JV Formed for Half-Billion-Dollar Redevelopment of Chicago’s Old Post Office
- Jun 20, 2014
It’s not mail that will be delivered from the Old Post Office in Chicago a few years from now. It will be office space, retail space and much more, now that Sterling Bay Cos. and International Property Developers North America have formed a joint venture to redevelop the historic 2.7 million-square-foot property into a mixed-use destination. The price tag on the high-end project’s first phase alone is $500 million.
It’s a gargantuan undertaking, and the strategic partnership is wasting little time moving forward. “The timeline is immediate,” Andy Gloor, managing principal at Sterling Bay, told Commercial Property Executive of the commencement of work on the development. “We’re in discussions with a few different users and simultaneously working on overall construction plans. Our intention is to get moving.”
The redevelopment endeavor has been in the works for a few years. IPDNA acquired the long-vacant Old Post Office, a 1930’s Neo-Classical building at 433 W. Van Buren St., in a 2009 auction for approximately $24 million. Antunovich Associates was later brought on board to spearhead the project design, the first phase of which will yield substantial retail offerings and hundreds of square feet of office space.
It’s a timely pursuit. Chicago’s office market is being fueled by tech hiring and new and expanding companies, according to a report by Marcus & Millichap Real Estate Investment Services. And many occupiers aren’t seeking the traditional accommodations. “A lot of the growth companies in today’s market are looking for creative office space, large floor plates,” Gloor said. He cites leases by Sara Lee Corp. and Google as examples. Last year, Google signed on for 250,000 square feet at Sterling Bay’s Fulton Market redevelopment project, and Sara Lee relocated its suburban headquarters to a 235,000 square-foot space at the real estate company’s 400 S. Jefferson St building. Both properties feature large floor plates. “We look at this trend as a national progression,” he added.
And like Sara Lee, many office users are migrating toward the city, away from the outskirts. “There are a lot of companies that are growing in Chicago, and you have a trend where companies that were in the suburbs are relocating downtown because they’re having a hard time attracting young workers to the suburbs.”
As for the city’s retail market, tenant demand is on the rise. Marcus & Millichap anticipates that the vacancy rate will drop to 6.3 percent this year, spurring an increase in asking rents of approximately 3.4 percent.
Sterling Bay and IPDNA are still ironing out the details of the specific square footage of both the office and retail segments at the Old Post Office project, but earlier plans called for 800,000 square feet of retail and 400,000 square feet of office space. Future phases of the redevelopment will include residential and hotel offerings.
Years in the making, it’s now full steam ahead for the Old Post Office project, although some thought it would never get off the ground. In its fourth quarter 2012 Chicago market report, one commercial real estate services firm described the Old Post Office project as a “pipe dream.”