GATX Moving Headquarters to Willis Tower

July 19, 2017

CRAIN'S CHICAGO BUSINESS

By: Alby Gallun 

The Willis Tower has landed another big tenant, with rail car leasing firm GATX planning to move its headquarters to the landmark skyscraper.

GATX signed a long-term lease for about 90,000 square feet, according to Equity Office, a unit of the Blackstone Group, the building's owner. GATX plans to move there from the Franklin, a two-tower office complex kiddie-corner from the high-rise, Chicago's tallest building.

The deal adds to the leasing momentum that has been building at the Willis Tower amid a major redevelopment of the 110-story building, which Blackstone bought for $1.3 billion in 2015. The New York-based private-equity firm is spending nearly $550 million on the revamp, which includes a major expansion of the property's retail space and Skydeck observatory and a new fitness center, rooftop deck and tenant lounges.

Equity Office, which oversees Blackstone's office portfolio, has snagged some new tenants in recent months, including the National Restaurant Association; Convene, a provider of meeting and event space, and ESD, an engineering firm.

Including the GATX deal, the building at 233 S. Wacker Drive now is 90 percent leased, said David Moore, senior vice president at Chicago-based Equity Office.

The lease is "a positive sign for the work we're doing at Willis," Moore said. "It's a further validation for the amenities and new vision we have for Willis."

He declined to disclose terms of the lease with GATX, which will occupy two full floors in the building.

The company will shrink its space when it moves there. It has been based at the Franklin since 2007 and is the largest tenant at 222 W. Adams St., the smaller of the two towers in the 2.5 million-square-foot complex. It leases 120,600 square feet in the 943,400-square-foot building under a deal that expires in 2023, according to real estate information provider CoStar Group. GATX is exercising an option to terminate its lease early.

"The move to Willis Tower and accompanying office redesign will give our employees access to highly efficient space, advanced office technology, more natural light and outstanding building amenities, among other benefits," GATX Chairman, President and CEO Brian Kenney said in a statement. "Importantly, this move produces improved economics for our shareholders while still providing room to grow."

A GATX spokeswoman did not return calls. A spokesman for New York-based Tishman Speyer Properties, which owns the Franklin, declined to comment.

Not including the GATX space, nearly 22 percent of the Franklin—about 543,000 square feet—is available for lease, according to CoStar. Though the strong downtown office market has helped landlords fill their buildings, it has lost some of its momentum amid a construction boom that is adding several big new buildings to the market. The downtown office vacancy rate rose to 12.3 percent in the second quarter, its highest level since early 2015, according to CBRE.

Joy Jordan, Jamey Dix, and Maggie Brophy of Chicago-based leasing firm Telos Group represented Equity Office in the GATX lease. Melissa Copley in the Chicago office of Newmark Knight Frank represented GATX.

The Willis Tower reported net operating income of $82.1 million last year, up 16 percent from 2015, according to a prospectus connected to a $1.02 billion mortgage on the property. The building's largest tenants include the parent company of United Airlines and law firms Schiff Hardin and Seyfarth Shaw.

Formerly known as the Sears Tower, the building took its current name in 2009, when Willis Group, an insurance brokerage and consulting firm now known as Willis Towers Watson, signed a lease there and bought the naming rights to the property.

The building was appraised in January at $1.52 billion, based on leases in place at the time, according to the prospectus. Accounting for expected future leases, the tower was appraised at $2.17 billion.