The owner of Chicago’s Water Tower Place is moving forward with plans to reduce the retail space from eight floors down to three, with JLL enlisted to find a buyer for the upper floors in a deal that could dramatically change the face of one of the nation’s best-known multistory malls.
JLL has formally begun marketing the top five floors, totaling 500,000 square feet, of the mall at 845 N. Michigan Ave. for sale — or potentially lease for a different use — the brokerage confirmed.
CoStar News first reported in early 2023 that the mall's owner, Metropolitan Life Insurance, was contemplating such a move and had hired JLL brokers for the assignment later that year. At the time, JLL had yet to begin formally marketing the space.
A new JLL brochure mentions that the mall’s owner “is evaluating a consolidation of the property’s retail uses down to the first three levels of the mall,” in the first public acknowledgement that the lender-turned-owner is drawing up plans to significantly reduce the amount of shopping space at the property.
A separate owner for upper floors could significantly change the look and function of the vertical mall pioneer, which is known for its soaring atrium.
"This is a location that gets 3 million visits a year, with underground parking, a sheltered entrance and a 100,000-square-foot floor plate," one of the JLL brokers marketing the property, Tom Kirschbraun, told CoStar News. "This is an opportunity for an organization to do something special while the lower (retail) floors get reprogrammed."
The 50-year-old mall is at the base of a 74-story residential and hotel tower. Those portions of the property would not be affected by a sale of the five retail levels.
If the retail floors are sold, a new entrance with elevators dedicated to floors 4 through 8 would be created on Pearson Street along the south side of the mall. The atrium of the mall would be closed off between the third and fourth floors to separate the mall and the new use above it, Kirschbraun said.
Moves to subdivide the space are a jarring reminder of the struggles on the Magnificent Mile, one of the country’s top shopping corridors, in the years since the onset of COVID-19 in early 2020.
Big store closures along the famed corridor have included a massive Macy’s flagship on parts of all eight levels of Water Tower Place, and vacancy has reached historically high levels in recent years.
That led the mall’s longtime owner, Brookfield, to hand the property back to its lender, MetLife, in 2022.
In a similar move, the longtime owners of another big vertical mall, the Shops at North Bridge, more recently surrendered their ownership to their lender rather than continuing to make loan payments.
Other area properties have sold for huge discounts to their previous values.
A wave of recent deals, including a Harry Potter-themed store that recently opened, have provided hope that the Mag Mile is recovering.
Next to the Water Tower Place mall, the owner of the 360 Chicago observatory on the 94th floor of the former John Hancock Center said it plans to expand the observatory into the two floors above, formerly occupied by the Signature Room restaurant.
It's unclear how much MetLife is expecting in a sale of the Water Tower Place floors. A spokesperson did not immediately respond to requests for comment from CoStar News on Friday.
By finding a buyer for the upper levels, MetLife could reconfigure the mall, consolidate existing tenants onto lower floors and seek new tenants to fill the upper floors. Even before the pandemic, the upper floors of vertical malls were challenging to keep filled because of much lower foot traffic than those on or close to street level.
JLL is pitching the opportunity for a user to own a high-visibility property with signage and branding opportunities. Tax-exempt users, such as non-profits or government agencies, could save money by owning rather than leasing office space.
The space could also work for medical offices, with hospitals such as Northwestern Memorial and Lurie Children’s Hospital already occupying sprawling campuses nearby.
"Growing up in Chicago, everyone has a Water Tower Place story," JLL broker Meredith O'Connor said. "It's an opportunity for a non-profit to take ownership of an iconic address."
For the record
JLL brokers Tom Kirschbraun, Meredith O’Connor, Danny Kaufman and Bruce Miller are marketing the space on behalf of the owner.