PNC calls off move to Wacker Drive, extending Franklin Street lease

PNC Financial Services isn’t up for moving its Chicago offices after all.

The Pittsburgh-based financial institution has abandoned discussions to lease 80,000 square feet in the 46-story office tower at 155 North Wacker Drive, owned by the John Buck Company. It will instead stay at its namesake location, the PNC Centre at One North Franklin Street, according to multiple people familiar with the negotiations.

Multiple news outlets in August reported that PNC was nearing a move to the Wacker Drive property, though the deal hadn’t been finalized and was vulnerable to falling apart. PNC on Tuesday confirmed it’s staying at One North Franklin, and people familiar with the deal said it’s trimming its space by about 20 percent, down to 95,000 square feet.

The bank leases 116,000 square feet today at the 37-story, 618,000-square-foot tower, which is owned by a venture that’s majority controlled by the New York State Common Retirement Fund. The landlord took out nearly $94 million in debt using the building as collateral shortly after buying it as part of a portfolio in 2015. While PNC didn’t specify terms of its lease, it said it had notched a “long-term extension with the landlord.”

The tower, also known as the PNC Centre since the bank gained its naming rights over a decade ago, is 81 percent leased, slightly better than the downtown Chicago average office occupancy of about 77 percent. With PNC’s extension, the landlord would dodge a big hole in occupancy.

“The extension affirms PNC’s long-term commitment to Chicago, as well as the importance of doing business
in the heart of our iconic financial district,” PNC’s Scott Swanson said in a statement.

What prompted PNC to nix its Wacker Drive plans is unclear. Other Chicago office landlords whose large bank tenants decamped for new buildings in recent years are staring down distress or potential conversions into housing.

The property value crashed at 135 South LaSalle Street, where Bank of America had long kept its Windy City offices, after the financial institution departed for a newly built Wacker Drive tower a few years ago. The LaSalle Street building, whose landlord is AmTrust Real Estate, is a candidate to be converted into apartments with the help of city subsidies.

At 155 North Wacker, letting PNC off the hook means landlord John Buck Company — which developed the 1.2 million-square-foot property, completing it in 2009 — still has a big space to fill from its loss of law firm Skadden, Arps, Slate, Meagher & Flom.

Skadden left its 170,000-square-foot space in the Wacker Drive building for a smaller one, at 320 South Canal Street, which was developed by Riverside Development and Investment. The Canal Street building also lured financial giant BMO Harris away from its longtime Loop home at 111 West Monroe Street — a building that developers Mike Reschke and Quintin Primo are considering for residential conversion.

Back at the PNC Centre, EWP Architects has also been engaged by building manager MetLife to take on renovations to enlarge the lobby and create a full-floor, building-wide amenity space on the 36th floor. The improvements are expected to be completed next year, the bank’s statement said.

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