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CHICAGO-The commercial real estate community was buzzing Thursday with news that the Sears Tower will soon be dubbed Willis Tower. The announcement of the renaming followed the finalizing of a 140,000-square-foot lease with London-based insurance broker, Willis Group Holdings Ltd.

While some executives saw the news as a fresh start for the iconic 110-story tower, which has struggled with vacancy in recent years, others were surprised owners gave naming rights for such a small deal and worried that a change in title could further plague the building’s occupancy.

“This is a very unique situation. It appears that the current owners are, in part, trying to change some of the stigma associated with Sears Tower, one of the most renowned office buildings in the world,” says David O. Stein, managing principal with Steinco. “While there may be some merit in what they are doing, there is a certain value that comes with buying or owning the Sears Tower, even though Sears hasn’t been a tenant for years. Renaming the building eliminates that; in fact it could actually devalue the building.”

The building’s occupancy rate has hovered in the low-80s in recent years, with some citing tenant anxiety to locate in a tall, iconic building in light of fears of terrorist attacks.

“I think it’s a bold move by ownership and one which, from a marketing perspective, could help this trophy building go a long way towards finally turning the corner on the post 9/11 stigma which has been haunting it for years,” says Mark Parrish, SVP with Grubb & Ellis’ Office Group.

Numerous executives expressed surprise that the building would be renamed for Willis, as its new office represents less than 4% of the 3.8-million-square-foot building. Executives suggest that Willis took advantage of market conditions to achieve an incredible deal in terms of attaining both naming rights and a low lease rate.

Willis executives said its lease rate on the deal was around $14.50 per square foot, a rate lower than the $15 to $20 asking rates quoted last week by Mike Kazmierczak, who represented the building in this deal as SVP with US Equities Asset Management LLC, the building’s management and leasing agent.

“There are some outstanding opportunities available in the marketplace for tenants, and for those who act today, like Willis, the value is significant,” says Ari Klein, SVP of Grubb & Ellis’ Office Group. “In this market, landlords have to find new ways to entice new office users, and in the case of signage and naming rights, which are coveted items, owners have to assess whether securing a new tenant today to bolster cash flow outweighs a larger payment in the future from a larger user. The fact of the matter is, the Sears Tower needed a large tenant, and it got one.”

Willis will consolidate its six Chicago-area offices, at 10 South LaSalle Street, One East Wacker Drive and 222 North Riverside Plaza in Chicago, in addition to its suburban offices in Oak Brook, Lombard and Schaumburg into its new space in the West Loop building. The property is owned by 233 S. Wacker LLC, which includes American Landmark Properties, the Chetrit Group and the Moinian Group. The West Loop’s occupancy rate is below 88% according to Cushman & Wakefield’s year-end office market report.

“It is always good news when a company decides to locate its offices in Chicago, and we are excited that the Willis Group, a global insurance leader, has chosen to enhance its presence in Chicago and bring jobs to the city,” says Rita Athas, executive director of nonprofit economic development organization World Business Chicago. “The Willis Group has 400 offices worldwide, and its consolidation into this Midwest base will lead to the company’s largest North American office, and its second largest office in the world, an impressive addition to our corporate community.”

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