Here’s what tenants are paying at Blackstone’s Willis Tower

Rents average $24 a foot at skyscraper, with United occupying 20% of office space

Chicago Insights /
Sep.September 22, 2020 02:15 PM
Jonathan Gray and the Willis Tower (Getty, Google Maps)

Jonathan Gray and the Willis Tower (Getty, Google Maps)

When Blackstone Group acquired Chicago’s landmark Willis Tower for $1.3 billion in 2015, it was the largest single-building buy in the U.S. outside of New York City.

In the years since, the investment giant has spent hundreds of millions of dollars on upgrades to the skyscraper, formerly called Sears Tower. It has also raised the property’s occupancy from mid-70 percent to more than 94 percent after renewing its biggest tenant and bringing in several new ones.

In 2018, Blackstone refinanced the 110-story tower with a $1.3 billion CMBS loan from Barclays and Deutsche Bank. Here’s what documents associated with that securitization — aptly named BBCMS 2018-TALL — say about the building’s finances.

Average rent at the tower came out to about $24 per square foot in 2018, but with some notable outliers like the third largest tenant, law firm Schiff Hardin LLP, which was paying more than $42 per square foot for its 181,000-square foot space.

At the time of the refinancing, according to the loan prospectus, Willis Tower’s 3.8 million square feet of space was leased to more than 90 tenants. Of the top 10 tenants, seven use their space at the building as their global headquarters — including the largest tenant, United Airlines, whose 850,000 square feet across over a dozen floors account for 22 percent of total office space.

In late 2018, United was reported to be eyeing a move to one of Chicago’s newer developments, but the airline ultimately ended up renewing its lease and adding a 30,000-square-foot cafeteria and roof deck on the fourth floor.

In addition to rent from office tenants, Willis Tower also generates significant amounts of revenue from other uses, with the building’s Skydeck pulling in $36.5 million in annual underwritten revenue, which is expected to rise to $50 million at stabilization.

The building’s two steel antennas, which have been leased to six radio, television and wireless communications tenants for over two decades, pull in more than $10 million a year. The building’s retail component, which is set to undergo a complete redevelopment, was expected to generate $25 million in annual revenue upon stabilization.

The valuation of the entire property is expected to reach $2.4 billion once the redevelopment is complete, according to an appraisal. The office portion will account for a bit more than half of that value, with the $675 million Skydeck, $359 million retail portion and $141 million antennas making up the rest.

In mid-May, the property suffered a major power outage after water from the Chicago River flooded the basement, knocking out the TV stations that use the building’s antennas in the process. Servicer commentary for the loan, updated in September, notes that the current estimated loss from water damage is $106 million, and that repairs are ongoing using insurance funds.






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