One of the few big-fish tenants in the downtown leasing pond has been reeled in.
Kraft Heinz is staying put at the Aon Center, 200 E. Randolph, renewing its lease for about 162,000 square feet of space at a time when office landlords and developers are aggressively working to hang onto big tenants or find new ones.
The food giant will continue to lease five floors at the 83-story tower, which is planning renovations for the outdoor plaza, the interior and the roof, according to brokerage firm Telos. The projects, including a $185 million observation deck and thrill ride atop the 2.75 million-square-foot skyscraper, will add 96,000 square feet to the footprint.
Property owner 601W Cos. has delayed the tourist attraction addition that will overlook Millennium Park again, blaming the pandemic. The construction, which includes a double-decker glass elevator tower on the northwest exterior, has been postponed until next year.
The $6.5 million redesign of the plaza is expected to be completed by September. It will ditch the fortress-like entrance with large, loud fountains to make room for a 9,000 square-foot pedestrian-friendly space with more greenery, an outdoor bar and group seatings.
The 1973 building — losing its status as the third tallest in the city this year after the St. Regis Chicago was completed — has been updated to include a full fitness center, bar and cafe in a tenant lounge. The East Loop building commands dramatic views of Millennium Park, Maggie Daley Park, the Gold Coast and Lake Michigan.
Terms of the deal were not released. In 2018, when office vacancies were much lower than the current record-high 17 percent, Kraft Heinz’s base rent was about $25 a square foot, according to the rent roll then.
The city’s office availability rate, which includes vacant and subleased space and space under construction, also sits at an unprecedented 22.6 percent, according to Colliers’s second-quarter downtown Chicago report. Sublease space alone peaked at 6.12 million square feet, or 3.9 percent of market inventory — the highest ever recorded in central business district history.
Keeping Kraft Heinz was a good save for Aon. There are 40 blocks of contiguous space of 100,000 square feet or more on the market, and two of those blocks are in Aon. The tower is 90% leased, according to Telos.
The shakeout in the downtown office market is far from over. Colliers, for one, doesn’t see office activity gaining any true momentum for another 18 months — “even if new tenant demand increases,” according to its Q2 report.
Though foot traffic in the Loop is slowly coming back, only 25 percent of the typical office workday population was back in the office in June, according to the Chicago Loop Alliance. The Aon Center’s office workers number 800, or 10 percent of the pre-pandemic total. The business group predicts the Loop office worker population to stand at 50 percent by summer’s end.