A New York investor that believes that there is still room for more downtown Chicago office space despite the record-breaking highest vacancy rate, has found a lender who agrees with him. Vista Property Group is the real estate developer who has landed a $31 million construction loan from Bank OZK in Little Rock, Arkansas.
An article in Crain's Chicago Business states that the brokerage firm of Jones Lang LaSalle plans to develop a 15 story office building at 601-609 W. Randolph Street in the West Loop. The building is scheduled to be completed in mid-2022.
Vista Property Group broke ground this week on a project that will add about 100,000 square feet of offices to the West Loop. This is a central business district that is now awash in vacant, available office space during this pandemic crisis. At this point, it is not clear when companies that are working from home will return to offices and how much space will be needed.
"We think there's a strong demand for high-quality, new office construction; not only before COVID but also as a result of COVID. We believe that companies are going to look at the future of office space in a post-COVID environment and look at the boutique, class A nature of our buildings and see some opportunities."
Vista Property Group Principal | Hymie Mishan
Vista won City Council approval last month to develop the new building on a surface parking lot at 609 W. Randolph St. and renovate a five-story loft office building that Vista owns next door at the corner of Randolph and Jefferson Streets.
This was quite a long shot to get a lender on board to build such a property on speculation, or with no tenants signed. Downtown office vacancy at the end of the year surged to 18 percent, the highest mark on record, according to brokerage CBRE.
Bank OZK has been one of the most aggressive construction lenders in the city in recent years. The bank backed a 440,000 sf spec office building at 625 W. Adams Street that opened with no tenants in 2018 before eventually signing CDW to fill most of the project.
More recently, it bankrolled construction of the 76 story Nema Chicago apartment tower in the South Loop and is leading financing for a pair of skyscrapers underway now - a 47 story hotel and residential tower from Sterling Bay and Magellan Development Group at 300 N. Michigan Avenue as well as One Chicago Square, a 76 story apartment and condo tower across the street from Holy Name Cathedral in River North.
On Randolph Street, Bank OZK is now betting on a project that Mishan sees as an ideal location a block from Ogilvie Transportation Center. He also expects a building that will include the following extras to give it a leg up in leasing over nearby competition:
- Touchless technologies
- State-of-the-art air filtration system
- Small floor plates that allow tenants to control their space
JLL Senior Director Christopher Knight of the company's Chicago Capital Markets team represented Vista in securing financing for the project.
A Vista affiliate bought the late 19th century-built loft office building at 601 W. Randolph Street in 2018 for $6.4 million.
Vista owns about 30 mostly smaller properties in the Chicago area, including a pair of retail buildings in the Fulton Market District at 1000 W. Washington Street and 113 N. May Street. The Randolph Street building marks its first ground-up development in Chicago.
DataBid is currently reporting on this project - 609 W Randolph Street Office Building Development West Loop - Chicago (0014080320)
