Charles Schwab slashing Chicago office space with big subleases

Charles Schwab has chosen how much Chicago real estate to cut after announcing it would reduce its office spaces and lay off thousands of employees to save costs last year.

The financial services firm’s plans add big chunks of space in downtown office buildings at 600 West Chicago Avenue and 150 South Wacker Drive, where other tenants have already dramatically downsized.

Schwab has hired Chicago-based tenant-focused brokerage Cresa to sublease more than 135,000 square feet combined across the two buildings, according to marketing flyers and people familiar with the offers.

Schwab’s takeover of TD Ameritrade several years ago required it to take on the costs of a nearly 68,000-square-foot lease on the eighth floor at 600 West Chicago, and Cresa is now putting the entire space on the secondhand market. The offerings add to a sublease inventory surge to more than 8 million square feet across Chicago, beginning when the pandemic drove tenants to slash loads of office leases.

At its longtime Chicago home of 150 South Wacker, Schwab is offering nearly 67,000 square feet for sublease on the 2nd 10th, 11th and 15th floors, or a little less than half of its nearly 146,000-square-foot lease in the 32-story tower.

Schwab previously announced its intent to slash its real estate costs, and it made substantial cuts to the sizes of its offices in San Francisco and Jersey City, New Jersey, SEC filings show.

“We want to be clear that Chicago remains an important Schwab employment center, and we expect to continue employing local talent to support our clients and maintain our special culture of stewardship within the Chicagoland community,” the firm said in a statement. “As we communicated to employees last year, we are downsizing the 150 S. Wacker and 600 W. Chicago locations where we will continue to occupy four floors and a portion of one floor, respectively, for employees who work in the office, either in assigned or reservation-based space workspaces.”

Any takers of the 600 West Chicago space could rent the office from Schwab through 2027 with an option to extend it through 2030, the marketing flier shows. The firm’s lease at 150 South Wacker also runs through 2027. The 600 West Chicago space is also divisible, meaning smaller users could take over chunks of about 26,000 or 42,000 square feet from Schwab.

The offers also pile onto significant office space reductions that have either already taken place at the buildings or are underway, setting up potential financial hits for their landlords.

At 600 West Chicago, landlord Sterling Bay and its lenders have moved to sell the asset, likely at a big loss from the $510 million the property fetched in a 2018 sale. It went up for sale after anchor tenant Groupon tried to market its entire 290,000-square-foot space for sublease and moved out of the building for a much smaller office at 35 West Wacker Drive.

And direct lender Golub Capital began marketing its entire 75,000-square-foot office space at Coca-Cola bottling magnate Marvin Herb’s 150 South Wacker for sublease last year in an effort to slash its Chicago real estate footprint to a third of its previous size. The firm also rents about 53,000 square feet at the adjacent building 100 South Wacker that it has so far planned to keep.

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