Zurich Slashes Chicago Office Lease with Willis Tower Move

Zurich North America is trading in its downtown Chicago digs for a smaller, more prestigious address in the sky.

The insurer signed a 52,000-square-foot lease at Willis Tower, cutting its Chicago office space by more than half as it prepares to vacate 300 South Riverside Plaza, a West Loop property already battling financial trouble.

The move will relocate the tenant’s Chicago workspace to the 53rd and 54th floors of Blackstone’s Willis Tower next year. Todd Mintz with JLL represented Zurich North America in the deal, while Nikki Kern with The Telos Group represented Blackstone portfolio company Perform Properties.

It’s a stark drop from the roughly 107,000 square feet Zurich leased at 300 South Riverside over the last 12 years, signaling how even deep-pocketed tenants are recalibrating real estate requirements in the hybrid work era.

Zurich’s exit delivers another blow to 300 South Riverside’s owner, a venture of investors David Werner and Joseph Mizrachi that has struggled with a complicated debt structure on the property. While they own the 23-story building, they’re also encumbered by a 99-year ground lease, paying rent to land ownership that includes well-known New York investor Rubin Schron.

Plus, in 2023, they triggered a loan default on a $175 million deal that has been tricky to resolve, and have also had major tenants leave or cut back on their leases.

Zurich’s move, while bad news for its old landlord, is a win for Blackstone’s Willis Tower, which has managed to stay at the top of the market through an expensive overhaul and difficult loan extension negotiations this year.

After a $500 million renovation completed in 2022, the 110-story skyscraper has consistently drawn blue-chip tenants and new capital. But whether the property is underwater on its 10-figure mortgage depends on who you ask.

Blackstone this year received a second valuation for the building that added $370 million to the $1 billion appraisal it notched during its loan modification this year.

The extra value is derived from the Skydeck revenue, a unique source of tourist-driven income that fluctuates seasonally and depends heavily on consumer spending patterns. But without accounting for the Skydeck’s contributions, the building’s debt of $1.3 billion, now due in 2028, would well outweigh the real estate value.

Zurich’s relocation reinforces just how uneven the recovery is.

Office occupancy in downtown Chicago hovered at a record low of 72 percent last quarter, and leasing is being driven almost exclusively by tenants trading up to premium, amenity-heavy buildings.

Zurich’s shift mirrors recent moves by law firm ArentFox Schiff, which also shrank its Willis Tower lease, and by companies like Cars.com, which trimmed its space in 300 South Riverside by two-thirds to 53,000 square feet, to match hybrid work patterns.

Meanwhile, office buildings outside the very top tier of quality are struggling with vacancy and distress.

Zurich, whose North American headquarters will stay in Schaumburg, framed the move as a long-term commitment to Chicago and its workforce. But the subtext is clear: companies want less space and more quality. That trend is leaving landlords of aging properties scrambling to hold onto tenants and make peace with lenders.

The move follows Zurich’s $20 million settlement earlier this year with Schaumburg over a dispute tied to tax incentive payouts at its 783,800-square-foot suburban headquarters.

The village had withheld funds over remote-work requirements, but the deal, which reduced Zurich’s maximum TIF reimbursement to $80 million from $100 million, ended a three-year standoff and set clearer rules for future payouts. The resolution comes as suburban office vacancies are above 30 percent, reflecting the same post-pandemic reckoning that’s driving Zurich’s leaner downtown presence.