Insurance company Zurich North America is moving its Chicago office to the city’s tallest skyscraper in a deal that adds to the trend of tenants reducing their square footage while seeking out new building amenities.
Zurich North America has leased about 52,000 square feet on the 53rd and 54th floors of Willis Tower, where it plans to move next summer, according to a statement.
The insurer’s downtown office will move from 300 S. Riverside Plaza, where it leases 107,807 square feet, according to a Zurich spokesperson.
It’s the latest example of tenants in recent years cutting back on space but seeking out newer towers or, in this case, decades-old properties whose landlords have poured dollars of dollars into major improvements.
“Chicago has always been an important part of Zurich’s story, and our relocation to Willis Tower reinforces our commitment to the city’s future,” Zurich North America CEO Kristof Terryn said in the statement. “This move ensures our downtown employees benefit from an outstanding workplace experience, with access to modern amenities and a dynamic location in the heart of Chicago.”
The downtown Chicago deal does not affect Zurich’s headquarters, which remains based in northwest suburban Schaumburg. Last year, Zurich subleased more than 200,000 square feet of its sprawling suburban structure to fleet management company Wheels.
The 110-story former Sears Tower at 233 S. Wacker Drive is owned by Perform Properties, the arm of New York-based Blackstone. The private-equity giant bought Willis Tower for $1.3 billion, a Chicago record, during a booming real estate market in 2015.
Blackstone has invested hundreds of millions of dollars in the property, including a $500 million addition that brought in restaurants, shops, entertainment and other amenities to the base of the tower.
“This transaction highlights the continued ‘flight to quality’ trend we’re seeing across the downtown Chicago office market,” JLL broker Todd Mintz, who represented Zurich, said in the statement. “Leading companies like Zurich are choosing spaces that elevate employee experience and reinforce their brand culture — Willis Tower checks all those boxes.”
The largest office tenant in the 1,451-foot-tall tower is the headquarters of United Airlines.
The 4 million-square-foot building was 87.5% leased before the Zurich deal, according to CoStar data.
“With our expansive 30,000-square-foot terrace, state-of-the-art fitness center, conference facilities and an ever-growing array of retail offerings, Willis Tower is purposefully designed to redefine the modern workplace experience,” Britton Derkac, executive vice president and head of office leasing at Perform Properties, said in the statement.
Major investment
Blackstone completed the lower-level expansion called Catalog in 2022, more than two years after COVID-19 led to persisting remote work trends that have slashed values of office towers throughout the country.
Early this year, Blackstone negotiated a loan extension of at least three years on more than $1.3 billion in debt on the property, averting a looming maturity date.
A few months later, an appraisal found that the value of the property had fallen to $1.03 billion, well below the value of the loan.
A report by Morningstar DBRS said it was placing credit ratings on commercial mortgage-backed securities debt on the property under review with “negative implications” because of the falling appraised value.
But the report noted that the valuation of the real estate itself did not include the massive value of the Skydeck observatory, a business that the appraisal estimated was worth more than $420 million. Just under $48 million of that value was the “real property” value.
The tourist attraction brought in more than $52 million in revenue last year, according to an appraisal report.
For the record
The tenant was represented by JLL broker Todd Mintz. The landlord was represented by Telos Group broker Nikki Kern.