Chicago office market sales activity has plummeted over the last year, but one investor is all in.
Spear Street Capital is paying $225 million — or $346 per square foot — for the office tower at 225 West Wacker Drive, sources told Crain’s.
This purchase comes after San Francisco-based Spear Street paid $412 million in June for a 46-story office tower at 500 West Monroe Street in the West Loop. The seller was Georgia-based Piedmont Office Realty Trust. It’s still the biggest office deal Chicago has seen since February 2018, according to Crain’s, as commercial investment sales have continued to drop.
JLL reported that sales of office, apartment, hotel and industrial buildings totaled $8.1 billion in 2019, compared to the post-recession peak of $16 billion in 2018. Office trades had the sharpest falloff, totaling $1.2 billion in transactions last year compared to $4.7 billion in 2018.
For Spear Street’s latest deal, the seller, Mirae Asset Global Investments, hoped to get $245 million when it put the 651,000-square-foot building up for sale last fall. The South Korean real estate firm paid $218 million for it in 2013.
The building is 96 percent leased, with 27 tenants, including Cushman & Wakefield. But occupancy is expected to fall to 70 percent as some tenants’ leases expire over the next 18 months, according to Real Estate Alert, which first reported the sale.
Those upcoming vacancies could have led to a price chop from the listed amount, Crain’s said. The building is located in an area along the Chicago River, where office tenants pay 17 percent more than the average rent for top-tier buildings elsewhere downtown, according to Cushman & Wakefield. [Crain’s] — Brianna Kelly