A revitalized office tower west of Chicago in suburban Itasca is now on the market after substantial renovations and a subsequent spike in occupancy, in a test of how much investors will pay for a stabilized suburban office property amid record vacancy in the area.
Sovereign Partners, led by brothers and co-founders Cyrus and Darius Sakhai, has tapped JLL to sell the 25-story Two Pierce Place tower, CoStar News reported. JLL’s Patrick Shields and Sam DiFrancesca are managing the sale.
The New York-based landlord, which specializes in acquiring high-vacancy properties and executing turnarounds, originally purchased the 486,000-square-foot property in January 2022 at a steep discount of $24 million, a roughly 73 percent decline in price compared to the $83.8 million previous owner Piedmont Office Realty Trust paid for it in 2006.
While it’s unclear how much Sovereign Partners hopes to secure in the sale, it is aiming for a significantly higher price than the clearance rack’s pickup price just two years ago.
Two Pierce Place, located within the Hamilton Lakes business park, is currently 72.4 percent leased, with a weighted average lease term of 8.3 years. The remaining vacant space offers potential for future value growth for a prospective buyer.
The building was more than 60 percent vacant at the time of Sovereign’s purchase, and underwent a $29 million renovation in 2023. The overhaul included updates to common areas, restrooms, building infrastructure and other amenities.
With the upgrades, the building has secured more than 300,000 square feet of new leases in the past two years. The tower’s two largest tenants —Topco Associates, with 83,613 square feet, and AIT Worldwide Logistics, with 56,808 square feet — decided to move in after the renovations were completed.
The sale of Two Pierce Place presents a unique opportunity in a suburban Chicago market that has struggled in recent years due to the pandemic sapping demand for office space and interest rate hikes crushing commercial real estate values. Many office properties in the region have faced significant financial distress, leading to firesales, handbacks to lenders, or even conversions into alternative uses like data centers or logistics campuses.
Notably, the former Allstate headquarters in Glenview is being repurposed for logistics, while the former Sears campus at 3333 Beverly Road in Hoffman Estates is set to become a data center.
Two Pierce Place, however, stands out as a relative success story amid these challenges. The property’s transformation and successful leasing efforts offer a rare example of an office tower bouncing back after years of decline, making it a potential bellwether for the health of suburban office real estate.
— Andrew Terrell
Read more
Commercial
Chicago
Dermody faces hurdle with Allstate redevelopment in Glenview
Development
Chicago
Sears headquarters sold to Compass Datacenters for $194M
Commercial
Chicago
Local investor grabs Loop office building at 63% discount