property.

—Quinn Donoghue