601W Cos.' Old Post Office Success Boosts CBD
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Developer 601W Cos. continues to enjoy tremendous success in securing tenants for its Old Main Post Office redevelopment in the West Loop, boosting the amount of net absorption in the Central Business District to the highest level since 2017, according to a new report from Newmark Knight Frank.
The company will open the 2.5M SF project later this year, and in the third-quarter secured an agreement from Uber Freight to occupy 450K SF, another with PepsiCo for nearly 200K SF and one with the Chicago Board Options Exchange for 185K SF.
That brought the building to 66% leased, up from 32% in the second quarter.
Net absorption totaled more than 1.2M SF for the entire metro area, up from 174K SF last quarter.
Although the new-construction trophy towers in the West Loop have also been successful in attracting tenants, lately adaptive reuse projects like the Post Office have attracted a lot of attention, NKF said.
Brookfield Properties recently began the reconstruction of the upper floors of Macy's flagship State Street into 650K SF of office space, and Vivid Seats, an online ticket marketplace, is rumored to be in talks for about 110K SF, according to NKF.
Tenant demand also remains high outside the downtown core.
WeWork recently leased nearly 90K SF at 1155 West Fulton St. in the Fulton Market submarket, its third site in the neighborhood, taking up all of the available office space in the building.
Developers are getting ready to take advantage of this demand, and broke ground on several buildings last quarter in Fulton Market, where 2.1M SF is now under construction, out of 6M SF for the metro area.
Newmark Knight Frank researchers expect the good news to continue.
"The Chicago office market is well-positioned to finish 2019 on a high note," according to the third quarter report.
"Despite a slowdown on the capital markets side, real estate tax uncertainty and macro headwinds, strong construction starts, low vacancy, high rental rates and tenant demand all indicate that strong activity will continue into 2020."