EXCLUSIVE: Google To Occupy 600K SF Of Redeveloped Chicago Landmark
Plans for Google's highly anticipated Thompson Center redevelopment are nearing completion, almost four years after the tech giant announced its intent to move into the iconic Central Loop building, with the company expected to occupy more than half of the space.
Google is expected to take at least 600K SF of the 954K SF of newly renovated space in the building but is not anticipated to move in until the middle of next year. The company will make the remaining 354K SF available for lease to other tenants, according to a second-quarter Colliers report shared with Bisnow.
Morningstar has reportedly considered taking around 300K SF of the space available for lease, but that deal has not yet been finalized. CBRE is marketing the office space to potential tenants.
A joint venture of The Prime Group and Capri Investment Group has redeveloped the Helmut Jahn-designed building and is projected to complete the overhaul by September. The heart of Chicago's downtown, which has struggled with elevated vacancy in recent years, is pinning its hopes for a significant boost to the area's activity on Google's presence.
David Burden, principal and vice chair at Colliers, told Bisnow that Google has gone through different iterations of how much space it will want to keep compared to how much it will lease out. Tenants seeking larger spaces, which are harder to find in the market, may be interested in the Thompson Center.
"In terms of, you know, spaces that are 200K SF or bigger, there's not that many of them out there," Burden said.
But smaller companies may be deterred because the building isn't a high-rise and its floor plates can be harder to use efficiently, he said.
The completion of Thompson Center renovations in the next couple of months comes as the broader downtown office market saw the reversal of a yearslong vacancy trend in the second quarter.
In Q2, overall downtown office vacancy dropped by 30 basis points to 24.3%, the first time in two years that the rate has decreased in the central business district, according to a Colliers report. Class-A assets led the charge, with 473K SF of positive net absorption in Q2, while Class-C assets saw vacancy dip slightly due to inventory shifts.
"The West Loop is the biggest submarket," Burden said. "It gets the most activity, it's where people want to be."
The West Loop has seen the most year-to-date absorption of any CBD submarket at 37K SF. The Central Loop, where the Thompson Center is located, has seen the least activity, at about 737K SF of negative net absorption for the year.
Transaction volume for downtown office has also picked up, with many buildings trading at discounts and more than double the number of buildings listed for sale over the past year, according to Colliers.
Of the roughly two dozen buildings listed for sale without a pending deal in the CBD, about a third sit in Fulton Market, outpacing every other submarket. River North and the Central Loop are next up, with five and four listings, respectively.
Class-B and C buildings make up the bulk of the pool — 10 and 13 properties, respectively — while only two listings carry a Class-A designation: the 415K SF tower at 33 N. LaSalle St. and 345 N. Morgan St.'s 197K SF Fulton Market building. Roughly half the properties on the list are under 50K SF.
Burden said Class-B and C buildings are trading at a low basis, roughly $50 to $60 per SF. While that's an attractive entry point for buyers, he said, once a new owner factors in renovations, tenant improvement costs, and transaction and commission fees, the all-in costs can climb to around $150 per SF.
"By the time they sell, if they can sell the building in five years for $300 per SF, maybe they will have cleared $100 per SF," Burden said. "I think that that's the game they're hoping to win on."
