CHICAGO—Lincoln International, a global mid-market investment bank, just closed a renegotiation of a long-term lease for its space at the 42-story Citigroup Center, 500 West Madison St., and brokers say it’s an unsurprising result. Lincoln, whose US staff has grown 60% since 2010, had occupied about 38,000-square-feet, including space on the 31st floor, but will now occupy about 47,000-square-feet on the 38th and 39th floors.
“In the West Loop, when a tenant wants a good-sized space, and needs a class A office in a high-rise, there are not a ton of options,” Lisa Davidson, executive managing director of Savills Studley, tells GlobeSt.com. In fact, “if you are looking for 50,000-square-feet of class A space above the 30th floor in the West Loop, there are only three options that would be available for occupancy today.” As a result, “we’re seeing a lot of these tenants stay in place.”
Davidson and senior managing director Tiffany Winne represented Lincoln in the transaction. Michael Lirtzman and Courtney Baratz, both of Transwestern, represented the landlord.
But even though this specific section of the submarket has tightened considerably in the last few years, Davidson says she “would not quite call it a landlord’s market.” Perhaps because many owners are mindful of the 2017 delivery of several nearby office towers, tenants can still catch a few breaks.
Although she could not reveal details about the new lease, Davidson did say “we’re still seeing healthy concessions and we’re still getting healthy rent abatements.” However, at the same time, “we are also seeing increases in the actual rental rates.”
The record sale prices that downtown office towers have recently garnered have been adding fuel to that fire, she adds, as landlords attempt to boost value by boosting rents. KBS REIT III recently acquired 500 W. Madison for about $425 million. And 300 N. LaSalle just sold for about $850 million, the highest price ever paid for a Chicago office building.
Still, “remaining at 500 West Madison turned out to be the right fit for Lincoln,” Davidson says, although Studley did explore several other options. “Not having to divert its attention to relocating allows the company to remain focused fully on continuing its impressive track record of growth, both in Chicago and across the globe.”