Landlords in Chicago’s Loop are facing more pain than ever, as two more office tenants downsize their footprints and head west of the river for new digs.
Law firm Levenfeld Pearlstein, which has been a LaSalle Street office tenant for almost 20 years, as well as health and wellness company Vitality Group, are leasing at 120 South Riverside Plaza on the west bank of the Chicago River, and departing Loop buildings.
Levenfeld signed a long-term lease for 37,000 square feet and Vitality signed a long-term 29,000 square foot deal for the property. Both moves are cuts, from the 54,000 square feet the law firm leased at 2 North LaSalle since 2003, and the 40,500 square feet Vitality leased in 2017 at 200 West Monroe Street.
Their exits from the Loop are the latest examples of companies crossing the river, helping to drive the area’s vacancy rate to record levels over the course of the pandemic, which has motivated office users to shrink their space with the rise of remote and hybrid work schedules.
The deals mark wins for Canada’s Ivanhoe Cambridge, which bought the two side-by-side towers totaling 1.4 million square feet at 10 and 120 South Riverside for $367 million in 2013.
At the same time as the landlord announced the leases, it also revealed it’s about to start renovations to add new all-season amenities to the property, including expanded lobbies, a tenant lounge, private outdoor spaces and upgraded fitness and wellness facilities that include massage therapy, nutritional consultation and personal training. Improvement projects to add such perks have become necessities for downtown landlords to compete with the newest developments, like those in Fulton Market built with similar facilities.
“The added amenities and our focus on keeping innovation, customer experience, hospitality, and wellness at the forefront of this redevelopment will undoubtedly appeal to Chicago’s top tenants,” Ivanhoe’s Jonathan Pearce said in a statement.
The new leases mark losses for Chicago’s Hearn, the landlord of 2 North LaSalle, as well as Accesso Partners, which owns the 200 West Monroe building that had been home to Vitality. Levenfeld extended its LaSalle lease in 2012 through next year and declined an option to exit at the time.
Representatives of Accesso and Hearn didn’t return requests for comment. Hearn this week was also hit with another tenant loss at a separate property, the former John Hancock Center at 875 North Michigan Avenue, from where Valor Equity Partners is leaving for Tishman Speyer’s Fulton Market building.
Accesso has been struggling with its Monroe property for five years, since the 2017 departure of Select Hotels Group, which had leased 14 percent of the building, according to a December DBRS Morningstar report on a $75 million CMBS loan against the 23-story, 635,000-square-foot property. Its occupancy dropped to 62 percent with that departure, but by fall last year it was back up to 77 percent, the report said.
“Leasing momentum has been slow, but there has been some improvement in the last few years and the sponsor has funded shortfalls out of pocket with no delinquencies or defaults reported since issuance,” Morningstar said.
The landlord has also put funds toward improving the property’s common areas, elevators, lobby and some restrooms in the last two years, though Accesso’s moves haven’t been enough to alleviate the rating agency’s concerns.
“Although these mitigating factors are noteworthy, the increased risks from issuance are undeniable and as such, this loan will remain on the DBRS Morningstar Hotlist pending further improvements in the occupancy rate and cash flow performance,” the report said.
Levenfeld was represented by Todd Mintz and John Zeffery from JLL, and Vitality Group was represented by Matt Carolan and Robert Schmidt from JLL. Kelsey Scheive and Jon Cordell of CBRE oversee office leasing for the buildings on behalf of Ivanhoe.
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