Exit strategy: WeWork eats Fulton Market leases

WeWork has abandoned plans to open two locations in Fulton Market as it reconsiders its business model amid a global pandemic and a change in leadership.

The co-working firm bought out a pair of leases totaling 110,000 square feet at 1155 and 1114 W. Fulton streets, Crain’s reported. It’s the first time WeWork has terminated a Chicago lease deal it had previously announced.

Before the recent pullback, WeWork had been one of the biggest office tenants in Chicago, gobbling up more than 1 million square feet of space across 15 locations in downtown. But new CEO Sandeep Mathrani has been looking to pare down WeWork’s portfolio of 800 locations to achieve profitability.

WeWork never moved into the spaces in Fulton Market. While it’s likely that WeWork will have to pay a portion of the owed rent, the owners will still have to find new tenants in an environment that is far less favorable.

The joint venture between Domus Group and Barnett Capital paid about $24 million combined for the two buildings, and landed a $44 million construction loan last year to gut-renovate the industrial properties.

Chicago-based leasing brokerage Telos Group is now marketing the properties to new prospective tenants.

The owners will have to compete with several other boutique office properties under construction as well as a growing sublease market.  [Crain’s] — James Kleimann