Chicago's Office Investment Drought May Come To An End

monroe
Courtesy of 500 West Monroe
500 West Monroe

The Central Business District’s long drought of big investment sales may be over.

Spear Street Capital, a San Francisco-based investor, is ready to plunk down between $415M and $425M, or about $440/SF, for 500 West Monroe St. in the West Loop, according to Real Estate Alert, an industry newsletter.

The 967K SF tower is owned by Piedmont Office Realty Trust, an Atlanta-based REIT. The exact price Spear Street will pay is unknown, according to REA.

The investment would be a coup for the Chicago office market, which has seen investors shy away throughout 2019. Many potential buyers got spooked when political newcomer Fritz Kaegi defeated former Cook County Assessor Joe Berrios in his re-election effort. Kaegi had promised to reform the county’s property tax system, which critics charged favored commercial real estate interests over homeowners.

Chicago’s CBD recorded only one sale in the second quarter, Ruben Espinoza’s $22M purchase of 19 South LaSalle, bringing the year-to-date investment total to just $244M, the lowest first half total in two decades, according to a July report issued by MBRE.

The West Loop location near the Metra train lines and the burgeoning Fulton Market District helped make Piedmont’s property a leasing success. It attracted suburban tech firms such as Motorola Solutions, which decided to move from Schaumburg to the tower in 2015.

According to a third quarter report from MBRE, 500 West Monroe had a direct vacancy rate of less than 1%.

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