Chicago office real estate faces severe challenges. A 10-story building at 216 W. Jackson Blvd, bought for $22.3M in 2013, was recently sold for $2.5M. The area saw $2B+ in real estate projects, including a $670M Willis Tower renovation and an $800M Old Post Office transformation. The building was 94% leased in 2020, with Mares Spectron as a key tenant. It generated $2M in income from $4.3M in revenue in 2018, implying a cap rate over 7%. Another building at 300 W. Adams St. sold for $4M, a 90% discount from its 2012 value of $38M.
Chicago real estate, particularly office, has elevated itself to nuked from downright scary.
A Chicago real estate firm purchased the 10-story 185 square feet office building at 216 W. Jackson Blvd in 2013 for 22.3 million. Europhoria engulfed the neighborhood then because deep-pocket investors had plowed more than $2 billion into major real estate projects adjacent to and near the building.
Two projects recently completed or on the verge of completion in 2013 were a $670 million renovation and expansion of Willis Tower, and an $800 million transformation of the Old Post Office building into a modern office building. Both projects within blocks of the Jackson Blvd building.
According to 2020 broker documents, the building was 94% leased, and its largest tenant was financial services company Mares Spectron which leased 40,000 square feet on the fourth and fifth floors.
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The building generated $2 million in operating income in 2018 from $4.3 million in revenues, according to a Bloomberg report discussing a loan on the property. The asking price in 2020, the last time the building was on the market, was $27 million, implying a cap rate of more than 7%.
Los Angeles-based Brog Properties purchased the property recently for $2.5 million.
If that wasn't bad enough, in the same month another Chicago office building sold at nearly a 90% discount. The property in question is located at 300 W. Adams St. in the West Loop. This 12-story 240k square feet building was sold by a Morgan Stanley-managed entity for $4 million, which represents an 89% discount from its value of $38 million in 2012 when it was last sold.
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