Tishman Speyer has called off plans to buy a development site and put up an office tower along the southern edge of Chicago’s in-demand Fulton Market district amid rising interest rates and concerns of a potential recession.
The halted project, involving a major developer and the fastest-growing U.S. urban office market, is a high-profile example of how much harder real estate deals are becoming to finance throughout the country at a time when inflation has reached levels not seen in 40 years.
Developers and investors face higher borrowing and construction costs, which real estate professionals say is causing some transactions to be stalled or scrapped.
Not even top developers or popular locations are fully immune to those economic conditions, or to the ongoing effect of COVID-19 on office demand, as the deal for the site at 850 W. Washington Blvd. demonstrates.
Tishman Speyer, a developer known throughout the world, is the second-largest owner of office space in Chicago with over 7.2 million square feet across eight properties.
Fulton Market in recent years has transformed from a former meatpacking district to a top destination for offices, including the global headquarters of McDonald’s and Mondelez International, and the Midwest headquarters of Google. Over the past five years, the neighborhood’s office supply grew by an average of 100% per year, faster than any urban office market in the country.
CoStar News reported in January that Tishman Speyer had a deal to buy the site at 850 W. Washington, with plans to demolish a car wash and parking structure on the site and replace it with an office tower.
New York-based Tishman Speyer signed a purchase and sale agreement to buy the site from Chicago-based parking company Park One on Dec. 13, according to Cook County property records.
Economic Concerns
Interest rates and concerns about the economy have risen sharply since then, and on May 31 Tishman Speyer terminated the contract to buy the site, property records show.
It’s not known how much Tishman Speyer had planned to pay for the site, which Park One bought for $14 million in 2018, or how large a tower the developer planned to build.
A Tishman Speyer spokesman declined to comment, and Park One did not respond to a request to comment.
The parcel on the northeast corner of Washington and Peoria Street is 37,200 square feet, according to CoStar data, with a single-story, 25,000-square-foot structure on it. The building is used for covered parking, and it also is home to the West Loop Auto Spa car wash.
The site is near attractions such as the Nobu and Soho House hotels and top restaurants, but it’s south of large office developments that in recent years have sprung up on and around Randolph, Fulton and Green streets.
Tishman Speyer is a longtime investor in and near Chicago’s Loop business district, and the firm recently completed its first office tower in Fulton Market at 320 N. Sangamon St. The 13-story building is less than a half-mile north of the Park One property on Washington.
The Sangamon tower, developed with Chicago firm Mark Goodman & Associates, opened last year and is now more than 85% leased, according to CoStar data.
Tenants include startup Hazel Technologies, property technology firm VTS, restaurant tech company Tock, and streaming company Roku.
Tishman Speyer is known for its investment in New York’s Rockefeller Center, where the company is headquartered, and the firm owns and manages properties throughout the world.
The firm recently sold a Sunnyvale, California, office campus for $707 million — nearly twice what it paid for it in April 2021 — after leasing the entire four-building property to Facebook parent Meta.
Also in California, Tishman Speyer is developing the 28-acre Mission Rock project with the San Francisco Giants baseball team.
Tishman Speyer’s investments in downtown Chicago include a pair of big, two-tower office complexes: The Franklin and CME Center.