Time to indulge in a little blatant localism. Just a short trip along the river from NAR’s downtown Chicago headquarters downtown is the Merchandise Mart, that massive 1930 monument to merchandising and architecture of the early 20th century. Its four million square feet see 20,000 visitors and tenants passing through its art deco doors every day, most in the retail and wholesale business. But a recent 15-year, 600,000 sq. ft. deal involving a technology giant creates a lot of upheaval, changing the mix significantly while it projects the Mart well into the 21st century.
Motorola Mobility’s Reverse Migration
In the largest single employer influx to Chicago in decades, cellphone and communications technology maker Motorola Mobility announced a move of their operation with its 3,000 employees away from suburban Libertyville to the Mart. A rare reverse of the decades-long commercial trend emptying city centers in favor of suburban locales, the move came soon after the company had been acquired in a $12 billion deal by internet search engine and applications giant Google. The moving and build-out costs alone are $300 million, as the merged company’s product design and hardware engineers. More or less, this means Motorola’s efforts in the rapidly-changing mobile device market will be footed in downtown Chicago, suggesting that 3,000 jobs could be just the ground floor number.
Make Room, Make Room
When a single-building tenant needs 600,000 square feet, chances are that means changes for existing tenants. No exception in this deal, as debt collection firm Harris & Harris can attest. The deal pushed an early end to their lease in the Mart, occupying 68,000 sq. ft. of office space, said Harris & Harris CEO Arnie Harris. The firm received a “substantial” sum to terminate the lease early according to Harris, and the company quickly found new digs about one mile south at 111 W. Jackson, a 24-story tower brought out of foreclosure in March of last year.
Downtown Chicago Picking Up Steam
Downtown Chicago vacancy overall fell to 14.8 percent at midyear, down from 15.9 percent a year earlier, according to CBRE Inc. Like most urban centers in the US, downtown remains a tenants’ market, but some feel this is changing as suggested by the Mart upheaval. The 88.5% occupied Mart itself is expected by some to be in the news again soon as the subject of another blockbuster deal: its own sale.
“If you were going to decide that you wanted to sell the building, doing it with some big, positive momentum is the time to do it,” said Bruce Miller, a managing director at Chicago-based real estate firm Jones Lang LaSalle Inc., who sells office buildings.
The Merchandise Mart was 88.5 percent occupied at the end of the second quarter, according to a Vornado quarterly report.
Vornado almost sold the building two years ago, and lately has been shedding properties to streamline its portfolio. In September 2010, Vornado confirmed it wanted to unload the property as part of a sale of its Merchandise Mart Properties Inc. division. But a $1.25 billion deal for the business fell apart.
Vornado in January sold the property next to the Mart, the former Apparel Center at 350 N. Orleans St., to San Francisco-based private real estate company Shorenstein Properties LLC for $228 million. But the company has said it plans to hold onto the Mart for the time being.
Adaptive re-use, technology, commercial property and jobs. Thus is a 21st century economy made.