Willis Tower owners wrap up $500 million makeover
Willis Tower owners wrap up $500 million makeover that includes new retail hub, enhanced amenities
Willis Tower still dominates Chicago’s skyline 49 years after its construction, but when Blackstone bought it for $1.3 billion in 2015, the iconic structure inspired more awe than affection.
“It was an engineering marvel, but it was monolithic, with granite everywhere, so it left a lot to be desired,” said David Moore, senior vice president of EQ Office, a firm wholly owned by Blackstone.
But company officials say a five-year makeover is complete, and a ceremonial ribbon-cutting on Tuesday will celebrate the transformation of the 110-story building, once the world’s tallest, into what they call a group of neighborhoods, open to workers, nearby residents and the many tourists flocking to its famous observation deck.
The more than $500 million project was planned long before anyone heard of COVID-19, yet still shows how downtowns can recover from the pandemic, added Moore. Employees who enjoyed the comforts of home for several years will not happily return to sterile environments but might refill downtown streets if office landlords create community hubs packed with restaurants, shopping, events and public spaces.
It’s not a slam dunk strategy. Another COVID variant just popped up in Illinois, raising infection rates and keeping the downtown market off balance. Office activity across Chicagoland remains stubbornly low, and companies could hold off pulling the trigger on new leases. But Moore said prospective tenants are already visiting Willis Tower and may soon fill its empty space.
“The biggest competition we have right now for office space is home,” Moore said. “We have to keep making sure we’re surprising or delighting our customers on a daily basis.”
A five-level retail, restaurant and entertainment hub called Catalog replaced a mostly empty plaza along Jackson Boulevard and includes a rooftop terrace where office workers type on their laptops next to sunseekers enjoying the weather. Tenants now enter through refurbished lobbies decorated with art and can quickly reach whole floors dedicated to amenities such as fitness centers, bars, cafes, conference spaces, lounges and a private club. Elevators were also modernized, and HVAC systems replaced, winning accolades from the U.S. Green Building Council.
“There was almost no part of the building that was untouched,” said Kathleen McCarthy, global co-head of Blackstone Real Estate.
Willis Tower now belongs to an elite class, she added, equal to gleaming new projects along the Chicago River such as the Salesforce Tower and others to the west in Fulton Market, the city’s hottest office market. Those buildings also promise all the perks and were landing new tenants even during the darkest days of the pandemic.
Blackstone hopes to copy that success at Willis Tower, currently about 85% leased. Its most notable vacancy appeared when United Airlines, the building’s largest tenant, announced early last year it would give up three of its 17 floors after posting more than $7 billion in losses for 2020.
Leasing empty offices is not easy these days. Firms have shed millions of square feet in leased space since 2020, and the market’s vacancy rate just hit a record high of 19.7%, according to a new report from Colliers International. And Kastle Systems, a security firm that tracks office entries, estimated most workers remain at home, with actual office use in the Chicago metro area now standing at just 39%, up from 37.8% four weeks ago.
Brokers helping companies find new office space say Willis Tower’s makeover gives it some advantage over the competition.
“This quadrant of the Loop is going to be a much more vibrant part of downtown,” said Allen Rogoway, managing principal at Cresa Chicago. “I also think they’ve done a fabulous job with the new retail, so we talk about Willis with every prospect we work with that’s a fit for the West Loop.”
But the $500 million price tag also means Blackstone has a big investment to recoup. That could lead to higher costs for new tenants.
“This isn’t a building you’re going to get into and find a discounted, post-pandemic rent,” Rogoway said. “Properties nearby don’t have comparable amenities, but they are going to be less expensive.”
Willis Tower has seen increased activity, according to Placer.ai, a data analytics firm which tracks mobile devices. Foot traffic into the building was down 64% in early January compared with the same week in 2019, and by May 9, traffic was down 44% compared with 2019, roughly similar to 70 other Chicago buildings studied by Placer.ai. The Catalog space was not included in the analysis.
“The most important thing for us is we’re seeing week-over-week improvement,” Moore said.
Workers who do return will find a more attractive environment from the moment they enter, according to Todd Heiser, co-managing director of Gensler’s Chicago office, one of the project’s lead architects. Designers in the 1970s considered urban environments chaotic and dangerous, and wanted to keep office workers isolated, so the old entrance on Wacker Drive forced people to first descend into a subterranean bowl, essentially walling off the building from the street. A wide staircase greets visitors today, along with light-filled spaces adorned with installations by artists such as Jacob Hashimoto and Olafur Eliasson.
“You once walked into a heavily secure basement before going up to an office, but now when you come in, you immediately go up and can take a minute and experience the majesty of the building,” Heiser said.
Modern design draws people into buildings, and at Willis Tower, the goal is to have office workers, tourists and neighborhood residents shopping in Catalog linger together.
“If you’re a family from Iowa visiting the Skydeck, you can stay in the tower and mix in with tenants from the building, that’s what cities are about,” Heiser said.
Catalog is the key to making that happen. Its retail space is 70% leased and includes a range of options once absent from the building and surrounding neighborhood such as upscale grocer Foxtrot, Do-Rite Donuts & Chicken, Brown Bag Seafood Co. and Kindling, a white tablecloth restaurant opening later this year.
“Two or three years ago, you wouldn’t have said, ‘Let’s get dinner at the Willis,’” Heiser said.
Catalog also includes an event space called Convene, and Blackstone added another 150,000 square feet of amenities on floors 33, 66 and 67, including Altitude Cafe and TONE, a 30,000-square-foot fitness center.
That gives even the smallest tenants, no matter how high up, easy access to services. And that’s something many companies planning to reopen their offices will demand, because their employees demand it.
“The pandemic has forced us to rethink how people work,” Heiser said. “We expect more out of our office buildings than ever before. After two years at home, when we go back into cities, having opportunities at our fingertips to live, work and play are going to be important.”
EQ Office could be on the verge of healing the wound caused when United vacated three floors, according to Moore.
“I will say activity in the space is strong, and in the next 30 days or so I’m hopeful we can announce a tenant,” he said.
That would send a strong signal that downtown was at least moving in the right direction.
“If they can backfill space in the building,” said Rogoway, “it would be a good testimonial to the health of the market.”