Life Fitness is returning to the office — in the same Chicago-area building it ditched last year.
Adventus Realty Trust, a Vancouver, Canada-based landlord with 3 million square feet of offices across suburban Chicago, landed a deal with the exercise equipment company for about 55,000 square feet at Columbia Center III, according to Adventus COO Rick Charlton. The deal quells some of the concern about the financing behind the 247,000-square-foot structure that was more than 60 percent vacant earlier this year.
It’s still a downsize for Life Fitness, compared with the space it had before exercising an option to terminate a 95,000-square-foot lease last year, just after kitchenware company Corelle Brands left its 55,000 square feet in the same building. The exits drew concern from ratings agency DBRS Morningstar over Adventus’ $42 million commercial mortgage-backed security loan against the property.
“Some tenants are coming to us to do a downsize and renewal, but we do have expansions going on,” Charlton said. “Clearly we’re experiencing more of the downsize than the upsize but we’re experiencing both.”
Earlier this summer, the landlord backfilled the former Corelle space with a lease to Chicago Mortgage Solutions, and the fitness deal means the building is 27 percent vacant, Charlton said. That matches the suburban Chicago market as a whole, according to JLL.
Tenants have shed slightly more space through the year than they had absorbed, with vacancy accounting for 53,000 square feet more than at the start of 2021 across the market. Suburban landlords notched the most absorption since the end of 2019 in the last quarter, as expansions and new leases accounted for 103,000 square feet more than downsizing and exits, JLL reported. Ace Hardware was a major factor in bulking up that figure, though, as it upgraded its offices with a 250,000-square-foot lease at Oak Brook Reserve, the largest office transaction in the suburbs since 2015.
While the market had positive growth last quarter, landlords including Adventus are still in some difficult situations. Even as its Columbia Center campus as a whole outperforms the rest of the market at 20 percent vacant, not all of the Canadian company’s buildings have fared as well. Adventus is in the midst of forking over its deed in lieu of foreclosure to commercial mortgage-backed securities lenders on a $33 million loan used to finance a 2013 purchase of the 312,000-square-foot Oak Brook Office Center property in Oak Brook. It was almost 90 percent leased for the first few years of Adventus ownership, then dropped to the mid-70s in 2017, slashing its net operating income to just more than $2 million last year. The pain grew as writing utensil maker Sanford, Adventus’ largest tenant, let its lease expire.
Adventus is also working to turn around the 869,000-square-foot Riverway office property, also in Rosemont, after it fell to 65 percent leased compared with 95 percent when a $128 million CMBS loan against it was issued in 2016. The landlord recently completed a renovation project at an unknown cost to spruce up the building.
“While the pendulum has begun to swing in the right direction, the overall future of
the suburban office market remains slightly hazy,” JLL said in its second quarter report.
Adventus bought the Life Fitness property in 2014 as part of a $93 million deal for the entire three-building, 620,000-square-foot Columbia Center Campus near O’Hare International Airport in suburban Rosemont at 9525 West Bryn Mawr Avenue. The campus as a whole is 80 percent leased. Life Fitness didn’t return a request for comment.
Adventus was represented in leasing negotiations on the Life Fitness deal by Dan Svachula, who jumped to JLL in July after spending 11 years as a broker at Cushman & Wakefield.
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