Shanna Khan, the daughter of a billionaire owner of an NFL team, is abiding by influential architect Daniel Burnham’s advice to “make no little plans” as she steps up in Chicago’s commercial real estate world.
She’s taking on her first major ground-up office development at a time when the asset class is so out of favor with investors that hers looks to be the only such project to get underway in the Windy City this year.
All eyes were on Khan Wednesday as she led off the groundbreaking ceremony for a 409,000-square-foot project at 919 West Fulton Street. Dozens of local real estate and construction professionals looked on as she made the symbolic start on a project that has, in fact, already required a load of work to overcome several challenges, including multiple tweaks to its design and historically tight capital markets, especially for office developments.
Khan sees a payoff in Fulton Market despite the tough numbers for the larger Chicago office market, with vacancies hovering around an all-time high of 24 percent, according to CBRE, and the return-to-office trend still well below pre-pandemic benchmarks. Fulton Market, however, is vastly outperforming the city’s broader office market as tenants flock to the newest buildings in bids to lure talent into the workplace, with the area’s offices nearly fully occupied, JLL said last quarter.
“Chicago has it all, and yet it has unlimited potential,” Khan, whose father is auto parts magnate and Jacksonville Jaguars owner Shahid Khan, told the crowd.
The development team — consisting of the younger Khan along with Alex Najem’s Fulton Street Cos. and Jim Letchinger’s JDL Development — navigated the roughest lending environment in at least a decade to land around $230 million in construction financing this fall from Bank OZK and mezzanine lender Manulife.
Before the party moved across the street for cocktails at the Timeout Market, the ceremony’s speakers hinted at how the rising caution lenders and investors are taking with commercial developments turned into obstacles for the developers.
“Without (Khan) this deal would never exist,” Letchinger said. “Manulife stepped into the capital stack with commitment and resolve that is rarely seen from a lender.”
To be sure, the developers of 919 West Fulton — who spent years assembling the site, including the $49 million purchase of the adjacent Lake Street Lofts apartments that will be incorporated into the project — have some factors working in their favor.
Chiefly, the location of the project has become one of Chicago’s premier addresses for office tenants as Fulton Market’s industrial meatpacking roots gave way in recent years to a development boom led by the likes of Shapack Partners, Sterling Bay, Trammell Crow and others who brought big commercial spaces west of the Kennedy Expressway and filled them up with tenants such as Google, McDonald’s, Snapchat, Boston Consulting Group and others. And Khan’s team won’t have much competition once the project is done, as JLL expects minimal new construction to take place any time soon due to remote work trends and a clampdown on office lending.
“Fulton Market is an exceptionally special and unique neighborhood,” Shanna Khan said, the lead equity investment partner and chief design officer for the project. “The energy is electric the moment you arrive and, once you’ve visited, it becomes a destination.”
For the 11-story 919 West Fulton, Christopher Merrill’s Harrison Real Estate Capital committed to pre-lease around 150,000 square feet in the property ahead of its construction to anchor the development plan. Gibsons Restaurant Group, the business behind the well-known Chicago steakhouse brand, is also planning on operating a first-floor eatery in the building.
“We’ve been looking to do a deal in the Fulton Market for, I’m not joking, probably a dozen years,” said Gibsons CEO Stephen Lombardo. “We’ve talked to just about every developer who has done everything along the street here.”
Skender is serving as the project’s general contractor and the building is set to be complete in 2025.
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