A 24-story office tower on Mag Mile is up for sale, in what will likely be seen as a test of the market for real estate on the famed shopping corridor.
An ownership group led by New York real estate investors has hired Colliers International to sell the mostly vacant office building, according to Crain’s.
While the 343,000-square-foot building at 500 N. Michigan Ave. doesn’t have a public price on its listing, an unidentified source familiar with the offering told Crain’s it was expected to get around $110 million.
The listing suggests possibilities beyond offices for the space, such as converting the tower to residential, senior housing, or a hotel. The portion of the building dedicated to office space is 321,000 square feet and currently 70 percent vacant. The building includes separate low-rise and high-rise elevators, which would allow for several different uses within the tower. Colliers’ John Homsher and Alissa Adler representing the ownership group.
Should the 54-year-old building sell, it will offer insight into how developers plan to reposition real estate on Mag Mile post COVID.
Mag Mile has been hit hard by the pandemic. A quarter of retail space is vacant, according to Crain’s. Retailers vacating the Mag Mile include Forever 21, which left 42,000 square feet along North Michigan Avenue before the pandemic. In some cases, landlords are struggling to replace them and building owners have tried to create smaller spaces for retailers. The North Michigan Avenue retail vacancy rate rose to 26 percent in 2021 from 5.3 percent in 2017, according to Cushman & Wakefield.
Two malls, Water Tower Place and the Shops at North Bridge, are facing uncertain futures as their property values dropped and vacancy increased.
Office demand is also slow to return to normal, further stunting retail. Full recovery is unlikely without a return to downtown offices by those currently working from home – less than 40 percent of the workforce, according to Kastle Systems.
The ownership group paid $86 million for the property in 2017, and then refinanced it in 2019 with a $94 million loan, according to the publication.
At the time of the purchase, the office portion of the building was two-thirds leased. The retail portion is fully leased, and the flier for the listing said the weighted average lease term is 10 years. Tenants include Chick-fil-a, Bank of America and Vans.
Editor’s note: This story has been updated to reflect that Samuel Schapira is not part of the ownership group of 500 North Michigan Avenue.
[Crain’s] — Miranda Davis
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